Electrocomponents PLC must have made Lindsley Ruth an offer he just could not refuse. In addition to the plum job of Group CEO, Electrocomponents must have given Ruth a substantial package to engineer his departure from Future Electronics Inc. But now that the negotiations are over Ruth must soon face the onerous task of fortifying the struggling distributor against hungry rivals in a weak economic environment.
That task begins in earnest on April 1, 2015. Ruth will be stepping into a new world, one dominated by forces he has been shielded from at Future Electronics, a privately-owned enterprises whose sole owner Robert Miller was the main individual executives answered to. At Electrocomponents, Ruth will have multiple bosses, including shareholders and a board of directors anxious to see him effect a turnaround large enough to put their company on the global electronics map. (See: Electrocomponents Names Future’s Ruth New Group CEO).
Ruth will also be overseeing a company with subtle hints of a branding challenge. Future Electronics had one brand, namely, Future. Its marketing message was therefore simple and easy to articulate. In fact, the company marketed itself for years simply as having “the most available to sell inventory.” Everything else flowed easily through because there was only one Future Electronics in North America, Europe, Asia Pacific, South America and everywhere else.
Electrocomponents is different. It is a holding company that does business under a different moniker in North America and another separate identity in Continental Europe, Asia Pacific and the rest of the world. While Ruth will be CEO of Electrocomponents, the companies he really presides over are Allied Electronics (North America) and RS Components (Europe, Asia Pacific and ROW).
Investors warmly welcomed the news of Ruth’s appointment to the top position at Electrocomponents. The company’s stock price rose to a 5-month high 241.30 pennies in U.K. trading on March 3 and volume spiked to 2.14 million versus the regular daily average of 1.23 million. Analysts piled in, raising their estimates on the stock, perhaps in anticipation Ruth would introduce American-styled reorganization to rein in costs and boost profit margins. That remains to be seen.
Before taking the reins at Electrocomponents, however, Ruth will have a tough time saying adieu at Future Electronics. He spent 13 years at the Canadian distributor, many of them working closely with Miller. Ruth was not just a top lieutenant to Miller but he was also considered by some as a potential successor to the corner office at the Canadian electronics components distributor.
While Future Electronics has not directly commented on Ruth’s pending departure, Miller is known to support executives leaving his company for greener pastures. In an interview with Electronics Purchasing Strategies late in 2013, Miller said people who left Future for competitors, suppliers or OEM/EMS customers often end up serving as ambassadors for his company and insisted the benefits from him supporting them outweigh any disadvantages occasioned by their departure.
Ruth, especially, will be sorely missed by Future. He was (and still is for a few weeks till the end of March) a key member of a 3-man group known internally at Future as the “office of the President”. The members of the group, which is responsible for most critical management decisions at Future, include Miller, Ruth and one of Miller’s adult sons. It was never clearly stated that Ruth was a likely successor to Miller at Future but his pending departure is nonetheless definite to be keenly felt at the company.
While Future deals with the fallout from Ruth’s exit, the departing executive himself must prepare to grapple with other issues related to the company he is about to join. Electrocomponents markets itself as the “global distributor for engineers” but the company is struggling to grow sales and facing stiff competition from medium-size rivals like Digi-Key Corp. and Mouser Electronics, both of which also directly target design engineers and are implementing huge campaigns to cement their positions in the market.
Additionally, the biggest electronics component distributors like Arrow Electronics, Avnet Inc. and Future Electronics have also trained their massive marketing budgets on design engineers as well as purchasing/procurement professionals to protect their market share and curb the growing penetration of Digi-Key and Mouser into areas they once heavily controlled. Electrocomponents reported revenue of £1.27 billion ($1.95 billion) for the fiscal year ended March 31, 2014, up 3 percent, from £1.24 billion in the fiscal 2013 year. Profit for fiscal 2014
The company’s performance since then hasn’t been exactly sterling. In the six months ended September 30, 2014, for example, Electrocomponents posted sales of £616.4 million, down from £635.4 million in the corresponding period of 2013. During the period, sales in North America rose 10 percent, exceeding the industry average, while Europe reported a piddling 2 percent increase and Asia Pacific 5 percent. The company has begun reorganizing operations, starting with its sales team in Asia Pacific and the United Kingdom, according to outgoing CEO Ian Mason.
“In the first half group underlying sales growth was 3 percent, led by a strong performance in North America,” Mason said in a statement announcing the fiscal 2015 first half results. “However, the UK and France were in decline in the period and below our expectations. Whilst mindful of the more challenging economic environment across Europe, we are progressing at pace with the actions to improve performance in these markets.”