August 9, 2010
Growth by acquisition only works if the buyer knows how to bake the new additions into its operations. Doing it wrong can cost a company billions of dollars, as evidenced by a few unfortunate buyouts from the past. Doing it right, on the other hand, can be a viable and profitable corporate strategy -- just ask Larry Ellison of Oracle (Nasdaq: ORCL ) or John Chambers of Cisco Systems (Nasdaq: CSCO ) , and they'll show you how it's done.
While nowhere near Oracle or Cisco in terms of scale and size, circuit board manufacturer TTM Technologies (Nasdaq: TTMI ) is working wonders with acquisitions, too. The company has doubled in size through outsized buyouts twice in the past few years. TTM took on the circuit board division of industrial giant Tyco back in 2006 and then bought out pan-Asian manufacturer Meadville earlier this year. And the strategy is working.
In the just-reported second quarter, TTM hit the ground running with Meadville as the new division more than doubled company sales and made a modest contribution to the bottom line right away. Comparing the new TTM to previous quarters doesn't exactly make sense since this new beast is vastly different from the old one, but let's do it anyway for a sense of scale: Revenue increased by 124% sequentially to $310 million, and non-GAAP earnings per share increased from $0.19 to $0.26 -- despite printing up 76% more shares to help pay for the acquisition.
The reimagined TTM serves a much wider customer base. TTM proper mostly serves homebodies like Cisco and the big defense contractors, while Meadville ships circuit boards to the Asian manufacturers that put together gadgets for a global customer base. Apple (Nasdaq: AAPL ) and Nokia (NYSE: NOK ) are among Meadville's -- and now TTM's -- largest customers. Buying exposure like that is priceless, especially when the integration process chugs along on-time and under budget.
I'm a fan and have rated TTM "outperform" in our CAPS system. The stock has a respectable four-star rating out of five, but could use a few more data points -- only 263 members have rated this stock as of this writing. Would you please swing by and add your own rating today?