Deja vu all over again: the more things change the more they stay the same--or do they?

I OVERHEARD AND SOME interesting conversations during the recent IPC meetings and Expo/APEX show. Maybe it was just the beautiful southern California weather, but I had this funny feeling I had been transported back in time--back to the mid 1990s, and in the distance I could hear Yogi Berra saying "It's deja vu all over again."

Yes, that's redundant. And that's the point.

Everyone at Expo was a lot more upbeat than they have been for the past six long years. While walking the show floor there was more equipment bearing "sold to" signs than anyone could remember. The positive mood was felt in the meetings as well, and in those sidebar conversations throughout the week of events. On all fronts, the bunker mentality of survival had given way to a cautious optimism that maybe, just maybe, the worst was over and the industry was experiencing some level of stability. Indeed, those companies who are still around should be proud that they either stuck to their knitting and strategically did not follow the pundits a decade ago or had the ability (cash) to weather the storm and position themselves in the current, highly strategized industry where specialty and focus rule.

And that's where the conversations began to get interesting. It seemed that some larger companies are acquiring fabrication companies in a way that has more than a passing resemblance to the roll-ups of a decade ago. Then there were other rumors of possible mergers between some of the larger remaining domestic companies, which had more than a passing resemblance to the merger mania that took place a decade ago among the then-largest companies. And finally there were the breaking headlines announcing the "expected" acquisition of a large struggling company by a "strategic" investment groups/buy out firm. Yup, it sure was sounding a lot like the 90s had returned with a vengeance.

So if Amp (remember Amp?) could not make a go of it and if Hadco (Hadco?) could not make a go of it, and if all the large and small investment groups who bought in and then closed and/or wrote off their investments could not make a go of it, then what has changed to make things look more promising today? Or more to the point, what opportunities do today's pundits see in owning big footprint facilities that the rest of us do not see?

My guess is that those who are outside our industry see us as a fragmented industry filled with undervalued "assets" that theoretically should be profitable if enough companies are merged together to reduce the combined overheads, attract higher volumes to cover the variable and fixed costs, and the debt load required to put them all together. Simple and theoretically correct, but anyone who has been in the industry--and survived the past few years--knows size has nothing to do with success. Consistently, throughout the history of our industry it's been about going after high(er) margin, keeping debt to an absolute minimum and not trying to be all things to all people.

If you look at the successful companies of today--success defined as profitability with positive cash flow--they are not necessarily large, and more often than not, they are niche companies that manufacture a portion of what they sell but augment their product offering via partnerships. These partnerships are either simple brokering relationships or more complex, vertical integration of design, fabrication and assembly. In short, the successful companies have found that they can offer as much capability and product breadth as a Tier 1 company while investing far less and becoming far more profitable. Plus, most of these companies have honed their processes and business relationships with foreign and domestic companies during an absolutely dreadful economic environment. If they have been able to turn a profit during a steep learning curve and under such lousy business conditions, then just imagine how they will perform with even a little economic tailwind!

Customers, of course, have far more to do with what strategy and which customers will be rewarded by success. Over the past decade one big change is the comfort level customers have with outsourcing--and more specifically, outsourcing to foreign suppliers. Today customers are placing the burden on their suppliers to deliver world-class quality, technology and service regardless of where or how they make it happen. Gone are the days, with the possible exception of military applications, where customers have demanded their suppliers have all production capabilities under one physical or corporate roof.

It will be interesting to see if customers have a change of heart and reward ownership of expanded facilities with lucrative orders. If I were a betting man, I would not bet my precious investment dollars on supersizing my company but would invest more prudently on building strong relationships with companies that offer complementary technology and have compatible management styles.

So as I walked away from an upbeat industry gathering, all I could think was "Here we go again." The more things change, the more they stay the same: the ongoing struggle between large vs. small--between own vs. collaborate--between Wall Street vs. Main Street. I remember how things went last time around and it sure looks like deja vu all over again!

PETER BIGELOW is president and CEO of IMI (www.imipcb.com). He can be reached at [e-mail].