Plexus Corporation History

Address:

55 Jewelers Park Drive
P.O. Box 156
Neenah, Wisconsin 54957-0156
U.S.A.

Telephone: (920) 722-3451
Toll Free: 877-733-7260

Public Company
Incorporated: 1979
Employees: 3,150
Sales: $492.4 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: PLXS
NAIC: 334412 Bare Printed Circuit Board Manufactur- ing; 334418 Printed Circuit Assembly (Electronic Assembly) Manufacturing; 541330 Engineering Services; 541710 Research and Development in the Physical, Engineering, and Life Sciences

Company Perspectives:

Plexus, formed in 1980, provides product realization services. The unique concept of Plexus is to provide all aspects of electronic product development and manufacturing to other corporations. The company has no proprietary products, but its product realization services have resulted in products that are used in a variety of markets, including medical, networking, telecommunications, industrial, computer and avionics.

Company History:

Plexus Corporation refers to itself as a 'product realization service,' that is, it helps corporations design and develop and manufacture electronic components and other products. The company is organized into two operating units: Plexus Technology Group and Plexus Electronic Assembly. The Technology Group provides product development engineering, prototyping, and test development services. Electronic Assembly provides manufacturing and after-market support services. Together, these two operating units offer 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; after-market services. Plexus has three types of facilities that are used in the product realization process: design centers, protocenters, and manufacturing centers. The company's major markets include medical (31 percent of 1999 sales), networking/telecommunications (24 percent), industrial (22 percent), computer (14 percent), and avionics/other (nine percent). In 1999 Lucent Technologies Inc. accounted for 16 percent of Plexus's sales, and General Electric Co. for 12 percent.

1980s Origins

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. However, the company also reported a net loss of $1.3 million. 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 Leads to Strong Sales in the 1990s

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 in recent years, 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 Corp. 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, according to 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. Analysts considered the results predictable and forecast improved sales for 1994. 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 it had designed an inexpensive radio module that allowed computers to communicate by radio wave from ten miles apart, compared to ten feet permitted by current technology. In addition, the high frequency wireless band used in this new technology could send 10 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 one day to communicate directly with one another in real time while bypassing all wired infrastructures.

Plexus has focused on the high-end, low-volume aspect of the electronics business, which has resulted in smaller sales

1979:Plexus is incorporated as a Wisconsin corporation.

1988:Sales increase 117 percent, and company turns a profit.

1994:A new 175,000-square-foot Advanced Manufacturing Center in Neenah is completed.

1999:Company acquires SeaMED, an electronic design and manufacturing services provider for the medical market.

2000:Company acquires a manufacturing facility in Mexico, the company's first expansion outside the United States.

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 planned to increase its engineering staff and open 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. Plexus would operate two facilities there, a newly constructed 210,000-square-foot electronic manufacturing plant and a 40,000-square-foot service center. It was the company's first expansion outside the United States.

Principal Subsidiaries: Plexus Electronic Assembly Corporation; Plexus Technology Group, Inc.; SeaMED Corporation.

Principal Competitors: ACT Manufacturing Inc.; Benchmark Electronics Inc.; Jabil Circuit Inc.; Solectron Corp.

Plexus Corporation History

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