Blindsided by a financial blow, Swiss injection molder Mikron Holding AG will delay its purchase of a U.S.-based toolmaker until later this year at the earliest.
The company, based in Biel, Switzerland, suddenly faces other pressing issues. Mikron plans layoffs and a plant restructuring in the wake of a profit warning for 2001, issued Jan. 23.
The difficulties arose unexpectedly after mobile-telephone maker Telefon AB L.M. Ericsson told Mikron it will pare down European operations and shift production to Asian suppliers, said Mikron Chief Financial Officer Jurg Wenger.
About 30 percent of Mikron's sales come from molding cellular-phone housings, under Mikron's infocom technology division. Cellular-phone growth, in general, is flagging in the Western hemisphere, and Ericsson is Mikron's largest customer for those products.
Meanwhile, Mikron plans to meet in February with the large U.S. toolmaker to discuss a new acquisition timetable, Wenger said in a Jan. 23 telephone interview.
Mikron has not revealed the company's name but said the firm has sales of about $34 million and about 230 employees.
The deal, announced in November, was to have been completed in the first quarter. Management at the tooling company had signed a letter of intent for the sale. The purchase now may take place in the latter half of the year, Wenger said.
"We'll do what we can to find a solution and possibly take a little more time in the process," Wenger said. "Now, we have to give priority to solving problems in infocom technology. Our intention is still to do the deal, but we have to tackle this first."
Ericsson, based in Stockholm, Sweden, plans to move production to China and other parts of Southeast Asia, Wenger said. The mobile-communication market is growing there, unlike the flattening sales in Europe, he said. Ericsson also has discontinued plans for two new cellular-phone products in Europe, he added.
"They see the need for additional production capacity in Asia or South America," Wenger said. "We have to realize at the moment that we have too much capacity in Scandinavia. We'll have to move more of that to Asia."
The market for mobile telephones has slowed. During the last quarter of 2000, vendors such as Nokia Corp., Lucent Technologies Inc. and Motorola Inc. have reduced sales estimates and reported a decline in order growth.
Mikron will restructure its work force to meet the change in demand. By the end of February, the company expects to close one of its three European injection molding plants — all located in Norway and Sweden — and lay off about 300 workers.
About 400 workers in its infocom technology division already have been laid off, Wenger said. Mikron directors have not decided which plant will close.
The company also will shift more molding capacity to a recently opened plant in Suzhou, China, and concentrate solely on tooling at its plant in Farevejle, Denmark.
The news was greeted by a sharp drop in Mikron's stock price, traded on the Swiss Stock Exchange. On Jan. 23, the price per share fell by about 134 Swiss francs ($82), ending the day at 435 francs ($266) per share.
Several analysts who follow Mikron said the stock-price hit could be a short-term falloff if the company broadens its scope beyond the cellular-phone market.
"They're a lot more lucky than some [suppliers]," said one analyst, who asked not to be identified. "They have other end markets."
In November, Mikron also announced the purchase of Eindhoven, Netherlands-based Axxicon Group NV, a large injection molder of plastic gears and automotive and office-copier parts. The company also is one of the world's leading suppliers of molds for compact discs and SmartCard readers.
With the acquisition, Mikron expected sales to reach 950 million Swiss francs ($535 million) this year.
According to Maria Graf, equity analyst with ABN Amro in Zurich, Switzerland, Mikron still is interested in buying the unidentified tool shop, but it no longer is a priority.
"They want to focus on Axxicon," Graf said. "They won't do the other deal unless they're pretty secure. I won't get excited unless it starts to look more realistic."
Although it has not been discussed, one option is for Mikron to purchase a minority share of the toolmaker and agree on an option plan to buy more of the company as the year progresses, Wenger said.
Mikron's troubles have not affected its integration of Axxicon, said Roel Zeevat, managing director of Axxicon Components Rochester, the company's Rochester, N.Y.-based U.S. subsidiary. The Axxicon sale was completed Jan. 1.
"With Mikron, we see a good base for much faster growth in the U.S. market," Zeevat said.