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Currently Black Box offers over 118,000 products. The product mix ranges from items such as infrastructural hardware to networking devices such as highspeed cables. In addition to their wide variet of products, Black Box offers a full array of IT solutions to its clients including communication and infrastructure. Black Box has numerous, on-site teams that help install and service existing clients with their products. Black Box also contains a full portfolio of products and services that cater to local and state governments. <ref>[http://www.blackbox.com/Store/why-black-box/118000-products.aspx]</ref> Currently Black Box offers over 118,000 products. The product mix ranges from items such as infrastructural hardware to networking devices such as highspeed cables. In addition to their wide variet of products, Black Box offers a full array of IT solutions to its clients including communication and infrastructure. Black Box has numerous, on-site teams that help install and service existing clients with their products. Black Box also contains a full portfolio of products and services that cater to local and state governments. <ref>[http://www.blackbox.com/Store/why-black-box/118000-products.aspx]</ref>

Revision as of 12:43, April 29, 2011

Corporation Summary

Black Box Corporation, founded in 1976, is a communications and infrastructure services provider. Black Box has grown significantly since its roots as a technology product catalog and is now integrated into 141 countries world-wide. Black Box is dedicated to providing the best technological products now and into the future.

Brief History

1976 - Founded as Expandor, INC

1982 - Changed name to Black Box Corporation

1992 - Issued first IPO

1994 - Black Box launches website

2007 - Black Box exceeds 1 billion in revenue [1]

Stock and Reporting Highlights

Black Box Corporation is traded as BBOX on the NASDAQ stock exchange

Black Box runs on Fiscal Year April 1st through March 31st

Current dividends for BBOX are $.06 per share quarterly, pending approval[2]

Marketing Strategy

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Price

Black Box prides itself as having among the lowest prices across the industry. Black Box provides a service where they will match prices on non-customized products if a competitors quote shows a lower price. Black Box also incorporates same-day shipping on over 95% of their products to ensure premium service to clients.[3]

Place

Currently, Black Box operates in over 141 countries world-wide. This allows for Black Box to have a competetive edge over the industry by maintaining a local feel all over the world. By having operations in so many countries, Black Box can maintain on-site teams for many of their clients whether it be the Middle East or central Africa. [4]

Promotion

In order to promote their products, Black Box utilizes an extensive and award winning catalog. In addition, Black Box has a fully compatible, on-line marketplace for purchasing their products along with on-site teams worldwide.

Product

Currently Black Box offers over 118,000 products. The product mix ranges from items such as infrastructural hardware to networking devices such as highspeed cables. In addition to their wide variet of products, Black Box offers a full array of IT solutions to its clients including communication and infrastructure. Black Box has numerous, on-site teams that help install and service existing clients with their products. Black Box also contains a full portfolio of products and services that cater to local and state governments. [5]

Porter's Five Forces

  • Threat of New Entrants

In the Networking and Communication Device industry, there is a large threat of new entrants. The need for for this industry is exponentially growing as the whole world continues to globalize and more areas become technologically advanced. New players in the industry such as Riverbed Technology show that there is a piece of the market for new entrants and they can be successful.

  • Bargaining Power of Suppliers

Bargaining power of suppliers is very high for Black Box. With such a large global presence, BBOX must be able to have products available to be shipped around the world, and in many cases already on-site. If suppliers of raw materials are to raise prices, BBOX would not be able to search for a new supplier and keep up with demand. With such a small market cap, a company like BBOX does not have much bargaining power with suppliers. Competitors within the industry have much higher levels of sales and therefor intake more products from similar suppliers. This leaves BBOX with the lower level of bargaining power.

  • Bargaining Power of Customers

Customers of the Networking and Communication Device industry have a medium amount of buying power. The overall size of the market is so large that companies using this industries products have many options to choose from and can easily shop around. However, once a company already has a product from this industry, they more than likely have integrated the products company wide. This helps to insure client retention within the industry and gives some power to companies such as Black Box, Cisco Systems, Riverbed Technology and Juniper Networks.

