Jabil Inc. makes a jabillion different kinds of electronics. The
company is one of the leading providers of outsourced electronics
manufacturing services (EMS) in the world. It makes electronics
components and parts on a contract basis for computers,
smartphones, printers, and other consumer electronics, as well as
more complex, specialized products for the aerospace, automotive,
and healthcare industries. The company's services range from
product design and component procurement to product testing, order
fulfillment, and supply chain management. US-based Jabil operates more than 100 plants in
about 30 countries with international customers accounting for
about 90% of sales.
Operations
Jabil conducts business in two segments: Electronics
Manufacturing Services (EMS) and Diversified Manufacturing Services
(DMS).
The EMS segment (about 55% of revenue) focuses on IT, supply
chain design, and engineering for all things electronic. The
products Jabil makes for its customers are used in the automotive,
digital home, industrial and energy, networking and
telecommunications, point of sale, printing, and storage
businesses.
The DMS segment (about 45% of revenue) focuses on manufacturing
services for material sciences and technologies. It works with
customers to develop and manufacture products for consumer wearable
technologies, defense and aerospace, emerging growth, healthcare,
mobility, and packaging.
Geographic Reach
Jabil has manufacturing plants in the US, Canada, and Mexico, as
well as Europe, Asia, South Africa, Asia, and South America.
Singapore and China are its largest
markets, accounting for about 35% and more than 20% of sales,
respectively. Mexico accounts for about 15% of revenue.
Sales and Marketing
Jabil depends on a small number of
customers for a significant percentage of revenue - five customers
account for just less than 50% of sales. Its top customer is
Apple (about 30% of sales) and other significant customers are
Cisco Systems, Dell Technologies, HP Inc., LM Ericsson, General
Electric, Ingenico, NetApp, Valeo, and Zebra Technologies.
Financial Performance
Jabil's string of annual revenue
increases continued for a fourth year in 2018 (ended August) with a
16% jump from 2017.
The company reported sales of $22.1 billion in 2018, up $3.1
billion from 2017, propelled by a 23% increase in the DMS segment
on strong demand from mobility customers and higher sales to
existing healthcare customers. The EMS segment's revenue rose 11%
year-to-year, boosted by customers in industrial and energy,
digital home, and capital equipment.
The company's profit fell to $86.3
million in 2018 from $129 million in 2017 due to a $142 million tax
expense related to the US Tax Cuts and Jobs Act.
Jabil had about $1.3 billion in cash and equivalents in 2018
compared to $1.2 billion in 2017. Operations generated about $933
million in cash in 2018 while investing and financing activities
used $798 million and $47 million, respectively.
Strategy
To compete in a rapidly consolidating industry, Jabil provides
production on a global scale and operates through semi-autonomous
business units that are dedicated to individual customers. The
company continues to add services and to expand globally through
acquisitions, including deals to acquire manufacturing operations
from customers looking to reduce costs through outsourcing. The
company tends to place manufacturing plants close to its
customers.
Jabil had expanded its work in the health care device market and
it has been a strong performer for the company. Operating income
from production for health-related products, which include
drug-delivery systems, continues to grow at better-than-expected
levels.
Apple has been a long and profitable
customer for Jabil, a key supplier for Apple's iPhone. However,
Apple warned that sales of its phones slowed in emerging markets,
which would affect Jabil's revenue.
Jabil implemented a restructuring program in 2017 to realign
costs and consolidate manufacturing in lower cost areas. The
program included job cuts and cost the company about $160 million
in 2017 and about $37 million in 2018. It plans to save up to $90
million a year with the moves.
Mergers and Acquisitions
Acquisitions have extended Jabil's product portfolio and its
geographic reach.
In 2017, Jabil acquired True-Tech Corp. to expand its capital
equipment division. True-Tech specialized in high-precision
machining, mechanical assembly, and clean room assembly for
semiconductor and aerospace customers.
In January 2016 Jabil acquired Inala, a South African energy
products provider and systems integrator. The deal acquisition
expanded Jabil's presence in the market for remote location energy
products and marked its first venture in Africa.
Company Background
Jabil Circuit was named for founders James Golden and Bill
Morean. The duo, who originally ran an excavation business, started
Jabil in suburban Detroit in 1966 to provide assembly and reworking
services to electronics manufacturers. Jabil incorporated in 1969
and began making printed circuit boards for Control Data
Corporation (later renamed Control Data Systems) that year.
William D. Morean, the founder's son who had worked summers at
Jabil while in high school, joined the company in 1977. The next
year the younger Morean took over Jabil's day-to-day operations.
The company had entered the automotive electronics business in 1976
through a $12 million contract with General Motors.
During the 1980s Jabil began building computer components,
adding such customers as Dell, NEC, Sun Microsystems, and Toshiba.
Jabil moved its headquarters to St. Petersburg, Florida, in 1983.
William Morean became Jabil's chairman and CEO in 1988.