Altron Incorporated History

Company Perspectives:

Altron's business strategy encompasses several elements: Focus on quality; provide service-oriented manufacturing; maintain technology leadership; target high value-added electronic interconnect products; maintain a diversified customer base; and pursue a "partnership" approach with customers.

Company History:

Altron Incorporated is a leading contract manufacturer of advanced electronic interconnect products, including surface mount assemblies, custom-designed backplanes, and multilayer printed circuit boards. The company also manufactures total systems, which include these components as well as card racks, power supply, and housing. Altron principally targets the mid-volume original equipment manufacturer (OEM) interconnect market, providing value-added services such as original design and engineering, prototype engineering, and pre-production and full production capabilities. The company generally works closely with its customers to develop components for customer products ranging from cellular telephones to magnetic resonance imaging equipment.

Altron's customers are typically high-growth electronics OEMs in the telecommunications, data communications, computer, industrial, and medical systems industry. Altron's list of more than 125 customers includes Motorola Inc., which accounts for approximately 13 percent of revenues, General Electric Co., Hewlett-Packard Co., Silicon Graphics Inc., Lucent Technologies, 3Com Corporation, Cabletron Systems, Inc., Cascade Communications Corp., Cisco Systems, Inc., Data General Corporation, EMC Corporation, Johnson and Johnson, Inc., KLA Instrument Corp., and U.S. Robotics Corp. Altron's value-added contract manufacturing activities account for nearly three-quarters of the company's revenues; the remaining portion of the company's sales comes from its manufacturing and sale of printed circuit boards.

The company's emphasis on value-added services during the 1990s has enabled the company to triple sales in the first half of the decade, from $53 million in 1990 to $165 million in 1996. The largest share of company revenues are typically generated through sales to the data and telecommunications industries, which account for more than half of Altron's revenues. Sales to high-end computer manufacturers, such as Hewlett-Packard and EMC, generate approximately 30 percent of revenues. Altron is led by company cofounder Samuel Altschuler, who serves as chairman, president, and CEO. Another founder of the company, Burton Doo, is executive vice president, and president of the company's subsidiary, Altron Systems Corporation. The Altschuler family controls more than 18 percent of the company's stock.

Headquartered in Wilmington, Massachusetts, Altron operates a 200,000-square-foot manufacturing facility there. The company also operates three ISO 9002-registered production facilities, a 104,000-square-foot plant and a 30,000-square-foot plant, both in Woburn, Massachusetts, and a 70,000-square-foot facility in Fremont, California. These facilities are part of the company's more than $50-million investment strategy in state-of-the-art electronics manufacturing, engineering, and design equipment, including capital-intensive surface mounting machines for soldering microprocessor chips directly to circuit boards.

Altron provides service-oriented, vertically integrated manufacturing capabilities, including the manufacturing of most of the printed circuit boards used in the company's total system products, surface mount assemblies, and custom-designed backplanes. Vertical integration enables the company to control not only quality, cost, and delivery of its products, but also to offer a broad range or high-technology prototype assembly and other high value-added services. A key component of Altron's business strategy is its pursuit of partnership-type contracts with its customers, providing design and engineering support to early product design stages, as well as quick turnaround times and just-in-time inventory management and delivery. Through such partnership contracts, Altron seeks to build long-term relationships with its customers, providing its value-added manufacturing services for a range of customer products and across multiple product generations.

Altron has positioned itself to take advantage of the growth in demand for multilayer printed circuit boards as developments in technology have created components requiring greater performance and speed, and more compact size than can be achieved with previous two-sided printed circuit board designs. The multilayer boards are composed of three or more layers of printed circuit boards. By laminating together several layers of printed circuit boards and interconnecting the layers with holes lined with conductive material, the multilayer boards provide increased density and reduced size of printed circuit packaging, greater power and ground distribution, and higher circuitry speeds. In 1996, multilayer printed circuit boards, which represented 80 percent of industry-wide printed circuit board production, accounted for 94 percent of the company's total printed circuit board sales. Altron also uses surface mount assembly technology (SMT) to solder, rather than insert using pins, semiconductor components directly onto circuit boards. SMT enables a greater density of components, increases in interconnect leads, and reduced size, as well as the ability to manufacture two-sided circuit boards.

Altron's custom-designed backplanes, also known as "motherboards," use the company's two-sided and multilayer printed circuit boards to assemble pins, housings, and other components. Backplanes house power supplies, component interconnects, processors, and fittings for additional printed circuit boards and cards. Altron produces backplanes ranging in complexity of up to 32 layers of printed circuit boards, thicknesses up to 0.300 inches, and dimensions of nearly two feet by three feet. In additional to these components, Altron also provides custom-designed total systems meeting the design and engineering specifications of its customers. Total systems feature components such as power supplies, backplanes, printed circuit board assemblies, and card racks and component housings.

The Slow Road to Growth in the 1990s

Together with Doo and two other partners, Altschuler formed Altron in 1970. Altschuler, who held a bachelor's degree in electrical engineering and a master's degree in business administration, had been working larger firms in the electronics industry when he saw a need for supplying high-quality printed circuit boards. These would remain the company's primary product through the 1970s. The company posted slow but steady growth based on its printed circuit boards, concentrating on building long-term relationships with its customers. A child of the Depression, Altschuler, who would serve as president and CEO from the company's inception into the 1990s, avoided taking on debt, preferring to maintain sufficient cash reserves to weather the cyclical downturns in the semiconductor industry.

