Grounded in 130 years of innovation and service, Middleborough, Mass.-based Sager Electronics provides customers and suppliers a combination of operational excellence and innovative business solutions. The company operates a national network of field sales representatives and strategically located service centers across North America. We spoke recently with Senior Vice President Marketing Faris Aruri.
What’s your market outlook for 2017? Where are the growth opportunities? Talk about product offerings, regional market opportunities, etc.
Aruri: The market in general seems headed for another year of very modest growth, 2-3% possibly. We are technically in a recovery though it certainly doesn’t feel that way. Last year lagged the average since the 2009 recession and momentum heading into 2017 could be stronger. Despite this, Sager is targeting 4-5% growth next year. Product wise, we see 2-3% growth in electromechanical and interconnect. However, Sager has invested heavily in our power supply and thermal product program where we achieved just over 10% growth in 2016 and are expecting similar results in 2017. The trend toward portability in medical devices and energy-efficient lighting plays well to Sager’s strengths and we anticipate strong growth in the medical and lighting segments.
Sager was purchased by TTI in 2012, a Berkshire Hathaway company, and became a wholly-owned subsidiary. What is Sager’s relationship with TTI and Mouser, which also is a TTI subsidiary? Do you collaborate and if so, how?
Aruri: Sager, TTI and Mouser Electronics are all in the same business, but our strengths differ in terms of product expertise, services and customers. Of the three, Mouser offers customers a completely different business model and our collaboration is mainly focused on the collection of product attributes. As traditional IP&E distributors, Sager and TTI compete more directly in the marketplace with some natural overlap, but this overlap is minimized by our differences in product expertise and customer focus.
Sager has a limited passive offering suited to our customers’ needs while TTI is the industry leader. Sager and TTI both have strong interconnect and electromechanical line cards; however, Sager has taken the lead in power supply and thermal product solutions. We’ve created a specialized group within our company called Sager Power Systems, which features a dedicated and technical outside sales force selling power supply and thermal solutions only. This specialization is unique and is valuable to both our suppliers and customers, many of whom are in the medical, industrial and instrumentation markets.
Sager purchased PowerGate in 2014 and Norvell Electronics in 2015. How are these acquisitions being integrated and how have they contributed to the company’s ability to serve Sager’s existing customers and attract new customers?
Aruri: The purchases of PowerGate and Norvell—both specialty power supply distributors—were designed to further differentiate Sager Electronics in the marketplace by bringing specialized knowledge to our customer base. As a distributor for power supplies, PowerGate was recognized for its sales and marketing expertise in this area. They had an impressive technical sales team, a line card of leading power supply manufacturers and expertise in marketing power supplies on the web, in print and for lead generation.
The Norvell acquisition was slightly different. While we did add to our line card and technical expertise, it was primarily the value add capabilities we were after to further our power strategy. Norvell had a state-of-the-art 40,000-square-foot facility in Carrollton, Texas, with full test, integration and design capabilities, and a team of electrical and mechanical engineers. As a result of the Norvell acquisition, Sager is well positioned to offer our power supply customers robust design capabilities including mechanical enclosure, cable assembly, quick turn prototyping, and product safety testing and certifications.
These acquisitions and the launch of Sager Power Systems cemented the foundation of our power strategy. With almost twenty power systems sales engineers, and an engineering and production team sixteen deep, Sager Power Systems is a power-only team of highly trained, technically experienced professionals working directly with customers offering a line card of world-class power manufacturers and a full complement of value added capabilities.
While this group focuses solely on power and thermal, they collaborate with the Sager Electronics team across North America to leverage one another’s skills and knowledge to bring Sager’s customers more value. Both of these acquisitions have been fully integrated on the back end as well, all working off a common system.
Do you see acquisition opportunities ahead for 2017? If so, in what product areas and regions, and for what reasons?
Aruri: Having completed two acquisitions in two years, all of us at Sager recognize the contributions required across all facets of the organization to successfully integrate a company. It is no small task to fully integrate an organization while continuing to advance your business. While there is a tendency to want to catch our breath in 2017, the opportunity to continue to further our expertise is too great to ignore. We are keeping our eyes open for businesses that can enhance our position in terms of people, product lines and services in the power and thermal space.
About 40% of Sager’s business is with contract manufacturers. Will CMs become an even larger percent of your customer base? Are there other types of companies/buyers you are pursuing? The maker market perhaps?
Aruri: Sager’s contract manufacturing business has stayed in the 35-40% range for the last several years, and we do not anticipate any variance to this level in 2017. Our CM business isn’t something that we target or try to define, and in many ways it is self-defining based on our customers and their needs. Sager’s service set is best in class and contract manufacturers have recognized this, contributing to the level of business we service. Our primary value however is in working with design engineering at OEM customers specifying our suppliers’ products into our target markets of medical, industrial and instrumentation. This is where our focus will remain.