Room to grow in markets abroad

More than half of LI's Top 100 have significant operations abroad, bolstering profits

BY RANDI F. MARSHALL | STAFF WRITER

June 13, 2005

When the technology stock bubble of the late 1990s burst, executives at Nu Horizons Electronics didn't flinch.

Their financials remained solid and the company was in good shape, president and chief operating officer Richard Schuster recalled.

Rather than seeking new business, it might be easier, some thought, to simply hold on and wait for the market to turn around. Instead, Nu Horizons plowed ahead - with a trip to the East.

During the next few years, the electronics component distributor began opening offices across Asia. The company started in Singapore in 1998, and has since moved into Hong Kong, China, South Korea, Taiwan, Malaysia and India.

"It knocks you in the face - that if we were going to continue [to grow], we had to have a presence where the manufacturing was taking place," Schuster said. "We knew we had to have a substantial infrastructure in the Asian market."

In the past year, Nu Horizons' foreign sales have grown by 70 percent, surpassing the $100-million mark and making up nearly a quarter of the company's overall revenue.

In benefiting from expansion overseas, Nu Horizons is employing a strategy used increasingly by Long Island businesses. More than half of the companies in the Long Island Top 100 - Newsday's 2005 ranking of public companies - have foreign business operations significant enough to be reported in their financial statements. And 12 of the top 25 - including No. 23 Nu Horizons - saw foreign revenue make up a bigger piece of their total sales in their last fiscal year.

Fewer chances here

Going global, of course, is nothing new. But now, more and more companies are relying on their international presence for growth as they find fewer chances for expansion in the United States. Sometimes, the expansion overseas comes in addition to new jobs and new business in the United States. But often, growth overseas comes at some expense to operations here - particularly in a high-cost area like Long Island.

Nevertheless, the Island is behind the curve a bit when it comes to growing internationally. While the data are not complete, due to discrepancies in how companies report foreign sales (see sidebar, Page D6), it's clear that more than 40 percent of the Top 100 don't have significant foreign sales. Some - such as commercial real estate, health care and utility companies - may not need to. But others simply haven't chosen to take the plunge.

Indeed, there's substantial risk for the companies in Newsday's Top 100 that do enter new markets. Heading the list of question marks: foreign currency fluctuations, economic stability, political uncertainty and cultural differences.

'Today's reality'

But many companies see the international marketplace as their salvation. Some of them have watched U.S. sales dwindle, while revenues in Asia, Latin America and Europe are on the rise. In the end, the opposing trends often more than balance out, providing Long Island's top companies with clear ways to gain ground outside the more saturated local and national marketplace.

"I think that's today's reality," said James Glassman, a senior economist with JPMorgan Chase. "That's where the growth opportunities are."

And it's not just Asia. For Henry Schein Inc., ranked third on the Top 100, the growth is in Australia, New Zealand and Western Europe. The dental and medical products distributor has relied primarily on acquisitions to spur its foreign sales gains.

"Once we know there are properties for sale, the window of opportunity is pretty short and we jump at them," said Michael Zack, Henry Schein's international group vice president.

Similar stories abound. At the top of the list, companies such as Arrow Electronics (No. 1), Computer Associates (No. 4) and Symbol Technologies (No. 7) continue to use their worldwide reach to gain ground. But even smaller companies, including Porta Systems (No. 72), Chembio Diagnostics (No. 95) and Scientific Industries (No. 94), rely on foreign revenue to drive much of their overall sales.

"The specialization in technology gives Long Island the competitive edge," said Pearl Kamer, chief economist with the Long Island Association, a business group. "Our technology is better than what foreign countries or foreign customers can get anywhere else."

Dollar rewards, risks

Part of the reason for the most recent boom in foreign revenue is simple mathematics: the declining dollar, especially against the euro, has made foreign sales significantly more valuable. Companies still have to deal with risk, of course, often hedging in case currencies change course.