A tale of two schools.

Apple Computer, I mean, Apple Inc.'s flashy entrance into the telecom market last month reminds us of the divide between the electronics industry's haves and have-nots.

After rolling out what is for now called the "iPhone" (Cisco holds a trademark on the name and is disputing Apple's use), shares of the erstwhile computer company shot up 14% to an all-time high.

That boost is a great reward for Apple's many investors, including its famous CEO. Upon his much-ballyhooed return from a 12-year exile to the then listing company he founded, Steve Jobs took an annual salary of $1, betting a healthy portion of company stock options would more than compensate for the security of a fat monthly paycheck.

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A few days later, the CEO of a leading PCB shop stepped down after failing to similarly spark his company's shareholders. Merix is a $300 million supplier of bare circuit boards and counts several big-name OEMs among its customers, including Cisco, Motorola, Harris, TRW, Visteon and Bosch. When it comes to building boards, Merix is about as good as they come. But when it comes to making money for its investors, that's another story. Merix's adjusted price on Jan. 3, 2002 (amid the wretched tech downturn) was $19.15. Now it's $9.13. That's not the direction most investors want to see their holdings go.

On a conference call with analysts, Merix interim CEO Bill McCormick explained the decision. "The pace of change at Merix was not occurring fast enough. Merix needed a CEO with more global experience."

Merix is a leading supplier of a critical component for electronics end-products, and its situation should resonate across all electronics manufacturing. Its problems are our problems. Precious few companies in the EMS sector have performed well over the span of their publicly held lives. As a friend of mine remarked," 'Job shop' industries are all problematic [because] they cannot sell a 'hot new product.'"

Indeed. Last month, I looked at the share values of 24 publicly traded EMS companies from their initial public offering through their Jan. 7 closings. (I omitted companies like Probe Manufacturing and Texas Prototypes that have been public less than one year.) Of the 24, just 15 showed a positive return, and only a handful outpaced index funds.

Jabil was the best of the bunch. Since its IPO on March 26, 1990, its price has grown to $24.48, some 25.7 times the company's $0.95 adjusted listing price. (Note: All dollar figures account for stock splits, dividends and buybacks.) Other winners include Plexus (up 19.7 times), Raven Industries (up 14.5 times), Benchmark (up 12.5 times) and Solectron (up 10 times). Flextronics, Nam Tai and LaBarge are all up seven times.

Time was, Sanmina-SCI was a Wall Street hero. Its adjusted share price hit $57 in October 2000. But if you bought in when it went public on June 22,1993, you would have made a grand total of $3.38 per share. A CD would have done almost as well, and with no risk. Even Plexus is well off its adjusted high of $77 posted in Fall 2000. The rest of the pack--Kimball, CTS, Nortech Systems, Sparton and Sigmatron, all of which have been public for 12 years or more--are up just 1.2 to 6.3 times.

Just under breakeven is Simclar, at 98% of its IPO price. Much worse is Reptron, which declared Chapter 11, then relaunched as an over-the-counter stock in May 2004. The company now trades at $0.64, just 7% of its post-bankruptcy IPO of $9.25. Other anti-Apples include Celestica, selling at just 83% of its IPO price, and CirTran. Sypris, Suntron, Northstar, IEC and SMTC are all selling at less than 20% of their initial offerings. Keep in mind that the EMS industry is coming off three straight years of good-to-excellent growth.

Looking at those two lists, four that stand out are Benchmark, Jabil, Sanmina and Celestica. All are Top Tier EMS firms and have extensive footprints in so-called high-cost regions. For example, by my math, 62% of Benchmark's active capacity (including Pemstar) is in North America or Western Europe. But their execution is worlds apart. Sanmina and Celestica have said their capacity in high-cost markets has been a drain on performance. Meanwhile, Benchmark and Jabil keep making money.

Wall Street has a historical tendency to jump in and out of industries, and so, yes, the herd could hypothetically overcome much of this almost overnight. But that's the short-term play. Our message to The Street hasn't been sufficiently compelling, nor have our results.

In this age of quick fixes and near-term gains, companies taking the old school approach are to be admired. But having a long-term view is one thing; suffering fools gladly is something entirely different. It's time investors hold some of those so-called leaders accountable for their shabby returns.

Trade show season starts this month. Those attending will see a host of suppliers who have figured out ways to overcome low-cost competition, either by superior branding or must-have technology advancement (or both). Like Steve Jobs, they offer a lesson the EMS suppliers would be well served to digest.

Mike Buetow, Editor-in-Chief

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