Seldom does a company hit such highs and lows within the space of two days as Andrew Corp. did earlier this week.
Early Sunday morning, a new digital television antenna supplied by the Orland Park-based firm was placed atop the Sears Tower in the Loop, where it will eventually transmit high-definition TV signals for Fox Television.
The next day, Andrew’s chief executive told analysts that earnings in this quarter will be only about one-third as large as expected. He also announced the company’s plans to trim its workforce by 10 to 12 percent, which could mean 500 people worldwide.
The juxtaposition starkly illustrates how companies that compete globally in the technology arena routinely must swallow large doses of good and bad news, all in a single gulp.
But Floyd English, Andrew’s chief executive, did take a moment Wednesday to reflect on the market whirlwind his company faces.
“I’ve been in this job 16 years,” said English, 64, “and having been through this turmoil once before, I wasn’t looking for an opportunity to do it again. But I guess the marketplace decided we’ve had it too easy the past few years and wanted to see if we’re still nimble.”
Andrew’s current earnings shortfall follows a slowdown in the buildout of wireless telephone systems across the nation after three years of boom times. On top of that, the economic meltdown in Southeast Asia has dried up demand there, pinching Andrew’s sales.
The firm’s stock had been at $21.25 as recently as Jan. 12 but has steadily declined. It dropped $1, or 7 percent, Monday after English delivered the bad news, closing at $13.37. Andrew stock closed Wednesday at $12.94, down 19 cents.
Even though wireless phone popularity in the United States is growing, there is a downside for equipment makers, said Andrew Cole, head of the wireless practice at Renaissance Worldwide, a Boston-based consultancy.
“Wireless operators face industry consolidation and rapid reduction in rates that’s putting pressure on them to cut their operating costs,” said Cole. “I have one client that expects to reduce operating costs by 50 percent this year.
“The service providers in turn are squeezing the margins they pay to their vendors.”
Cole said that smaller vendors like Andrew may be forced into closer relationships with larger players or even be taken over by them.
In 1983, when English took over as chief executive, C. Russell Cox, Andrew had a booming business in supplying antennas and related equipment for the rapidly growing, competitive long-distance carriers. But that business fell apart when the carriers realized they were overbuilt and that fiber lines were preferred to microwave wireless transmissions.
English led his firm into supplying towers, antennas, cables and other equipment for the wireless phone industry, expanding its global focus. It now has 66 facilities in 27 countries around the world. About half of Andrew’s sales are international.
While globalization exposes the firm to problems with economic downturns–as happened when about 7 percent of its total sales vanished in the Asian meltdown–it also opens up longer-term opportunities, said English.
By building manufacturing plants in Brazil, China, Russia and elsewhere, Andrew not only gets closer to its customers, but also picks up business in countries that require a certain percentage of local content in products sold locally, English said.
Most industry observers find the basic strategy sound.
“Andrew is well positioned internationally,” said Craig Clausen, senior vice president of New Paradigm Resources Group, a Chicago-based consultancy. “Every company goes through trials where they must revisit what they’re all about.”
Jeffrey Kagan, an Atlanta-based telecommunications consultant, said that while economic volatility poses a problem for companies like Andrew, the long-term prospects are very good.
“Communications systems aren’t optional,” said Kagan, “they’re vital to expanding an economy. And in most developing countries, that means wireless. They need the infrastructure that Andrew makes.”
Besides developing new products, such as digital TV equipment that some 1,500 U.S. TV stations will need in the next several years, English said, Andrew is working to keep boosting productivity.
“In the 1980s and most of the ’90s, advances were aimed at blue-collar productivity, but now we’re focused on white-collar productivity,” he said. For example, the Orland Park headquarters is beginning to receive real-time production information from its international manufacturing plants to help cut the time it takes to make decisions.
“We have the people, the distribution and the manufacturing to satisfy our customers wherever they are,” said English. “We’re up to the challenge.”
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