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SCI profit grows as company diversifies

The contract manufacturer announces that revenues and profits shot up in the past quarter in part because of its efforts to diversify beyond the PC.

Contract manufacturer SCI Systems today announced that revenues and profits shot up in the past quarter in part because of the company's efforts to diversify beyond the PC.

Huntsville, Ala.-based SCI said that net income for its third fiscal quarter, excluding extraordinary events, came to $49.7 million, or 37 cents in earnings per share, a 54 percent increase over net income of $32.4 million, or 24 cents a share, from the same period the year before.

Sales rose 38 percent to $2.2 billion from $1.6 billion for the first three months of the year.

The increase in sales and profits comes amid a time of transition for the company. SCI, which assembles PCs for major manufacturers such as Apple Computer and Hewlett-Packard, was for several years the leader in the contract manufacturing business.

Last year, however, rival Solectron took over the top spot in the industry, while other competitors, such as Flextronics, grabbed market share through rapid acquisitions.

SCI also had to contend with declining profits, sparked in part by increased competition. And amid these problems, chief executive Olin King said he would hand over control of the company to Eugene Sapp.

Since then, the company has expanded beyond the PC into manufacturing communications equipment. Following the earnings results, numerous Wall Street analysts raised or reiterated their ratings on the stock to "buy" or "strong buy."

"Diversification of products together with growth in telecommunication products stimulated the revenue and operating margin growth in what has been a historically down sequential quarter for SCI," Sapp said in a statement.

He added: "Our product diversification strategy is not only providing growth, but is also abating some of the seasonal trends the company has seen in past years, particularly in the personal computer business."