Online Extra: No. 35: AT&S
Sales: €332 million
Austria doesn't have much cachet as a high-tech center, but it's home to a company that provides the "nervous system" for nearly 40% of Europe's mobile phones. Vienna-based Austria Technology & Systems Engineering Corp. (AT&S) makes the printed circuit boards (PCBs) that allow different parts of electronic devices to communicate with each other, and it's racing to boost capacity as consumers' demand for the latest technological gadgetry shows no signs of abating.
AT&S, Europe's largest producer of PCBs, boasts a client base that's the envy of rivals. Nokia (NOK ) is its biggest customer, but AT&S also has contracts with Motorola (MOT ), SonyEricsson, Research in Motion (RIMM ), and other wireless-industry heavyweights.
These are relationships AT&S has cultivated through a dedication to innovation and an ability to adjust quickly to changing customer needs. Formed in 1984 through the merging of three Austrian PCB makers, AT&S was one of the front-runners in the miniaturization of PCBs, which involves packing more circuits onto a smaller space. That, along with a dedication to innovation and efficient supply-chain management, has enabled it to establish strong relationships with handset makers.
AT&S defied convention during the mobile industry slump in 2002 by announcing plans to build a manufacturing facility in Shanghai. But sound strategic thinking was behind the move: It saw clients were turning their attention to the Chinese market. "Some thought we were crazy," for investing 140 million euros -- half its annual sales -- on the factory, says Harald Sommerer, chief executive of AT&S. "It was risky, but for us there was no other way."
The gamble paid off. The factory broke even within six months of its December, 2002, opening. One-quarter of the company's 4,200 employees are now based on the mainland, and that number will increase next year, when a second Shanghai factory -- three times the size of the first -- comes online. Lower manufacturing costs mean profit has tripled to 26.7 million euros. Sales have risen at a more earthly 20%, to 332 million euros.
AT&S still produces PCBs in Austria for automotive and industrial clients, but it's the shift to China that has made it more competitive with Asian rivals. Now, it's ready for the next challenge: the consolidation of the global $35 billion PCB industry, which has more than 2,000 players. The top 30 companies -- AT&S is No. 15 -- together control only one-third of the market.
"We want to be one of the leaders of the consolidation," says Sommerer, 38, who took over as CEO in July after eight years as the company's finance chief. "With almost no debt, we're in a good financial position to do just that."
AT&S is keen to get a foothold in the U.S, too, particularly in the area of prototype development. But that would necessitate a strong local presence, so AT&S could work closely with its customers, and it says it won't make acquisitions just for the sake of doing deals. The company has already looked at -- and rejected -- opportunities there because they haven't been a good fit, and AT&S says it refuses to overpay.
"The management team is very disciplined -- you wouldn't expect them to do silly deals" that don't jell with the company's strategy, says Nicholas von Stackelberg, an analyst at Sal. Oppenheim Jr.
AT&S, which currently has a 13.5% share of the global PCB market for mobile phones, wants eventually to boost that to 20%. Reaching that goal won't be easy. Germany's Siemens (SI ), its second-biggest customer, sold its mobile-handset unit earlier this year to Benq Corp., raising concern that AT&S could lose that contract to Asian PCB makers that already have ties with the Taiwanese company.
AT&S also wants to become less reliant on the mobile industry, which accounts for nearly two-thirds of sales, by winning more automotive and industrial clients. Given its knack for innovation and ability to gauge the market, though, some analysts feel confident AT&S can achieve both goals. As Alexander Hodosi, an analyst at Bank Austria Creditanstalt, puts it: "The company's track record speaks for itself."