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In early 2011, the stock and investment advisement wonks at The Motley Fool rang up the differences between, arguably, the top two heavyweights in the connector and interconnect systems industry, and the result was overwhelmingly one of ICW's "most read" news stories of the year.
As G. David Frye pointed out for the Fool in his cogent article of Feb. 11, the $35 billion global interconnect products and systems industry is highly fragmented. Amphenol says its own data shows the 10 largest companies (the perennial list also includes TE Connectivity, Molex, JST, FCI, Yazaki, Foxconn, Hirose, JAE and Sumitomo, according to Bishop) account for a combined market share of only 49% (it should be noted, however, that for the top 100 largest companies, it's a different story).
"The electronic connector industry isn't very sexy," wrote Frye. "Once you get past the male-female plug thing, it's pretty boring. But Amphenol seems to have figured out how to make it pay -- take a bigger cut of each connection." After crunching some numbers, Frye concluded that "the fundamental difference [between Amphenol and Molex] is that Amphenol is getting almost twice the margin on its product lines, and that spills over as free cash flow...clearly the company has positioned itself in product lines where they have some pricing power."
While that analysis aligns with what we'd reported on previously, as would be noted elsewhere in 2011, Molex is not to be underestimated. Publicly assessing the company's performance in FY2011, CEO Martin Slark assured shareholders that Molex was doing just fine -- as attested to by the many new products they would announce by the year's end.
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