The backup-drive manufacturer has margins that fill its huge rivals with envy

At the height of the tech boom, emissaries from Flextronics, Solectron, Celestica, and other contract manufacturing giants were knocking on Wong Ngit Liong' s door, offering him enticing sums for his company, Venture Corp. The Singapore manufacturer enjoyed a solid reputation as the maker of Iomega Zip backup drives, Hewlett-Packard printers, and Agilent Technologies' testing and measurement gear. Wong watched as Singapore' s other contract manufacturers -- NatSteel Electronics, JIT Holdings, Li Xin Industries, and Omni Industries -- were acquired, one by one. But he rebuffed the offers. " The valuations were very tempting," recalls Wong, Venture' s CEO. " But we knew we could create more value for our stakeholders as an independent entity than as part of some global giant."

Wong' s stubbornness has paid off. Although his company remains far smaller than those that gobbled up his local rivals, Venture has been growing fast and enjoys margins of 7.6% -- the best in the business. Last year, Venture reported earnings of $140 million on sales of $1.85 billion, and analysts forecast a 25% increase in earnings this year. Today, Venture has 10,000 employees in 23 plants worldwide. And the company is rolling in cash: It has $500 million, and J.P. Morgan Chase & Co. expects that to grow to $800 million by the end of next year -- enough to make Venture a predator itself. But that' s not what Wong, a 61-year-old former HP manager, has in mind. " We don' t want to be the world' s biggest contract manufacturer," he says. " We just want to be the most profitable."

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While the biggest names in the business went on a three-year acquisition spree from 1999-2001, Wong focused on earnings. What sets Venture apart is its diverse, low-volume product mix, which allows the company to design most of the products it manufactures -- and charge higher prices. So, instead of simply churning out cell phones that offer margins of 2% to 3%, Wong won contracts to design and manufacture high-end office printers for the likes of HP at margins as high as 10%. Also, by eschewing takeovers, Venture has avoided the costly headaches of integrating the operations of acquired companies. " Wong is the Warren Buffett of contract manufacturing," says Russell Tan, an analyst at NRA Capital in Singapore. " He only cares about extracting the greatest value for his shareholders."

Wong has also been successful in diversifying Venture' s product line. That, he says, will provide a cushion when tech inevitably heads south again. Sales of printing and imaging equipment today make up 37% of Venture' s total sales, a proportion that is decreasing as Venture brings more products into the mix. The new products in the lineup include networking and communications gear, auto electronics, and medical equipment. Sales of those products could grow by more than 50% this year and next, according to J.P. Morgan. And Agilent is stepping up purchases of testing and measurement equipment.

Wong' s biggest challenge is expanding Venture' s footprint in China. In a country that accounts for one-third of Flextronics' global production, Venture' s three China factories make up just 5% of its capacity. But as his China order book grows, he plans to expand those plants and increase their production from $70 million last year to $1.2 billion by 2008. " The opportunity for us in China is tremendous, given the pipeline of existing and prospective customers," says Wong.

He might even find a way to spend some of that cash he has been building up -- for example, as a venture capital partner in startups that have innovative products. That way, as those companies expand, Venture will not only grow as a supplier but also will reap benefits as a shareholder. " Whatever we do, we' ll be very careful in how much we invest and where," he says. As always, Wong Ngit Liong plans to proceed with caution -- and profit.

By Assif Shameen in Singapore