Bel Fuse, Inc.

198 Van Vorst Street
Jersey City, New Jersey 07302
U.S.A.
Telephone: (201) 432-0463
Fax: (201) 432-9542
Web site: http://www.belfuse.com

Public Company
Incorporated: 1947
Employees: 866
Sales: $96 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: BELFA
NAIC: 335999 All Other Miscellaneous Electrical Equipment and Component Manufacturing

Originally an automobile fuse maker, Bel Fuse, Inc. has stayed abreast of technological changes and diversified into the manufacture of television components and the production and sale of parts used in cutting edge high-speed data transmission, telecommunications, and networking. From its corporate headquarters in New Jersey, Bel Fuse operates facilities in Massachusetts and California, as well as plants in the Far East and the United Kingdom. Although the company was hit hard by the economic downturn that struck the high-tech industry as a whole in 2000 and 2001, its cost-management efforts and strategic acquisitions left it well positioned to prosper in the coming years.

A Family Company Flourishes

In 1949, 26-year-old Elliot Bernstein founded Bel Fuse in Jersey City, New Jersey, to make fuses for automobiles. With America’s love affair with the car blossoming in the postwar years, the young company did well and soon expanded its business to make fuses for another wildly popular consumer product: televisions. The company’s fortunes waxed further when it collaborated with television industry giant RCA Corp. to create the first delay lines used in color television sets. (Among other functions, delay lines are used to ensure that signals are transmitted in proper order.) When RCA became one of the pioneers in the computer business in the 1960s, Bel Fuse followed in its wake, making delay lines for these newfangled products as well. In 1966, Bel Fuse began making delay lines for the mainframe computers produced by industry colossus International Business Machines Corp. (IBM).

To fund further growth, Bel Fuse held an initial public offering of stock in 1967, though Bernstein and his brother Howard, the company’s vice-president and treasurer, retained a majority ownership interest, controlling more than 50 percent of the stock. (Although the family’s stake was down to about 25 percent by 1995, day-to-day management still remained in the hands of the Bernstein family, particularly in the person of Elliot’s son Daniel Bernstein, who became president of the company in the 1990s.) As the computer industry grew through the 1970s and then exploded in the early 1980s with the proliferation of desktop personal computers (PCs), Bel Fuse moved along with it. Counting IBM and Digital Equipment Corp. among its customers, the firm expanded its product offerings to include miniature fuses, which help prevent computer circuit boards from overheating. By 1983, Bel Fuse had revenues over $18 million and operated manufacturing plants in Hong Kong and Macao. The company had shown consistent sales growth of better than 15 percent each year since its inception, with annual profits increasing more than 35 percent yearly on average. “Our secret has been our ability to change as technologies evolve,” company president (and founder Elliot’s son) Daniel Bernstein told Business News New Jersey. “As new technologies evolve, we grow with them.” Bel Fuse continued to grow throughout the 1980s, spending roughly eight to 10 percent of its annual revenues on research and development to diversify its product range and compiling a nearly 500-strong customer base that included such notable firms as 3Com Corp., Compaq Computer Corp., Philips Electronics Corp., Siemens AG, and Apple Computer, Inc.

Expansion in the 1990s

Although Bel Fuse had never stopped making products for the automotive and television industries while simultaneously moving into the burgeoning computer field, by the early 1990s it had become evident that components for high-technology products would be the company’s main source of revenue in the coming years. Along with fuses and delay lines, Bel Fuse began to manufacture a wider set of magnetic components and power converters, essential parts for the electrical and electronics industries. To capitalize on the technological boom of the decade, Bel Fuse established an engineering facility in California’s Silicon Valley, allowing it to work in closer proximity to firms that would become some of its best customers. This proved to be a distinct competitive advantage, as Bel Fuse was able to tailor its products to be compatible with products of different companies to appeal to the widest possible customer base. “Being near the 3Coms and Intels of the world, Bel Fuse is able to offer a higher level of engineering support than its competitors,” Brent Bracelin, an industry analyst told Business News New Jersey. “That has really opened quite a few doors for the company.”

Bel Fuse made another significant decision in 1996 when it decided to restructure its operations and focus most heavily on its networking components business. Networking—the ability of computers and other electronic devices to talk with one another— was becoming an increasingly important field with the rise of the Internet and the reliance on computers in the workplace, and great profits were available to firms who could succeed in facilitating it. Bel Fuse’s magnetic components were integral to the field, and the company reached sales of $73.5 million in 1997, on which it realized an $8.9 million profit. Wall Street was impressed, as the company’s share price more than doubled between the start of 1997 and May 1998, when it announced extremely strong first quarter profits ($2.97 million—more than double 1997’s first quarter profits of $1.31 million).

