Plexus Corporation Business Information, Profile, and History

Company Perspectives

Our mission as The Product Realization Company is to provide a complete menu of value-added design and manufacturing services from which our customers can choose, giving them a competitive advantage in time to market, technology, flexibility and total cost.

History of Plexus Corporation

Plexus Corporation refers to itself as a "product realization service," that is, it helps corporations design, develop, and manufacture electronic components and other products. The company offers a full range of product realization services, including hardware and software design; printed circuit board design; prototyping services; new product introduction; material procurement and management; printed circuit board and higher level assembly; functional and in-circuit testing; final system box build distribution; and after-market services.

Since 2000, the company has worked to develop a global manufacturing network to meet the needs of its clients. The company's major markets include wireline/networking (38 percent of 2005 net sales), medical (30 percent), industrial (22 percent), wireless infrastructure (10 percent), industrial/commercial (17 percent) and defense/security/aerospace (5 percent). In 2005 Juniper Networks, Inc. accounted for 19 percent of Plexus's sales, and General Electric Corp. for 12 percent.

Beginning Operations in 1980

Plexus was incorporated in Wisconsin in 1979 and began operations in 1980. The company was founded by Peter Strandwitz, John Nussbaum, and a group of other entrepreneurs interested in a venture to design and build computer circuit boards by contract. Located in the eastern Wisconsin city of Neenah, on Lake Winnebago, the new company found the bulk of their early work through contracts with IBM.

The business grew, and by 1987, Plexus reported revenues of $24.5 million. The company also reported a net loss of $1.3 million, however. Turnaround was quick, and the next year the company saw revenues of $53.2 million and net income of $393,000, a dramatic increase in sales of 117 percent. To effect this change, management had cut operating expenses as a percentage of sales by 50 percent. The company's stock, then traded over-the-counter, responded in 1989 by nearly doubling in the first six months. Sales in 1989 again rose substantially to $78.1 million.

By the end of the 1980s Plexus had organized its business among three subsidiaries. One, Technology Group Inc., was headquartered in Neenah, Wisconsin, and focused on electronic product development and testing. The other two subsidiaries were the company's dual contract production units, Electronic Assembly Corp. and Electronic Assembly Inc., with facilities in Neenah as well as in Richmond, Kentucky.

Quality Control Leading to Strong Sales: 1990-1994

Strong sales growth continued in the 1990s as Plexus developed a reputation for quality control in producing its electronic circuit boards. With the quality of boards produced in the Far East and the Pacific Rim slipping, more companies were buying boards made in the United States. Sales in fiscal 1991 reached $120.4 million, representing a five-year growth rate of 26 percent.

By 1991 the two contract production units had been merged into one, Electronic Assembly Corporation. The other subsidiary, Technology Group Inc., focused on product design and development. The company's customers ranged in size from giant IBM to a small Wisconsin-based maker of telecommunications devices for the deaf. The company's CEO and founder Peter Strandwitz told the Business Journal-Milwaukee: "Three key factors in Plexus' success are state-of-the-art technology, a high-quality, motivated labor force, and the quality demands of its customer base." Analysts agreed that the quality of Plexus' technology was among the industry's best. Due to its board testing equipment, Plexus could test board designs even more thoroughly than some of its customers, noted one analyst.

For 1992 sales rose 32 percent to $157.4 million, while net income jumped 39 percent to a record $5.1 million. In 1993, however, sales were flat at $159.6 million, and net income plunged about 50 percent to $2.6 million. Sales improved to $242.5 million in 1994; net income was about $3.1 million.

The company had completed work on its new 175,000-square-foot Advanced Manufacturing Center in Neenah. Costs associated with bringing the facility online had affected profits in 1993. The new facility added capacity in anticipation of future business from outsourcing by major electronic manufacturers. Major customers included IBM and GE Medical Systems.

Expansion and Alliances: 1995-2000

In 1995 Plexus expanded by hiring 500 people in the fourth quarter. Some of the new employees were hired through Wisconsin's Department of Vocational Rehabilitation, leading the company to hire workers with physical disabilities primarily for basic assembly jobs. Plexus also developed new training methods and established its Mentor Training Program, wherein volunteer mentors helped new employees through their first days and weeks at the company. Workforce diversity and training objectives became part of the company's strategic plan in 1996, and in 1998 Plexus was given the Governor's Exemplary Employer Award.

