executives see the current economic slowdown lasting through the first half of 2001, but say they are prepared and poised for growth.
The company, which sells semiconductors and passive components such as resistors and capacitors, said 2001 would be a year for acquisitions. Vishay disclosed its plans to a packed room at the
Wall Street Analyst Forum
in New York earlier this week.
"Recessions are a good time to expand. When you come out of the drop, you've got twice as much kick," said Avi Eden, Vishay's vice chairman.
Analysts seemed inclined to agree. Jim Magrid, a senior advisor with
, which underwrote a Vishay offering in April 2000, supported Eden's stance. "The whole acquisition strategy for the past 15 years was justified by how well the company did last year," he said.
In 2000, Vishay acquired
and the business of
. Prior acquisitions include
, the flagship division of Vishay's semiconductor unit.
Eden didn't offer any specific acquisition candidates for 2001, but said Vishay is currently looking at 10 to 15 companies. Vishay's present situation is reminiscent of 1985, Eden said, when the company was sitting on a significant cash pile and decided to go on what he referred to as the "acquisition trail."
Vishay didn't stray from the financial guidelines the company issued Feb. 6. Executives said they remain comfortable with earnings of $2.50 to $2.75 a share in 2001. Though the numbers represent a significant drop from 2000, Vishay attributed the decline to overcapacity. Customers, especially those in the cell phone industry, cancelled orders placed in the fourth quarter that were set to pay out in 2001. While demand in those markets hasn't dropped, it hasn't grown at anticipated levels either, executives said.
Analysts polled by
First Call/Thomson Financial
expect Vishay to earn $2.54 a share for the year and 75 cents a share in the first quarter of 2001. The company stood by its earnings forecast of 65 cents to 75 cents a share for the quarter, but didn't project further.
Eden presented a healthy set of diagnostics. The company is practically debt free, with a $1 billion credit line. Earnings in 2000 totaled $518 million, or $3.70 a share, the highest in Vishay's history. Revenue was about $2.5 billion. Strong cash flow allowed Vishay to pay off debt accrued from purchases in the past decade and a half.
The criteria for future acquisitions will be simple -- the company must add to earnings in the first quarter following the deal, and Vishay must be able to improve on it in some way. "We don't want to buy a really well-run company, because there's nothing we can do for it," Eden told analysts.
That means Vishay won't be going after a competitor such as
, said Needham's Magrid. He expects the company to think small, focusing on divisions of larger companies or a particular product line. "They're going to go after companies you and I have never heard of," Magrid said.
Another Wall Street analyst thought Vishay, following the Siliconix acquisition, would look to purchase another active-conductor business. "Maybe they're more interested in the active side, which is the discrete semiconductors," according to the analyst, who asked not to be named. "They look at those businesses as higher-margin in the long term."
Acquisitions are what will move Vishay above the competition, especially if a recession occurs, Magrid said. "They're hinting that if things are worse, then it will be a lot easier for acquisitions," he said. "A recession will strengthen Vishay, it won't hurt them."