The year 1998 brought a few shaky moments, as the electronics industry was effected by fallout from the Asian economic crisis. Bel Fuse—whose main overseas manufacturing plants were in Hong Kong (which had been returned by the United Kingdom to China in 1997) and Macao (which Portugal handed over to China in 1999)—sweated out the political uncertainties caused by these geopolitical shifts. However, the company continued to thrive and indeed to pursue its new interest in networking. In August, Bel Fuse announced plans to purchase Lucent Technologies, Inc.’s signal-transformer division. The deal closed in October, and Daniel Bernstein explained the acquisition’s importance for Bel Fuse to Electronic Buyer’s News. “We have to broaden our portfolio for telecommunications and power applications,” he said. “With the acquisition of the signal-transformer business of Lucent, we accomplish this goal.” To cut costs, Bel Fuse shifted production of the newly acquired lines from Lucent’s plant in Matamoros, Mexico, to its own plants in Asia. The acquisition boosted Bel Fuse’s bottom line, as the company reported a profit of $15.2 million in 1998 on sales of over $90.8 million.

The following year proved even more successful. Sales reached nearly $120 million, and Bel Fuse netted a record $21.3 million for the year. In recognition of its achievements, Forbes named the firm one of its 200 best small companies in America for 1999.

Networking into the New Millennium

Bel Fuse’s focus on networking continued to pay dividends in 2000, as the company posted strong sales for the first half of the year, driven primarily by “increasing demand for its products that support ADSL high-speed data transmission and voice-over-the-Internet protocols,” as Electronic Buyer’s News explained. Demand for the firm’s fuse products also increased dramatically due to the explosive growth in the telecommunications sector. Fuses are essential for the proper operation of an array of products such as modems, fax and answering machines, and cellular base stations, and the strong demand for these products pushed the company’s fuse sales up by more than 35 percent during the course of the year. Networking, however, still remained the firm’s biggest profit source. In late 2000, Bel Fuse entered the home phone line networking market, rolling out a transformer module designed to work with Broadcom Corp.’s newly released networking chip. Broadcom’s offering, itself part of a strategic partnership with budget computer vendor Gateway, Inc., was designed to enable people with multiple computers in their homes to set up in-house networks and also to afford people with portable computers the ability to have network and/or Internet access from their homes, offices, or other remote locations. With at least 25 million multiple-PC households, and millions more portable computer users, this new product line gave Bel Fuse access to a huge and potentially lucrative market.

These factors combined to make 2000 Bel Fuse’s best year ever. Sales topped $145.2 million, an increase of 22 percent on 1999’s then-record figure, and the company earned more than $32.2 million, 51 percent higher than the year before. To top it off, Forbes again named Bel Fuse one of its 200 best small companies in America. Storm clouds appeared on the horizon, however, as the U.S. economy began to weaken during the latter part of the year.

Company Perspectives:

Bel Fuse enjoys a long-standing reputation as a financially stable, world class manufacturer—the result of its ability to engineer optimal solutions to meet changing market demands. The company continues to grow through its strategic partnerships with leading high tech companies, making Bel components an integral part of customers’ new product development programs.

Bel Fuse’s profits continued to rise during the first quarter of 2001, as the company netted $7.5 million on sales of $33.7 million during the quarter. (This was a 69 percent increase over the company’s $4.4 million in profit during the first quarter of 2000, which was achieved on sales of $26.1 million). Bel Fuse, however, recognized that the global economic slowdown was about to hit the company hard, as many of its customers were already experiencing extreme difficulties in the post-bubble environment. Anticipating that its short-term profitability was likely to suffer, Bel Fuse turned an eye to the future and decided to invest much of the $63 million in cash it had on hand to acquire companies that would help it reach its long-term product development goals. As it had in 1996 with its focus on networking, Bel Fuse identified what it expected to be another growth field and concentrated its efforts there. Specifically, the company decided that it wanted to make itself into a one-stop shopping source for all of its customers’ power supply needs. To this end, the company acquired the Westborough, Massachusetts, start-up firm Current Concepts, Inc. in May 2001. Although only five months old at the time, Current Concepts had been founded by two industry veterans and was regarded as an innovative designer of cutting edge DC/DC converters that could be used to power coming generations of low-voltage silicon that would be used in high-speed microprocessors and memory chips. Bel Fuse planned to turn its new purchase into the flagship of its newly formed Power Products Division, headed by Bel Fuse’s strategic marketing director Marshall Miles.

The following week, Bel Fuse expanded its presence in East Asia with the purchase of Hangzou, China-based E-Power Co., Ltd., a privately held research-and-development company that concentrated on devising power conversion technologies for high volume commercial users. Bel Fuse was enthused about the deal, the terms of which (as had been the case with Current Concepts) were not disclosed. “The E-Power acquisition will significantly speed the development and introduction of cost-effective low power DC/DC converters for high volume applications typically used by Bel’s established customer base in the telecommunications, networking and computing markets,” Bel Fuse’s President Bernstein said in a company press release. “This is Bel’s first China-based design center and we look forward to their assistance in developing these new products and providing ongoing engineering and cost-control support for our new team in Massachusetts [at the erstwhile Current Concepts plant].” Industry observers were impressed. “The Point of Load segment Bel is pursuing with these acquisitions [of Current and E-Power] is the fastest growing sector of the [$5.8 billion] DC/DC market,” Jeff Shepard, president of the Darnell Group, an power supply industry analyst, told Business Wire. “This is also an area in which their packaging capabilities should serve them well as they compete for market share.”

