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Lothar Maier |
At this year’s electronica CIE managed to spend some time with Linear’s CEO, Lothar Maier, who talked about the challenges of the past few years and how Linear planned to move forward as the recovery takes hold.
“In the fiscal year to the end of June 2010 our sales have grown by over 21 per cent and that despite the recession still having an impact on those figures. We’ve had record consecutive quarters in terms of sales and our sales are now exceeding those prior to the downturn. I’m expecting that type of performance to continue into the first quarter in the current financial year.
Like most companies Linear saw sales plummet as the recession began to take hold with sales dropping, from their peak, by around a third to $200m per quarter. However, since the nadir of early 2009 the company has seen sales move ahead strongly.
“If you strip out the recession and extrapolate our growth rate then the curve is almost perfect as to where we are now. The impact of the downturn was certainly extreme, but at no time did I think the world needed a third less of our products. It was a pause, a significant re-adjustment yes, and we certainly suffered from the more general economic worries, but we were confident that the recession wasn’t going to turn into a depression.
“We didn’t close factories or lay off staff. We certainly took some heat from the investment community who thought we should be cutting back - ‘acting decisively’ - but we were financially stable. When you consider the time, effort and money that goes into training our engineers then it seemed, to us, foolish to lay those people off. In fact we’ve found ourselves better placed to respond to the recovery than many of our competitors who have been caught rather flat-footed.“
By retaining capacity and a well trained workforce the company has been able to meet returning market demand.
“We were quickly able to return to growth once the economy began to recover. We’d managed to keep lead times throughout the downturn to around 4-6 weeks, unlike our competitors, which put us at a distinct advantage.”
Sales for the company have grown quarter on quarter and exceeded by 5 per cent, on average, those of their competitors.
“That’s been the case throughout 2010. We have our own facilities and are not dependent on foundries or sub-contractors.
“We had the financial resources so there was no need to panic when sales dropped by 35 per cent. We carried on investing in research and development and kept our technical team together. We kept delivering to customers who were themselves continuing to design new products. These guys didn’t want to take a risk with a supplier that could only offer a 20 week lead time. And we’ll benefit from those relationships as over the coming years these companies ramp into production.”
Linear Technology has traditionally sold into the industrial, computing, automotive, consumer and military/aero sectors but has decided to focus on just three: industrial, automotive and communications, primarily infrastructure in the years ahead.
“At present those three areas account for 75 per cent of our sales. We decided to become more focused around 5 years ago and to be honest many investors never really understood our approach, especially when we decided to focus on the automotive space. It takes time to engage with the automotive industry but we saw real growth opportunities in terms of navigation, safety and entertainment, and last year the automotive space accounted for 10 per cent of total sales.”
According to Maier the majority of the company’s business will come from these three markets in the next five years.
“Over 90 per cent of our sales will be derived from these three areas and any consumer business will, in all likelihood, be just legacy sales.”
A few years ago the company was accused of having a broad portfolio but with no star performers.
“We feel pride in not having a star performer. We have a lot of little star performers and you need to be in the consumer space to get that kind of recognition. I don’t want to be in a market where you can go from zero sales, then have a boom and then end up back at zero sales in a matter of years. I want to make better use of scarce design resources.”
The company’s decision to focus on industrial, automotive and communications does mean that it will have an impact, especially in terms of the type of competition it will now face.
“We’ll find ourselves in a more fractured group of markets where performance and value are more important. There are also real barriers to entry in to these particular markets and in a sense that will help insulate Linear from the ferocious type of competition you tend to see in consumer markets.“
Linear is a global business and is observing real change in the relationship between the supplier and the customer.
Maier explains: “We sell everywhere in the world and have sales offices scattered around the globe. We offer a wide variety of technical services and I believe that we’ve positioned ourselves pretty well to exploit ongoing changes in the market. The important thing is as time has gone by we’ve seen more customers looking to their suppliers to provide more engineering support. Products are getting more complicated all the time and customers are looking to have access to good analogue expertise from wherever they can find it, and increasingly we ‘re having to design the analogue portion of our customer’s products.
“We recognised this trend a number of years ago and in response rolled out a module analogue product range. It has been a real success for us but there have been a few surprises. Initially we targeted it at small to medium sized businesses who might not have access to the engineering resources available to larger companies. But what we’ve found is that these module products are also selling well to larger customers because, in their case, it’s all about time to market and that’s the key value proposition for them.“
Since the launch of the module range the company has developed a portfolio in excess of 40 with a further 30-40 under development.
“We thought we’d be at sales of around $50m with this range, but now we’re looking at topping $100m.”
Going forward the business under Maier’s leadership looks well positioned.
“The recession we’ve just gone through was a distortion and over the next few years, quarter on quarter, I think we’ll see steady growth. We offer thousands of different products.”
“Longer term there will be quarterly variations in demand and growth but one fact that wont change is that we’ll see more electronic components in our PCs, cell phones, vehicles and across the infrastructure we use. In the past it was all about individual products and the opportunities they offered. The future is going to be about how all these products link together.
“I come from an operations background. That is one in which you’re always pessimistic and the sky is always falling. But I actually believe that it’s not a risky bet to say that the electronics business is going to carry on growing.”
