You may have never heard of Flextronics or its globetrotting chief executive, but youve probably bought something the company made.
In 1994, Michael Marks took the reins of Flextronics, which was then a small contract manufacturer pulling down less than $100 million per year, and turned it into a global manufacturing behemoth that expects to generate $13 billion in revenue this fiscal year.
Flextronics, which operates 150 factories worldwide and has 70,000 employees, has been the fastest-growing company in the outsourced electronics manufacturing sector, though its No. 2 in sales behind Solectron.
Flextronics customers — for whom it handles various manufacturing and distribution functions — include the high-tech industrys crème de la crème: Cisco Systems, Compaq Computer, Hewlett-Packard, IBM, Lucent Technologies, Microsoft, Nokia, Palm, Philips Electronics and Sony, among others.
In January, the company landed one of its biggest customers ever: Flextronics will manufacture all of Ericssons mobile phones, a deal that could be worth as much as $5 billion per year alone.
Granted, its not the sexiest business to be in, as far as the general public is concerned. But someone has to make the physical equipment that makes the Internet tick.
And increasingly, the companies that design, market and sell hardware view the manufacturing side of their operations as huge cost centers.
Marks, 50, believes that Flextronics can do much better, since building and shipping the boxes is what his company does exclusively. For example, he expects to cut at least $400 million per year from the cost of Ericssons mobile phone manufacturing operations.
“It just works better. Its a better model,” he says. “Were a variable cost from the customers perspective.”
But as sales cool in previously hot hardware categories — personal computers, for example — Flextronics could be stung by falling demand. Flextronics stock has declined in the past month amid the news of lower earnings and layoffs at technology companies.
Marks, however, sees the sunny side of an industrywide contraction as an opportunity for Flextronics to get even more business.
“Now that we have a downturn, once factories get half-full, then you cant imagine how fast people will scramble to get rid of them,” he says.