TTI: Private parts

In the age of IPOs, TTI is perfectly happy to remain privately held.

By Heidi Elliott -- Movers & Shakers, 11/1/2004

Though it has changed with the times, specialty distributor TTI remains true to its roots.

In 1971, Paul Andrews started buying and selling resistors from his apartment after being "downsized" from General Dynamics. Thirty-plus years later, TTI employs 1,500 people (and has moved out of Andrews' residence). Its product offerings include passive components, interconnect products, and most recently electromechanical parts. The company has also expanded into foreign markets, has acquired a catalog distributor, and operates a 55,000-square-foot connector-assembly center from its Fort Worth, Texas, location.

Craig Conrad, Senior Vice President, Chief Marketing and Strategic Planning Officer, TTI

TTI has grown to encompass a total of 63 offices and four warehouses, with branches in France, Germany, Italy, Sweden, and Singapore. The privately held company puts 2003 revenues at $525 million, making it one of the top 10 distributors of electronic components. TTI is faring well this year. Through the middle of the year, the company's sales are up well over 35 percent globally. "This is likely to be the second best year we've had as a company," says Craig Conrad, senior vice president, chief marketing and strategic planning officer.

The company has done well by offsetting the market declines in North America with gains in the European market and sales from the Mouser catalog division. "Two years ago, everyone was cutting," Conrad says. "Our business was stable, so we prepared for the upturn and...uncovered a lot of opportunity." The company made some strategic investments at the end of 2002 and into 2003. "We're reaping the benefits now," Conrad adds.

As a passive-component specialist, TTI avoids the severe gyrations that plague the semiconductor market. In the active-component arena, particularly semiconductors, the market typically experiences dramatic peaks and valleys in its fortunes, primarily due to the long lag time involved in increasing manufacturing capacity (it takes more than a year to build a fab). As the fortunes of the semiconductor suppliers go, so go their distributors. The passive- and interconnect-component markets, on the other hand, do not experience this kind of volatility.

That said, the last downturn did not leave TTI unscathed. It too suffered as the electronics supply chain worked its way through a huge glut of inventory, combined with lackluster demand and a murky view of the future. "Nobody in the industry had fun in the last few years," Conrad notes. "It was very, very challenging for everyone, including TTI."

Still, times are looking up. TTI has gained market share in North America, Europe, Asia, and through catalog distributor Mouser. "Each of those businesses is significantly outgrowing its competition," Conrad says. TTI expects the growth momentum to continue, with positive hopes for the fourth quarter and into 2005.

TTI is a quite different company than it was a decade ago. The company made its initial foray abroad 10 years ago, opening a branch in Europe. As recently as five years ago, 98 percent of TTI's business still came from North America. Today, about 75 percent comes from North America, 20 percent from Europe, and 5 percent from Asia. Conrad predicts that in five years those figures will be 50 percent from North America, and 25 percent each from Europe and Asia.

When it entered the European market, TTI chose the grassroots approach to market expansion—bucking the growth-through-acquisition trend that swept the distribution industry throughout the 1990s. Still, it took several years to gain traction in the European market. Conrad describes the early years in Europe as largely inconsequential to the bottom line. "I would say we were a token player for most of those years," he says.

TTI got serious about this business about five years ago. Today, it has 16 offices in 11 countries and plans to expand into Eastern Bloc countries while growing market share in existing countries. And the European market is responding well to TTI's push. "In many lines we're No.1," Conrad says. "And, if we're not, then we are the fastest grower."

The company took on the Asian marketplace three years ago. Today, it has six branches in four countries. The distributor is aggressively investing in what is arguably the hottest region for the overall electronics market. In fact, TTI has exceeded its own financial goals for the region. "We're well ahead of where we expected to be," Conrad says. "We're nicely ahead of any plan we ever had."

In a break from its normal growth-by-organic-means strategy, TTI purchased the Mouser catalog distribution business in 2000. This was a decidedly smart move for the company. The Mouser business has grown so much that it is now too big for the facility that TTI built just a few years ago. "Mouser continues to have a record every month," Conrad says. "They are just absolutely on fire."

Though TTI is predominantly a North American company, founder Andrews has big plans for the company as it moves toward becoming more global. To take the company to that next level, he brought in an advisory group two years ago. Among its recommendations was refining some communications processes. For example, TTI has recently revamped its quoting system, making it easier to transfer quotes sent in via email into spreadsheet format.

Another change came at the top. In April of this year, TTI fortified its senior management team, with Andrews giving six top executives, including Conrad, additional duties that had been under his jurisdiction. "Paul spent most of the last 30 years running the day-to-day operations," Conrad says. "In the future, he'll focus more on strategic issues. Things that used to go to him now go to one of the [executive team]."

One thing unlikely to change is TTI's core identity. Though not impossible, company executives and analysts say it is unlikely TTI will be sold to another distributor or go public. "TTI has long been an attractive company for acquisition, but to date they continue to pursue their own route," says Robin Gray, executive vice president of the National Electronic Distributors Association (NEDA).

Analysts argue that if it wanted to sell itself, TTI would have been scooped up during the acquisition frenzy of the 1990s. The company is also unlikely to take itself public. "I can't say never, but it's certainly not the plan now," Conrad says. "Our desire is to stay privately held. So far, we've been able to achieve our objectives without going public."