A high-voltage combination: HC Power acquisition rounds out Power-One's portfolio

In a consolidation of complementary power vendors, Power-One purchased HC Power in a stock-for-stock transaction of 2.1 million shares valued at $110 million. The deal, finalized at the end of February, is intended to give the companies' customers more comprehensive telecom equipment solutions.

"We're almost exclusively focused on the telecom market, and our goal is to get 75% of revenue from telecom this year," said Bill Yeates, president and chief operating officer for Power-One, which designs and manufactures power supplies for the telecom and data communications markets. Power-One provides its systems to service providers and OEMs.

The companies' complementary services and products made the two a natural fit, officials said. "The synergies are great. [The companies have] the same tremendous growth. And we've had some opportunities to sell into major deals," said Fred Lewis, vice president of sales and marketing for HC Power. "One of our weaknesses was, `Who was HC Power?'"

HC Power had estimated sales of about $45 million as of fourth quarter 1999. Power-One had more than $200 million in sales in 1999 - a more than 100% growth rate from the previous year.

"[HC Power] needed to make capital investments to keep it growing," Yeates said. "We have low-cost offshore manufacturing, higher volumes of raw parts purchases and a significant presence in Europe." In addition to Europe and North America, Power-One plans to increase its presence in Asia.

The companies' product offerings mesh because HC Power's systems run the devices that Power-One makes, including routers, switches and cellular base stations. It's a move up the food chain for power solutions, Yeates said. "We would like to offer a comprehensive power solution for telephony," he said. "If you look at the power industry, it's very fragmented. We consider ourselves to be one of the consolidators of that industry. This better serves our customers for a fuller product offering."

He used a cellular base station as an example. A base station might include a Power-One-branded DC-to-DC converter, which would convert the bulk power to lower voltages within the cellular base station. HC Power would supply the battery plant to power the base station and convert the AC to DC voltage.

The addition of HC Power also adds to Power-One's Board Mounted Power division. Based in Boston, the division makes products that provide power to silicon devices. HC Power makes telecom battery plants that use those devices.

And in the uninterruptible power supply space, "[Power-One] goes up to the point about where [HC Power] picks up" Lewis said.

Although both companies are based in California - Power-One in Camarillo and HC Power in Irvine - HC Power will remain an independent facet within the company.