In 1997 Plexus gained marketing clout through a design and marketing agreement with Cadence Design Systems Inc., the world's largest software design company. Under the agreement, Cadence's 450-person sales force would market Plexus products and services to its customers. Plexus, with its large staff of engineers, provided the electronics industry with design, manufacturing, and testing services, but had a minimal sales force.

In April 1997 a new assembly plant in Green Bay, Wisconsin, began operations. The $22 million, 110,000-square-foot facility was built by Plexus on an Oneida reservation. Plexus and the Oneida tribe collaborated on the building and equipment for the facility, which was financed and owned by the Oneidas but operated by Plexus. It was Plexus's third electronic manufacturing services plant in addition to plants in Neenah and Richmond, Kentucky. The Green Bay facility featured five cells; the first became operational in April 1997, and others could be brought on line as business increased. Plexus also opened a design center in Raleigh, North Carolina, in 1997.

To help it land corporate research and design contracts, Plexus formed alliances with other research and design companies. In addition to its alliance with Cadence Design Systems, Plexus formed an alliance with Adaptive Microwave, a digital compression company based in Fort Wayne, Indiana, with expertise in video compression. Another alliance was established with IDEO of Palo Alto, California, the world's largest private firm in industrial design and engineering. Plexus's longest-standing alliance was with Battelle Institute of Columbus, Ohio, a private research and development company with $1 billion in sales. For fiscal 1998 net sales were $396.8 million, with net income of $19.2 million. The company had about 2,400 employees.

In early 1999 Plexus expanded its Raleigh, North Carolina, design center, which was originally opened in September 1997. It also opened its third regional design center in Louisville, Colorado, near Boulder. The 14,000-square-foot facility was designed to house up to 60 engineers. Plexus began by transferring a core team of eight to ten engineers from Neenah, then hired more engineers in Colorado. Overall, Plexus planned to double its engineering staff to 500 nationally over the next three years. The company's geographic expansion was guided in part by a desire to locate in high quality-of-life areas that would attract highly qualified technical candidates. Future expansion plans included the West Coast, Boston, Texas, and Europe. Expansion was seen as necessary to win contracts from global corporations.

In mid-1999 Plexus acquired SeaMED, a medically focused electronic design and manufacturing services provider in the Seattle, Washington area. The acquisition added 135 engineers and support personnel to the company's Design Center staff. SeaMED's customers included Boston Scientific, Johnson & Johnson, Medtronic, and Novoste. Later in the year Plexus acquired printed circuit board assembly production facilities in the Chicago area from Shure Inc. for the RF/wireless technology market.

In addition to expanding its research, development, and production capabilities, Plexus continued to develop new technologies. Late in 1999 the company announced that it had designed an inexpensive radio module that allowed computers to communicate by radio wave from ten miles apart, compared with ten feet permitted by current technology. In addition, the high frequency wireless band used in this new technology could send ten to 20 times the amount of data that existing systems could handle. The technology also allowed computers within the confines of a building to communicate several hundred feet apart. Using this technology computers would be able to communicate directly with one another in real time while bypassing all wired infrastructures.

Plexus focused on the high-end, low-volume aspect of the electronics business, which resulted in smaller sales growth than companies focused on high-volume commodity electronics have realized. As a result Plexus's stock was not given a high valuation by Wall Street and was considered undervalued by investors during 1999. By March 2000, however, the company's stock price had jumped from $34 a year before to about $56, and Plexus's market capitalization exceeded $1 billion for the first time.

Building a Global Supply Chain in 2000 and Beyond

Plexus's high degree of engineering skill made it a leader in supplying contract engineering and manufacturing as well as design and testing services to the electronics industry. As the company sought to expand its capabilities, it hoped to establish an overseas presence; at the end of 1999 all of its facilities were located in the United States.

