Xircom Expands Penang Factory Amid Sales Hike

Posted on April 1, 1997 
Filed Under Julian, Nikkei Electronics Asia

By Julian Matthews

Mobile connectivity solutions provider Xircom Inc of the US is expecting record sales of its PC communication card products this year, with the strong showing of its first quarter sales for 1997.

Dirk Gates, Xircom chairman, president and CEO, said net sales of company’s PC card products grew to US$56.3 million for the first quarter of fiscal 1997, up 15% from the previous quarter, and a 67% rise over the first quarter of fiscal 1996.

Xircom earlier reported a turnover of US$193 million for its 1996 fiscal year ending September 30, up 53% from the previous year. Gates predicted a growth rate of about 85% for Xircom in 1997.

Gates said PC cards accounted for 90% of Xircom’s business and claimed the company is the market leader in combination LAN/modem combo cards and LAN cards. He also said Xircom has between 50 and 60% market share of the worldwide PC card market and between 60 and 70% share in the Asia- Pacific region.

Quoting IDC studies, Gates said the PC card market is expected to reach the US$1 billion mark in 1997, with more than 16 million PC cards sold worldwide.

Gates said key trends which will drive Xircom growth in the future include growth of the mobile workforce, the replacement of portable PCs over desktops, growth of information access and higher access speeds. Gates said he expects features mirroring these trends in product roll outs in 1997.

In October 1996, Xircom Inc began to roll out its family of 33.6kbps LAN and modem combination PC cards, the only such cards of its kind available at the time.

To Add US$120M to Penang Plant

Gates was at the Xircom Inc’s Penang facility recently to commemorate the one millionth PC card manufactured at the plant. The plant is its sole offshore plant and currently manufactures all of Xircom’s PC card products.

Xircom has already invested US$80 million in the 12,500 square meter plant and plans to invest another US$120 million in the coming years. By year’s end, the plant’s present four production lines will be expanded to between 9 and 12 lines and its staff strength increased from the current 400 to 700.

The Penang facility has a current capacity of about 1.2 million PC cards annually. Gates said he expects this figure to expand ten-fold by the end of the decade.

“The Penang operations contributed a very significant part in the re-engineering of Xircom’s business model to focus the Xircom brand on our core PC card business,” said Gates.

“We will continue to invest in process automation as well as production, ramping to meet the forecast growth in our business,” he added.

Founded in 1988, Xircom has become a leading manufacturer of PC card communication products for connecting mobile and remote portable computer users to corporate networks, the Internet, and other online services from a wide variety of locations.

Since 1989, Xircom has manufactured more than 3 million PC cards, a third of that in 1996 alone.

Of its 1996 revenues, about 57% was contributed by the Americas, 32% by Europe and 11% by the Asia-Pacific region. The Asia-Pacific region’s contribution is expected to grow to 15% by this year.

Gates said about 6 to 7% of the company’s earnings are channelled into research and development.

Xircom Penang managing director Jeffrey Tang said that worldwide shipments of portable PCs was growing at a compounded annual growth rate of 20% until the year 2000 and the network connection market for portable PCs was growing even faster at over 70%.

As such, Tang said the Penang facility was expected to expand aggressively and hoped to double revenue growth to US$200 million for fiscal 1997.

Gates said Xircom’s recent alliance with the world’s leading chipmaker, Intel Corp of the US, would see the two companies combining forces to develop the next generation of mobile connectivity solutions.

Intel announced in January 1997 that it was buying 12.5% of Xircom stock (2.5 million newly-issued shares) and acquired warrants for an additional 7.5% of the company’s stock (1.5 million shares) under a deal signed recently. The value of initial Intel equity investment in Xircom is US$52 million.

The companies also signed a three-year technology and multimillion dollar OEM agreement to further advance mobile connectivity solutions for high- performance business computing.

Published in Nikkei Electronics Asia, Apr 01, 1997

by Julian Matthews, Malaysian correspondent

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