  • Threat of Substitutions

Threat of substitutions for Black Box can be looked at both as very high and very low. The fact that there are so many competitors within the industry all offering their unique products, threat of substitutions is high. All of the companies in the networking and communication device industry produce similar products and offer similar solutions, but products across companies could be more valuable to a client.

Threat of substitutions can also be looked at as being extremely low due to the fact that once a client has integrated a certain company into their infrastructure, it is very unlikely that they will begin using other companies products. Although many products being offered in the industry are similar, different software and compatability issues could arise thus making the threat of substitutions low.

  • Competetive Rivalry

Competetive rivalry within the Networking and Communication Device industry is extremely high. Despite a growing market place, there is room for new entrants and many players in the industry are continuing to grow. As many of the biggest companies worldwide adapt their technology, the demand for this industry should increase accordingly. Many of the industry leaders will fight to emerge as the premier networking and communication device provider.

Competitors/Industry Comparison

Competitors

Cisco Systems (CSCO) - Cisco, in terms of size, is BBOX's biggest competitor with a market cap of $93.64B. Cisco is a designer and manufacturer of many communication and IT related products such as networking devices, routers, firewall software, etc. Competition with Cisco is difficult for BBOX due to the large market share that Cisco has with sales of $40B. BBOX to figure out how to best build value for its products so that it may steal Cisco's market share. By producing superior products and continuing to expand their clientele, BBOX will make itself a true competitor to Cisco.

Juniper Networks (JNPR) - Juniper is the second largest competitor in the network & communication device industry with a market cap of $24.55B. Juniper designs, develops and sells products related to IP networking, networking infrastructure, technical assistance and IT hardware. Juniper offers its products mainly through a sales force, but also through various retail mediums. Juniper has many similar target clients to BBOX and a large way that the two companies can compete is through their sales medium. BBOX uses an extensive on-line catalog for the majority of its sales which some potential clients may favor over a sales force or retailer.

Riverbed Technology (RVBD) - Riverbed is a mid sized competitor of BBOX with a market cap of $5.41B. Riverbed's main product lines are designed to help with IT performance and speed. The main product lines are Steelhead appliances which use Riverbed's RiOS software. Riverbed has clients from small offices to large corporations across the world. Riverbed is a relatively new competitor in the industry and is not even a ten year old corporation. As a young player in the industry, Riverbed poses as fresh competition in the market place to Black Box. BBOX may have an advantage competitivly rooted in historic performance and product quality since both companies target the same type of clients.

Financial Comparisons

BBOX, for its industry, is a very cheap stock. The graph below illustrates such. BBOX's EV/EBITDA ratio is just under 1.1 higher than the lowest company in the industry (Cisco Systems). When looking at the industry as a whole it is obvious that many company's stocks are over-priced. Juniper's EV/EBITDA ratio is quite alarming at 19.47 and Riverbed's ratio is indicative of an extremely overpriced stock. This gives great positioning for BBOX within the industry. Such an undervalued stock has great potential for growth, especially when many of its competitors are having a hard time establishing their worth.

Image:EVEBITDA.jpg [6]

Financial Metrics

Capital Structure

BBOX currently finances its operations with primarily equity at an almost 3:2 ratio. Competitor CSCO currently operates right around 1:1 while RVBD operates at 4:1. It is beneficial for a smaller company such as BBOX to operate with more equity as they will pay out less in interest expense and can create a bigger return for stockholders.