Through acquisitions and internal expansion, the company was increasing its engineering staff and opening facilities in Mexico and Europe. In May 2000 it completed the acquisition of the electronic contract manufacturing operations of Elamex, S.A. de C.V. in Juarez, Mexico, for approximately $54 million. It was the company's first expansion outside the United States. Plexus would operate two facilities in Juarez, a newly constructed 210,000-square-foot electronic manufacturing plant and a 40,000-square-foot service center.

Revenues were $752 million in 2000. In May of that year, Plexus closed the acquisition of Boston-based Agility Inc. A couple of months later, it bought Keltek Holdings Ltd. of Kelso, Scotland, another privately owned EMS provider. The company aimed to use Keltek as a base for opening regional design centers throughout Europe, an executive told EBN.

Unfortunately, as a supplier to original equipment manufacturers (OEMs) in the electronics industry, Plexus was affected by the enduring slowdown following the collapse of the tech bubble. By the end of 2001, the company had reduced its workforce by about 10 percent as a result.

At the same time, Plexus made a couple of strategic acquisitions. The purchase of Hillsboro, Oregon-based e2E Corp. for about $25 million in stock and assumed debt bolstered its PCB engineering capabilities. E2E had 100 engineers based in a handful of cities in the United States and abroad. Adding hard-to-find design talent was a priority for Plexus. The acquisition of San Diego-based Qtron Inc., a $75 million EMS provider, brought advanced wireless infrastructure technology as well as two Southern California manufacturing plants.

Plexus added manufacturing capacity in Malaysia, China, and Nampa, Idaho via the January 2001 acquisition of five plants of bankrupt MCMS Inc. of San Jose, California from MPC Computer (formerly Micron Electronics Inc.). Plexus continued to cut its workforce by about 10 percent a year. It was, however, hiring more engineers at its Research Triangle, North Carolina facility.

The company's plants were running at half capacity in the post-bubble economic slump. Plexus lost $4 million in 2002 on sales of $884 million. In the next two years, the company closed manufacturing facilities in Bothell, Washington; San Diego, California; Richmond, Kentucky; and its oldest facility in Neenah, Wisconsin. Operations in Nashua, New Hampshire and Tel Aviv, Israel were sold to former employees. A second plant was acquired in Penang, Malaysia in fiscal 2004.

Thomas B. Sabol, the company's chief financial officer, told the Wall Street Transcript that what set the company apart from its competitors was its "passion for customer service." Plexus continued to avoid the high-volume commodity and consumer markets in order to focus on its niches: medical, optical, wireless, networking, data communications, and industrial. Another distinguishing factor, an analyst told EBN, was Plexus's strength in new product introduction (NPI) capacity. After buying Agilent, Plexus had doubled the size of its facility for use as an NPI Plus center.

Plexus landed a contract for broadband equipment from Next Level Communications in 2003. This work was allocated to the newly acquired Nampa, Idaho plant. By this time, Plexus was running 14 manufacturing plants around the world.

Net sales rose nearly 20 percent in 2004 to exceed $1 billion. This was not enough to stem the flow of red ink, though the company did manage to reduce its previous year loss of $68 million by more than half. After losing $31.6 million in 2004, Plexus posted a $12.4 million deficit in 2005, when sales were $1.3 billion. The company had added the defense/security/aerospace market to its list of chosen niches.

Principal Subsidiaries

Plexus Services Corporation; Plexus International Services, Inc.; PTL Information Technology Services Corporation; Plexus Management Services Corporation.

Principal Operating Units

United States; Asia; Mexico; Europe.

Principal Competitors

Solectron Corporation; Flextronics International Ltd.; Sanmina Corporation.

Chronology

• Key Dates
• 1979 Plexus is incorporated as a Wisconsin corporation.
• 1988 Sales increase 117 percent, and the company turns a profit.
• 1994 A new 175,000-square-foot Advanced Manufacturing Center in Neenah is completed.
• 1999 The company acquires SeaMED, an electronic design and manufacturing services provider for the medical market.
• 2000 The company acquires a manufacturing facility in Mexico, the company's first expansion outside the United States.
• 2001 Plexus cuts its workforce 10 percent while buying e2E, Qtron; sales exceed $1 billion.
• 2002 The MCMS acquisition adds manufacturing capacity in Asia.
• 2004 A second Malaysia plant is acquired to meet demand for low-cost manufacturing.