Peak Expands Moto, Conexant, Business : Moves U.S. shipping center to Milpitas from Austin

Electronic News, August 9, 1999 by Jeff Dorsch

Austin--Peak International Ltd. reported signing sizeable contracts with Conexant Systems Inc. and Motorola Inc. to supply the semiconductor manufacturers with trays for packaged devices.

"Although Peak cannot disclose details, the contracts significantly expand Peak's relationship with these companies by providing for the supply of Jedec-style shipping and baking trays for semiconductors," the company stated.

In addition, the company decided to relocate its U.S. shipping and distribution center to Milpitas, Calif. from Austin. Peak will keep a sales office in Austin.

Calvin L. Reed, Peak's president and chief executive officer, who now works out of San Diego, plans to set up an office in Milpitas. The company, a Bermuda corporation, also has an office in Hong Kong, where non-executive chairman and majority shareholder T.L. Li is based, and a manufacturing plant in Shenzhen, China.

Reed, who was named president and CEO in April after a period that saw several top executives and dozens of other employees leave the company in a dispute with Li, is reshaping Peak's operations on several fronts.

Peak reported first-quarter sales for the period ending June 30 were up 19 percent from a year ago, to $18.8 million from $15.8 million, and net income was up 21 percent, to $3.7 million or $0.27 per diluted share from $3.1 million or $0.23 per diluted share.

"During the quarter, the new management began the process of evaluating Peak's business position," Reed said in a statement. "We have determined that our capacity is sufficient to meet near-term market demand, and therefore, we have put on hold the completion of the new factory in China. We are continuing to investigate and resolve irregularities in the operations of our facilities in China. We also closed a manufacturing facility in Penang, Malaysia.

"In addition, we have taken steps to improve efficiency in Peak's recycling business. In this regard, Peak has terminated its relationship with the SemiCycle Foundation in Austin and relocated its U.S. shipping and distribution functions from Austin to Milpitas. The sales office in Austin will be maintained. We expect this restructuring to result in better service to U.S. customers, as well as cost savings to Peak."

Asked to elaborate about the reported irregularities at the China plant under construction, Reed said last week, "There have been some irregularities with inventory at the plant, and some irregularities in the bidding process."

The company's handling of the alleged irregularities in China precipitated the departure of many Peak executives and employees in the United States and Asia, who protested the treatment of M.S. Khoo, who headed the plant in China. By scapegoating Khoo, Peak put his life in danger, some employees asserted, since the Chinese government has been known to execute managers for white-collar crimes.

Some employees, led by Steve Dezso, Peak's former vice president of U.S. operations, are known to be involved in setting up a new company that would compete with Peak, to be called EPAK, an anagram of Peak. The new venture is believed to be seeking financing; Dezso couldn't be reached in Austin last week.

"All we could do is wish them luck," Reed said of EPAK. "It's a capital-intensive business."

Commenting on ending the tray-recycling relationship with the SemiCycle Foundation, a non-profit organization that recycles plastics and other materials from manufacturers in the semiconductor and computer industries and donates the proceeds to various charities, Reed said, "It was a cost issue. We did not feel it was a cost-efficient way to recycle trays."