That term keeps coming up when electronics executives talk about today’s economic mess. Unlike the downturn of 2000-2001, which resulted from an Internet and telecommunications bubble that burst and caused a freefall in the high-tech sector, this crisis hit when the bubbles of real estate and credit imploded, causing a ripple effect that’s being felt by every sector of the economy, including innocent bystanders like electronics.
That ripple reached the electronics industry last fall, when customer orders took a steep dive. “October and November were the worst months I’ve ever had in business,” said Rajeev Madhavan, chairman and CEO of Magma Design Automation Inc and a serial entrepreneur in high tech since the early 1990s.
3. Take advantage of the situation to acquire new businesses
If your company has the financial reserves, now is the time to go shopping. “We’ll see a lot of acquisition activity coming out of this cycle,” said Ciacchella. “Companies with strong cash positions already have deals in the hopper ready to go, they are just waiting for the right time.”
Avnet has already used the opportunity to scoop up three businesses in the last few months. It acquired Nippon Denso Industry Co Ltd of Japan in late November, acquired Abacus Group PLC of the UK in January, and finalized a joint venture with Sanko Holding Group in Turkey in February.
But in today’s environment, due diligence is more important than ever, said Aart de Geus, chairman and CEO of Synopsys Inc, which acquired the CHIPit business unit of ProDesign in December. “We are in this interesting twilight," he said. "There are and there will be many businesses for sale because they can’t survive on their own."
De Geus said he’s been approached by several businesses in the last few months, often with seemingly innocuous comments about pursuing stronger strategic alignment. “I know what they are talking about,” he said. “It’s called meeting payroll in a month and a half.”