Salcomp: All Charged Up

Outsourcing operations to Brazil and China helped the No. 1 maker of cell-phone chargers lower costs and open up new markets

It helps to have powerful parents. Just ask Salcomp, the world's top seller of mobile-phone chargers and No. 10 ranked company on this year's European Hot Growth list. The Finnish company, spun off by handset giant Nokia in 1999, today has 24% of the global market for chargers, with manufacturing plants in the fastest-growing cellular markets. Salcomp's operating profit for the first half of 2007 grew 161%, to $16 million, on revenues that jumped 16%, to $189 million.

But like most successful offspring of the mighty, Salcomp (SAL1V.HE) has had to make its own way, in this case plying the brutal trade of supplying cell phone accessories. While the company continues to supply Nokia (NOK) with chargers, it has also forged strong relationships with the rest of the world's leading mobile-phone manufacturers. Today it's the only company that sells chargers to all of the top five mobile-phone makers—Nokia, Sony Ericsson, Motorola (MOT), Samsung, and LG Electronics, which together hold 80% of the global handset market.

Entrée to Emerging Markets

The company also has been quick to offshore its manufacturing to remain competitive. Facing high overhead and bleak growth prospects in 2003, Salcomp executives laid off 90% of their 600 Finnish workers, quickly setting up shop in Brazil, India, and China. The strategy has had unexpected benefits. Not only has the company's total number of employees more than quadrupled, to more than 9,000, but locating operations in the world's fastest growing cell phone markets also has given the Finnish company a jump on its leading rival, Friwo Group, a unit of CEAG (CEAG.DE), which has plants only in China and its home country of Germany. "We've used our connections and know-how in China and Brazil to move the business forward," says Salcomp Chief Financial Officer Antti Salminen.

In Brazil, where high tariffs limit the number of chargers that can be imported, Salcomp has snared 85% of the market by manufacturing locally. Its Manaus factory has grown to more than 1,000 employees since the company took over the plant in 2005. "Repositioning itself in emerging markets has been very important for Salcomp," says Teemu Saari, equity analyst at Glitnir Bank in Helsinki.

Flush with success, Salcomp is hoping to branch out into other areas. It already has deals with Nokia and Sony Ericsson to make Bluetooth phone headsets, and it's on the lookout for an acquisition that would help it break into the market for chargers for laptop computers. Future expansion could be made easier since Stockholm-based investment firm Nordstjernan has acquired a 54.5% stake in Salcomp over recent months. Seen as a long-term investor with deep pockets, Nordstjernan's backing could help Salcomp keep growing out of the shadow of its more famous parent.

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