BUSINESSWEEK ONLINE : JUNE 19, 2000 ISSUE
COVER STORY Don't Be Fooled by This Low Profile Private for 20 years, Synnex may be the biggest tech outfit you've never heard of. That may change soon Robert T. Huang's life has always revolved around international business. In 1955, Huang's father moved his company, Nichidai Trading, from Taiwan to Osaka to be closer to Western markets. ''It was good timing,'' Huang says. Japan's economy was just starting to blossom, as was an American yen for Chinese noodles--Nichidai Trading manufactured the paper boxes used to export the tasty noodles around the world. ''My father did very well,'' says Huang. The Huang legacy of global business savvy lives on. Today, Robert is the founder, president, and CEO of Synnex Information Technologies Inc. (SYNNEX), a $3 billion Fremont (Calif.) company that may be the largest tech company you've never heard of. Why? Contrary to today's IPO-at-all-cost culture, Synnex is still private after 20 years in the contract manufacturing business, ranking as the sixth-largest company on this year's Info Tech list of private companies. SLIM MARGINS. Synnex's private status, however, may be about to change. Huang thinks Wall Street is high these days on contract manufacturers. Bigger companies in the field, such as Flextronics International (FLEX), which ranked No.31 on the IT 100, and SCI Systems Inc. (SCI), No.86, are paving the way to Wall Street acceptance. On May 30, Flextronics landed a five-year, $30 billion deal to build cell phone, pager, and switching gear for communications giant Motorola Inc., which sent Flextronics' share price soaring 34%, to 67. Now, Huang is hoping to go public within the next year in order to keep pace with bigger rivals. Computer companies turn to Synnex when they have neither the resources nor the desire to build their own equipment. Clients include Hewlett-Packard Co. and upstart PC server maker VA Linux Systems Inc. Synnex has factories in four countries around the world, close to parts suppliers and cheap labor. The proximity is crucial since the company operates on an anemic profit margin of 1% to 2% and needs to shave costs whenever possible. ''Foreign manufacturing is absolutely critical in contract manufacturing,'' says Pamela Gordon, president of management consultant Technology Forecasters Inc. So is a bean-counting zealotry and a laser focus on execution. With such tight margins, Synnex doesn't have any room for slip-ups. The company managed a measly $20 million in earnings last year, despite 48% annual growth and revenues that are expected to top $4 billion this year. ''To turn on those razor-thin margins, they have to have their execution down,'' says Hank Zoeller, director of manufacturing resource management at CacheFlow Inc., a Synnex customer that makes server appliances that speed delivery of Web pages. CacheFlow and other computer-equipment manufacturers are increasingly outsourcing to Synnex to improve their own slipping margins, and to avoid building pricey manufacturing plants. The result is a booming business. Total revenues for contract manufacturers jumped from $60 billion in 1998 to $73 billion in 1999, according to market researcher Technology Forecasters. Revenues at the company are expected to top $126 billion by 2002. Synnex does more than just build equipment for others. The company pulls in about 56% of revenues through its manufacturing contracts, but it has distinguished itself among competitors by providing an important product distribution network that helps Synnex clients transport their products to customers. ''That has made things an awful lot easier for us,'' says customer Daniel Shore, vice-president of worldwide operations at VA Linux. ''We're able to concentrate on what we do best--software engineering, marketing, and sales.'' Huang also is moving Synnex into new Web businesses. So far, the company has created ecLand.com, which provides software hosting and consulting services to computer resellers, and eManage.com, which will run a customer's Web site. The two sites have about 150 customers combined. Huang hopes to one day spin out ecLand.com. And eManage.com already is operating on its own and could go public within the next year, Huang says. By going online and providing more automated services, Huang says he can ultimately cut costs and maybe--just maybe--pump up those razor-thin margins. ''They've been among the most aggressive in reinventing themselves,'' says Webb McKinney, vice-president for PCs at Hewlett-Packard Co. and a Synnex customer. ''I think that will bode well for how they are perceived in the future.'' Huang is accustomed to adapting to new environments. When he moved to Japan in 1955, he was 15 and didn't speak a word of Japanese. He was shunned by high school classmates. ''Japanese society is very exclusive. It can be difficult for someone from the outside,'' says Huang. He persevered, learned the language, and adapted to his new culture. Today, Huang is no longer perceived as an outsider, visiting Japan on his monthly trips to Asia. SELF-EFFACING. After graduating from college, Huang moved to the U.S. in 1968 to attend graduate school. He received an MBA from the Massachusetts Institute of Technology's Sloan School and went on to become the a sales manager for chipmaker Advanced Micro Devices. By 1980, Huang was ready to go his own way. He started a computer-distribution company called Compac Microelectronics. In 1992, Huang changed the name to Synnex and gained an important investor in Taipei-based Mitac International Corp., which is still the largest Synnex shareholder. Mitac provides Synnex with the boards on which computer chips are built, power supplies, and computer casings. Mitac also inexpensively procures for Synnex important components such as hard drives and CD drives. Although self-effacing and soft-spoken, Huang is a stickler for details. Synnex is clearly his company, and few decisions get made without his thumb print. ''I'm always amazed by his command of the operation,'' says Synnex Marketing Director Sandra Salah. Still, take him outside the office, and Huang sounds like any other fiftysomething businessman. He enjoys golf, wishes he could spend less time on the road, and is sometimes baffled by his two teenage children. ''This generation is just so different,'' he says. Huang says he's comfortable keeping a low profile. Like his father, he's doing the tough work that helps other companies prosper. Still, as he readies Synnex for an IPO, he'll have to convince Wall Street that a quiet, not-so-little company is an investment with pizzazz. By Jim Kerstetter in Fremont, Calif. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Don't Be Fooled by This Low Profile TABLE: Top Private Info Tech Companies (extended) INTERACT E-Mail to Business Week Online

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