Investors value phone maker HTC at next to nothing

annual revenue drop about 9 percent since 2011, to $26.1 billion. Its share of the $409 billion electronic manufacturing services industry has fallen from 8 percent to 6.6 percent in that time, according to researcher IDC.

Building stuff for startups and nontech companies is a lot more profitable than trying to satisfy giants such as Apple and Cisco, which have squeezed contract manufacturers’ margins to around 2 percent. That’s one reason San Jose-based Flex aims to become more indispensable with the Internet of Things business, says Jeannine Sargent, Flex’s president of innovation and new ventures. “We touch everything from the connected home to the connected car to connected medical devices,” she says. “Companies in all kinds of industries need to create intelligent, connected devices, but this is an area they just don’t know about.”

Flex’s 2,500 product designers have created a library of 130 component designs that can help companies cobble together devices more quickly. Some of its engineers have built a tiny sensor that scans your retina, useful for products that need to log in users without keyboards. Another group focuses on bendable circuit boards that will be used in electronic tattoos to track vital signs, or in sneakermounted wireless chargers that draw power from a wearer’s movement, says Joan Vrtis, who heads that team. “We are trying to be very much in front of what our customers want,” she says.

To help customers make use of its components or create new ones, Sargent has opened 23 R&D labs across the country where they can work with designers and use 3D printers and industrial manufacturing equipment to make prototypes. Flex is developing smart shelves with Intel and cropmonitoring sensors with Farm2050, a food production consortium started with Google Executive Chairman Eric Schmidt.

Flex also offers startups lab space, equipment, and training at its $50 million Milpitas (Calif.) facility in exchange for undisclosed equity stakes. “We liked that they were committed to being an innovator, not just a manufacturer,” says Ian Campbell, a co-founder of NextInput, one of the startups that joined the accelerator program. His company’s chip makes touchscreens more sensitive to different levels of pressure. The workspace puts Campbell’s wares on display for the thousands of larger companies that visit Flex looking for manufacturing help.

Companies making driverless farm equipment or bathroom scales that upload your daily weight to the cloud are willing to pay higher rates for engineering help and technological shortcuts, says Eric Miscoll, an analyst with consultant Charlie Barnhart & Associates. For Flex to develop steady sales, though, it’ll have to pick the right partners—ones whose products can actually be made. In April, Flex canceled a contract with a startup called Central Standard Timing, which was trying to build a smartwatch that was less than a millimeter thick. In a June post on its Kickstarter page, CST said Flex lacked the specific manufacturing expertise needed for the watches. The startup’s chief executive officer, Dave Vondle, declined to comment for this story, citing possible legal concerns. “We’ve executed on all of our obligations,” says Sargent.

It will likely take years for IoT sales to offset Flex’s slowing PC and smartphone businesses, but the company’s profit margins rose from 1.6 percent in 2014 to 2.2 percent this year. Analysts predict they’ll reach 2.4 percent in 2016. Flex’s business is growing with clients including Ford, Whirlpool, Johnson & Johnson, and Fitbit. Still, Flex will need to move faster to avoid getting crushed by huge Asian manufacturers and stay ahead of nimbler startups, says Miscoll. “I wish they would do more,” he says of Flex. “If you aren’t getting 50 percent of your revenues outside of traditional electronics, please contact us, and we’ll help you liquidate your assets.” —Peter Burrows

Sargent

Smart jacket

More than 60 sensors and components are built in

The bottom line Flex projects a rise in its slim margins due to IoT component sales, but that hasn’t offset slowing revenue.

Mobile

Investors Say HTC

Ain’t Worth Squat

The phone maker announces more cuts as its market value plummets HTC’s cash “is the only asset of value”

HTC has tried a lot of things to reverse its tumbling smartphone market share: Since last year, the Taiwanese company has replaced its marketing chief, begun selling GoPro-like action cameras and developing virtual- reality headgear, bet more heavily on its highend but poor- selling line of phones called the One, and booted Chief

Executive Officer Peter Chou in favor