By the end of its first decade, Altron was still only a $15 million company. In 1979, however, the company began manufacturing multilayer printed circuit boards. Over the next decade, buoyed by increases in technology and the growth of the computer and electronics industries overall, the company would more than triple the size of its revenues. Altron remained profitable during the early 1980s, despite the national recession and a severe downturn in the computer industry. By 1985, the company posted a net income of $1.7 million on nearly $30 million in revenues. The following year, however, the computer industry's troubles caught up to Altron. Sales slumped to $25.6 million, and the company recorded a net loss of more than $3.7 million. Altron was forced to close a manufacturing plant in Puerto Rico, write off inventory, and sell off some of its real estate. In 1987, as the electronics industries began to pick up again, the company managed to boost sales to $31 million, and cut its losses to just over $1 million, aided by the sale of its Puerto Rican plant.

By 1988, Altron was back in the black again, posting a net income of $26,000. But sales were rising rapidly, reaching $42 million for the year and climbing to $53 million in 1989. By then, Altschuler had already moved to diversify the company's operations. Altron added an in-house engineering design department, and began investing in equipment to give the company the capability of manufacturing complete electronic systems. The company's new strategy was to place itself in the position to take over more and more of its customers electronic engineering design and production. Meanwhile, Altron continued to avoid costly advanced research activities. As Altschuler told Investor's Business Daily, "We haven't fallen in love with technology for technology's sake. You have to be at the leading edge of technology. But not so far ahead that there's no business behind you .... We don't have an 'R&D' budget. We have a 'D' budget. We're doing applied development to solve customers' needs."

Altron's move to vertically integrated production capacity came at the right time for the electronics industry. As the 1990s began, major OEMs, which had previously looked in-house for their printed circuit board, backplane, and other electronics production, began to look for third-party manufacturers to supply them. By turning to value-added contract manufacturers like Altron for these products, the OEMs were able to reduce their own capital investment--on the rise as both production and product technologies were making significant advances--while refocusing their resources on their core technologies. Freeing up these resources enabled the OEMs to compete more effectively in the tight margins and stiff rivalries of the electronics industries. Contracting out to third-party supplies enabled OEMs to maintain access to cutting-edge production technology, while reducing inventory costs, particularly by shifting to on-demand delivery and just-in-time inventory systems. In turn, the third-party suppliers offered a greater flexibility and shorter turnaround times for their customers orders. This became particularly important into the 1990s, when product life-cycles became progressively shorter, and also during the early years of the decade, when OEMs were faced with a worldwide recession. Between 1991 and 1996, the electronics industry underwent a dramatic shift in production of printed circuit boards. Where only 66 percent of the printed circuit board market was shared among third-party manufacturers in 1991, these manufacturers, including Altron, held more than 85 percent of the printed circuit board market, valued at nearly $8 billion, by 1996.

In the early 1990s, Altron put into place the capacity to most of the components of a single electronic system, including the circuit board and assemblings, disk drives, ventilation fans, power supplies, and casings. With this capacity, the company's revenues posted strong gains, particularly among communications OEMs, but also among computer makers, such as Sun Microsystems and Hewlett Packard, and makers of electronics-based medical equipment. In 1991, the company added surface mount technology to its production capacity, bringing the company fully into the contract manufacturing business. By 1992, the company's annual sales had jumped to $68 million.

In 1994, after signing an agreement to act as a value-added reseller for AT&T Microelectronics Power Systems, designing and manufacturing custom-designed power supply systems using AT&T power supply components, Altron made its first-ever acquisition, buying Astrio Corp. of Fremont, California, for a purchase price of $4.6 million, including $3 million in cash and the balance in Altron stock. The addition of Astrio to the company's Altron Systems Corp. subsidiary combined the latter company's card cages and systems assembly production with the former company's printed circuit boards, surface mounts, and data board assembly production. As Altschuler told the Boston Business Journal, the acquisition "greatly expanded capacity and capability to better serve our growing customer base in Northern California." Doo, serving as president of the Altron Systems subsidiary, stated that adding Astrio's production capacity would provide Altron with a "real presence on the West Coast," a crucial market for the third-party suppliers to the computer and electronics industry.

Altron continued to deploy its "value and build" strategy, turning its ISO 90002-certified plants to include backplane assembly and testing, multilayer manufacturing up to 32 layers, card cage design and assembly, surface mount assembly, and the design, assembly, and testing of complete systems. In addition, Altschuler looked forward to increasing the company's share of its customers' business, eventually to taking on distribution of completed products. As Altschuler told Fortune, "we want to supply the total system and ship it to our customers' customers." The Altron strategy was working. After posting a revenue increase to $104 million in 1994, which generated more than $8 million in net earnings for the company, Altron saw its sales jump past $143 million, for more than $14.5 million in net earnings in 1995.

The growth of the company's value-added services has steadily reduced its dependence on sales of printed circuit boards, from primarily all of the Altron's revenues in the 1980s to just 39 percent in 1994 and 27 percent in 1995. Under Altschuler, the company had built long-term relationships with many of the leading "blue-chip" OEM electronics companies, building a strong position within the highly fragmented--and competitive--value-added contract manufacturing market.

Principal Subsidiaries: Altron Systems Corporation.

Further Reading:

• Alster, Norm, "Altron Inc.," Investor's Business Daily, December 5, 1995, p. A6.
• ------, "Altron's Sam Altschuler," Investor's Business Daily, May 21, 1996, p. A1.
• Labate, John "Altron," Fortune, October 31, 1994, p. 238.
• Schreiber, Yoav, "Altron Buys Astrio Corp.," Boston Business Journal, June 17, 1994, p. 5.

Source: International Directory of Company Histories, Vol. 20. St. James Press, 1998.

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