Multi-Fineline: Change in strategy could prove profitable

When Motorola (NYSE:MOT) caught the cold shoulder of cell phone buyers as the faddishness of its RAZR line faded, Multi-Fineline Electronix Co. (Nasdaq:MFLX) felt the chill.

At one point, the Anaheim, Calif., maker of flexible printed circuit technology relied heavily on Motorola, which had accounted for nearly 90% of Multi-Fineline Electronix’s sales. It was Multi-Fineline’s flexible wizardry that enabled Moto to deliver the ultra-sleek RAZRs that consumers craved.

The RAZR nicks and cuts are healing at Multi-Fineline, commonly known as M-Flex, amid a management restructuring and other changes. It was a rather quick turnaround: in the January through March quarter of 2007, the company warned of a sales shortfall.

Having learned from that painful lesson, Multi-Fineline Electronix is broadening its customer base to makers of cell phones, hand-held devices and smart phones, while eyeing potential growth in medical devices and other specialties. Despite the demand rollercoaster created by the retrenching U.S. economy, the company has three quarters of positive results under its belt.

Analysts who follow M-Flex apparently didn’t find a lot to fault when results for the fiscal second quarter came out May 6. According to a Thomson Reuters survey, two of the five analysts polled have Multi-Fineline as a “buy,” with the other three calling it a “hold.”

Shares of M-Flex have held steady around $20 in recent weeks, which is less than a third of the highs seen in March 2006, when the stock topped $67. Multi-Fineline shares hit a 52-week high of $24.14 on March 12, and a low of $9.70 on Aug. 3. The Thomson median price target is $23. Shares closed Monday at $20.19.

Founded in 1984, Multi-Fineline has become a leading provider of flexible-circuit technology. M-Flex also provides end-to-end services to electronics companies, from design to production and assembly. Most manufacturing takes place in China, where it has some 800,000 square feet around Suzhou. Construction is beginning this month on a new plant that will expand capacity in about a year by $30 million in monthly sales on top of the $64 million in current monthly sales capacity.

Following the May 6 release of results for the three months ended March 31, M-Flex shares shot up 12%, and for good reason. The company said in the fiscal . . .

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below