Image:BBOXCAPITAL.jpg [7]

Sales Mix

Geographical Sales

SWOT Analysis

  • Strengths
A cover of Black Box's Catalog
A cover of Black Box's Catalog

CommScope Center of Excellence - The CommScope Center of Excellence shows immense strength of Black Box. CommScope is one of BBOX's biggest product lines and this center will help with growth and support to further its effectiveness. CommScope is a leading technology communications company whose products and solutions are available through BBOX. By having this virtual center, BBOX is guaranteeing consumers of the product line full support and a wholy beneficial experience with the products. The center was recently awared Elite status by the CommScope BusinessPartner program. This center, along with the symbiotic relationship between CommScope and BBOX, will ensure the growth of the CommScope business line. [8]

Global Presence - Black Box currently houses offices in over 140 countries world-wide which service an approximate 175,000 clients. As the business world continues to globalize, it is essential for BBOX to expand accordingly. By having such a diverse amount of locations, BBOX can easily service its numerous clients who too have expanded globally. One specific example is the opening of a new office in South Korea.[9] The office which will be known as Black Box Korea, will help capture and fulfill the needs of the growing northeast Asian technology sector. BBOX currently operates in South Korea but in association with the U.S. Military. This new office will hopefully pave the way for an even stronger BBOX representation in all of the Asian marketplace.


Catalog - The catalog is the bread and butter of Black Box. First introduced in 1977, the original catalog contained only nine items resulting in revenue of $175,000. Today the Black Box catalog contains over 118,000 items having resulted in over $1B in revenue. There is also an on-line version of the catalog to make BBOX's products even more available. In 2005 the catalog was named "Catalog of the Year" for the second straight year by Multichannel Merchant. Such a comprehensive catalog truly helps BBOX offer an easy platform to view products for new and existing clients. A catlog of this nature is not readily available by most competitors.

  • Weaknesses

Low market cap - As far as the industry goes, Black Box has an extremely low market cap at just about 609.5M. Industry leader Cisco Systems has a market cap of over $93B, and even smaller competitors such as Riverbed and Aruba Networks both have market caps of over $3B. Such a small market cap for BBOX makes it difficult to compete in shear scope of the market place. Such large competitors can hinder growth for Black Box by crowding out the total market volume for the industry.

Recent dip in revenues - For any company in any industry in this slumping economy, decreased revenues do not bode well for potential investors. Revenues have steadily declined since 2008 at about $200,000 per year. Conversely, major competitors Cisco and Juniper have actually seen a steady increase in revenue over this time period. Also alarming is the dip in net income that BBOX incurred from 2009 to 2010 which was close to $11M. [10]

  • Opportunities

Black Box's opportunities lie within their world-wide integration. The exponentially growing technology sector of the world-wide market place poses a large growth opportunity for BBOX. Their worldwide integration gives them a foothold in many of these emerging marketplaces and easy access to the marketplace. Black Box must make sure to continue to have speedy service and offer quality products and solutions to all potential clients. As more and more companies are becoming dependent on IT integration, the possibility of acquiring new clients increases too.

Black Box holds another opportunity with their biggest client type, governments. With over 25% of their sales coming from government institutions, Black Box is guaranteeing consistent revenue. As world-wide governments continue to expand and continue to become more technologically integrated, this only opens more opportunites for BBOX. If BBOX can continue to present there value, they may incorporate further with government clients and may even gain notice from other large companies working with governments.


  • Threats

The biggest threat to Black Box is the size and number of major competitors. As mentioned above, a market cap of under $1B does not give BBOX nearly as much room to operate in the marketplace as their competitors.

The benefits of BBOX's international presence also carries some potentially large risks. Black Box operates in many countries which have seen large disasters (Japan, Sri Lanka) and areas of much political and military unrest (Middle East, northern and western Africa). Operating in these areas can pose threats to not only BBOX locations, but also to their client base.

Corporate Governance

Below is a table containing the top officers at Black Box. Note that each of these officers have been with Black Box for over 10 years showing strong internal promotion.

Image:BlackBox.jpg [11]

References

  1. [1]
  2. [2]
  3. [3]
  4. [4]
  5. [5]
  6. [6]
  7. [http://finance.yahoo.com/q/bs?s=BBOX+Balance+Sheet&annual
  8. [7]
  9. [8]
  10. [9]
  11. [10]
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