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April 03, 2000 02:00 AM

Flextronics beefing up with Palo Alto buy

Roger Renstrom
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    Flextronics International Ltd. has become a major injection molder while pursuing a strategy to add manufacturing capabilities for electronics firms. Contingent on a pending acquisition, the firm operates 429 injection molding machines at six sites in Asia, North America and Europe. The plastics operations employ more than 1,900.

    "The molding capability of Flextronics is formidable and can be compared to the top molding operations in the world as a stand-alone business," Nicholas Brathwaite, senior vice president and chief technology officer, said during a telephone interview.

    The San Jose, Calif.-based contract manufacturer has campuses in China, Hungary, Thailand and Mexico.

    Flextronics gained plastics processing capability mainly through acquiring control of Neutronics Electronic Industries AG of Althofen, Austria, and DTM Products Inc. of Niwot, Colo., in late 1997. Flextronics added Fico Investment Holding Ltd. of Doumen, China, in March 1999.

    In early April the company will close on the purchase of Palo Alto Products International Pte. Ltd. of Palo Alto, Calif.

    Dynamic markets such as cellular telephones drove the need for plastics processing and advanced finishing techniques as part of integrated operations to make, warehouse and ship complete products to customer distribution channels.

    Brathwaite said that as the market changed, Flextronics discovered that some of its plastics part suppliers lacked the financial strength to invest in new capabilities.

    Flextronics charged into the breach, but "not necessarily to compete with other plastics" firms, he said.

    An ambitious schedule calls for the company to buy more presses this year. "Generally, our plants have autonomy," Brathwaite said. "As we get orders and customers share strategies, I would not be surprised if we would add 10 percent to 15 percent more presses this year." One observer viewed that forecast as conservative.

    Paul Rost, director of business development for plastics, listed the polymer processing capabilities:

    Asian operations have 181 presses of 25-550 tons in Doumen and Shanghai, China, and 98 presses of 60-1,000 tons in Bangkok, Thailand.

    North American activity involves 37 presses of 20-620 tons in Guadalajara, Mexico; 21 presses of 20-180 tons in Niwot; and 16 presses of 22-680 tons in New Braunfels, Texas.

    The European site has 76 presses of 25-1,050 tons in S rv r, Hungary. A new structure there emphasizes advanced plastic processes such as thin-wall molding, in-mold decorating and multi-shot molding.

    Flextronics is adapting for next-generation products, particularly in cell phones.

    Key customers are original equipment manufacturers of telecommunications, data networking and computer gear.

    Flextronics' existing product- development centers and front-end services will report within a newly named Flextronics Design unit.

    "With the addition of Palo Alto, we acquire a significant number of designers and engineers," Brathwaite said. "We will offer full-service development from concept through production."

    On Feb. 7, Flextronics announced Brathwaite's appointment to his current position, which includes responsibility for mechanical engineering and development.

    He was with nChip Inc. of San Jose in 1996 when Flextronics acquired the multichip module maker.

    Flextronics is incorporated in Singapore and is expected to have sales of more than $3.5 billion for the fiscal year ended March 31.

    A recent follow-on offering of 8.6 million shares boosted the total outstanding to 131.6 million. That offering generated net proceeds of nearly $500 million and positioned Flextronics for more acquisitions.

    The stock trades on the Nasdaq National Market.

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