Science Technology Company

In: Business and Management

Submitted By Faithsantos
Words 647
Pages 3
Science Technology Company 1985 President: Bill Watson
CFO: Harry Finson Questions:
1. Are the 5-year forecasts useful, given uneven growth in sales, inventories and receivables, and earnings in the past?
2. What will be the impact of a resurgence of inflation, fueled by massive budget deficits, on STC?
3. Can the company finance the rapid sales growth that is anticipated? STC
• Leading manufacturer of automated test equipment (ATE)
• 31% market share on testers for printed circuit boards
• Second largest in semiconductor test operation
• Objective: To be the recognized international leader in providing integrated quality management systems to manufacturers of electronic devices and equipment.
• Strategies: o Heavy spending on research and development o Spread cost of R&D across a large number of sales o Aggressively pursue major segments of semiconductor and electronics manufacturing industries in Europe, N. America, and the Pacific Factors that Increased Market Demand for ATE
• Swift and dramatic technological breakthroughs (from 1975-1984)
• High competition that required speed to move a design into manufacturing at low costs, which increased the demand for ATEs
• Steady increase in labor rates that pushed electronics manufacturers to automate testing
• In-house testing capacity made obsolete due to the increase in number and complexity of semiconductor components
• Dramatic improvement in the testing technology and changes in test devices STC’s Performance, 1980-1984
• Sales increased by 58% (from $144M in 1980 to $227M in 1984), with a compound annual growth rate of 12%
• Profits were erratic: o 1980: $10M o 1981: ($3M) o 1983: $16.3M o 1984: $10M
• Share price soared: o 1982: $10 o 1983: $42
• Poor performance in mid-1983 due to: o Increased no. of employees and amount of plant capacity due to estimates that were…...

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