While Bel Fuse continued to plan for the long term, its prediction about the immediate state of the economy proved correct. Due in part to expenses incurred during its spring buying spree, and more to the overall business climate as the technology bubble of the late 1990s emphatically burst, the company lost $12.2 million in 2001 on sales of $96 million (a figure roughly one-third lower than 2000 revenues). Bel Fuse also suffered a more intimate blow in July of 2001 when its founder, Elliot Bernstein, died at age 78. (His son, company president Daniel Bernstein, had been named chief executive officer two months before.) Undeterred, the company pushed ahead during the year, rolling out several new products and seeking to position itself strongly for the recovery that the company expected would inevitably arrive. Perhaps the most important among these new product lines were three different families of transformer modules—part of the company’s growing line of surface mount magnetic components. These modules are used in an array of Wide Area Network applications, such as Internet service provider servers, digital access and cross-connect systems, cellular base stations, and internetworking interfaces. Crucially, the three different sets of offerings were tailored to work with divergent systems offered by leading transceiver manufacturers such as Sierra Wireless, Inc.; Connexant Systems, Inc.; Cirrus Logic, Inc.; Exar Corp.; and Intel Corp. ‘ These are not ‘one size fits all’ components,” Daniel Bernstein told Business Wire. “Each part number within our new [product lines] is specifically engineered to optimize the performance of a specific manufacturer’s chipset.” In this way, Bel Fuse could offer high-quality items to serve the broadest possible customer base. “We’re trying to move up the food chain to provide more value-added products to help our telecom customers,” Bernstein told Electronic Business News.

Buoyed by offerings from its new Power Products division and efficiencies gained from internal restructuring, Bel Fuse charged into 2002. In January, the company announced a further streamlining effort, the consolidation of its telecommunications and value-added engineering operations into one San Diego facility, a move which involved shuttering plants in Dallas and Indianapolis as well as an existing one in San Diego. The company unveiled seven new lines from its Power Products division in the first five months of the year alone. And despite posting a nearly $600,000 loss in the first half of the year (on revenues of $41.2 million), Daniel Bernstein was optimistic about the firm’s potential. “We believe the worst of the slowdown in the global electronics industry is now behind us,” he told Business Wire on April 26, 2002. “While conditions remain tough, they are clearly getting better. Backlog is rising and we see signs that momentum is being reestablished in several key product areas. … At the same time, manufacturing overhead and variable expenses have been dramatically reduced, which should contribute to improved profitability as sales begin to recover.” Indeed, by the end of the third quarter of 2002, the company was $1.2 million in the black on revenues of $69.6 million. While total sales were still down from 2001, the company was well positioned to profit in the future, so long as the technology industry as a whole managed to return to health.

Principal Divisions

Power Products.

Principal Competitors

Cooper Electronic Technologies; Littelfuse, Inc.; S&C Electric Co.

Key Dates:

1949:

Elliot Bernstein founds Bel Fuse, Inc. in Jersey City, New Jersey.

1966:

Bel Fuse begins to supply delay lines for mainframe computers to International Business Machines Corp.

1967:

Bel Fuse lists itself as a public company; Elliot Bernstein and his brother Howard, the firm’s vice-president and controller, retain a majority share of the stock.

1996:

The company restructures operations to focus heavily on its networking components business.

1998:

Bel Fuse buys Lucent Technologies’ transformer and inductor division.

1999:

Bel Fuse celebrates its 50th anniversary with record profits and is named by Forbes as one of the 200 best small companies in America.

2001:

The company forms Power Products Division.

Further Reading

“Bel Acquires E-Power Corp.,” Business Wire, May 15, 2001.

“Bel Announces Three Transformer Families for Industrial T1/E1/J1 Applications,” Business Wire, September 5, 2001.

“Bel Enters Home Phoneline Networking Market with Transformer for Broadcom’s Internet-on-a-Chip’ Products,” Business Wire, December 8, 2000.

“Bel Fuse to Reorganize Domestic Engineering Ops,” Dow Jones News Service, January 9, 2002.

“Bel Reports First Quarter Results,” Business Wire, April 26, 2002.

“Bel Reports Fourth Quarter and 2001 Results,” Business Wire, February 8, 2002.

“Bel Second Quarter Net Income Increases,” Cambridge Telecom Report, August 5, 2002.

Chin, Spencer, “Acquisition Improves Power Line,” Electronic Buyer’s News, May 14, 2001.

——, “Navigating in Today’s IP&E World,” Electronic Buyer’s News, February 11, 2002.

Joseph, V.K., “Bel Fuse Breaks Free from the Pack,” Business News New Jersey, May 18, 1998.

Moore, Anne, “Growth in the Middle Medium-Sized Firms Show Strength,” The Record of Northern New Jersey, November 18, 1984.

Roos, Gina, “Telecom Drives Transformers,” Electronic Engineering Times, June 19, 2000.

Scouras, Ismini, “Lucent to Sell Signal-Transformer Biz to Bel Fuse,” Electronic Buyer’s News, August 31, 1998.

“Special Report: Best Managed Companies—Runners Up,” Electronic Buyer’s News, October 18, 1999.

—Rebecca Stanfel