ATC Tech Working Connections

ATC Technology Corp. (ATAC) is set for growth in the future, especially in its Logistics segment. At the same time, pricing concessions to a few customers such as Ford (F), Chrysler, Honda (HMC), and AT&T (T) exist, although they are modest and partially offset by cost reductions. Hence, we recommend a Hold and set a six-month target price of $25.

New business wins in the Logistics segment, coupled with continued strength in wireless and mobile devices distribution, are driving revenue growth. AT&T is a major customer in this business. Additionally, services for T-Mobile (DT) and Nokia (NOK) and increased replacement demand for advanced handsets are contributing to sales.

Subscribers and revenues in the wireless market as a whole are expected to grow 3-5% per year in the next 1-2 years, with 57% of the growth driven by replacement demand. The company is also seeking to expand this business into the broadband/cable, medical devices and electronics/computer segments, areas that are similar to the wireless business. Growth is driven by the ability to save costs for customers. About one-third of growth is from new customers, while the remaining two-thirds are from existing customers.

The implementation of original equipment manufacturer (OEM) warranty administration governs demand made by dealers in warranty applications. This is one of the greatest challenges facing ATC Technology, particularly on the older programs. Due to this, dealers are replacing fewer transmissions with remanufactured units. This has led to a reduction in the volume of remanufactured transmissions

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