SCI Systems, Inc.
Founded in a basement in Huntsville, Madison County, basement in 1961 by engineers Olin B. King, Bill Greaver, and Joe Kirk, Space Craft Inc. (SCI) grew into a billion-dollar business by constructing aerospace components. Some of SCI’s client companies included Boeing, Sperry, International Business Machines (IBM), Thiokol, and Northrop.
Olin King In 1959, President Dwight D. Eisenhower announced new government-sponsored programs to enable universities and private companies to own and operate orbiting satellites. King, Greaver, and Kirk saw a good business opportunity in designing and selling satellites to private buyers such as Johns Hopkins University. Together, they possessed considerable knowledge of celestial mechanics, thermal dynamics, ultra-powered electronics, and synchronous communications and wanted to take advantage of that expertise. In 1961, they pooled $21,000 and set up shop in King’s basement.
When the U.S. government announced that the National Aeronautics and Space Administration (NASA) would bring the Apollo moon-landing project to Huntsville, the men reoriented SCI to take advantage of Apollo’s government contracts. Boeing and other large contractors hired SCI to build subsystems for Apollo’s Saturn V “moon rocket” and the Skylab space station as well as for the Titan III intercontinental ballistic missile and Poseidon submarine-launched ballistic missile programs.
By 1965, Olin King was the company’s chief executive officer (CEO) and chairman of the board (positions he held until his phased-out retirement in 1999 and 2000). In 1966, the company went public, offering shares in the company to buyers, and King emphasized rewarding shareholders with good returns.
When the Apollo program ended in 1972, many Huntsville aerospace businesses closed. SCI, however, adapted and prospered. The company began building components for the Army’s Pershing missile and for the Air Force Titan missile. By 1982, SCI was making core memory units for MX missiles and building F-15, F-16, and F-18 military aircraft. Defense work continued to account for about one-third of all its contracts.
The company also pursued commercial contracts, however. Under King’s leadership, SCI pioneered contract manufacturing in which one firm builds another firm’s designs. Some of its most significant contracts involved building personal computers for IBM, computerized control systems for oil pipelines in Saudi Arabia, and an automated toll collection system for the New Jersey Turnpike. When SCI began making personal computers for IBM, sales skyrocketed. Between 1978 and 1981, sales rose from $2.5 million to $45 million.
By 1982, SCI was engaged in some 200 projects and was among Alabama’s 10 largest private employers and the largest private employer in the Tennessee Valley. The firm had five plants in north Alabama employing 3,100 people, 800 of whom were engineers, and additional plants in North Carolina, Scotland, and Singapore and regional offices in 12 U. S. cities. As of 1985, sales had risen to $500 million. By 1987, SCI had re-invented itself and become one of the 500 largest companies in the United States and the world’s largest contract manufacturer. Building other firms’ designs contributed to 79 percent of its revenues.
During the 1980s, however, some analysts questioned the benefits of SCI’s prosperity and fame, concluding that the high-technology boom had not translated into substantially higher wages, increased skills, or number of jobs for Alabama workers. Rather, SCI had banned the hiring of former union workers, including those laid off from Birmingham’s steel mills, and opposed state efforts to protect workers. King in particular was prominent among Alabama’s many large manufacturing employers who vehemently, but unsuccessfully, opposed the state’s law allowing injured workers to sue co-employees for damages.
Sanmina Assembly Line When Olin King retired in 1999, longtime partner Eugene Sapp succeeded him as CEO and re-directed SCI again—this time into optical and wireless technology. SCI had become Huntsville’s largest private employer, with more than 4,300 employees, and the largest company in Alabama. It also had 31,500 workers in 37 plants in 17 countries. Much of the effort toward locating plants in other nations was aimed at reducing labor costs to produce greater capital gains. Jobs that had formerly been performed by Alabamians were being completed by laborers in Mexico, Malaysia, and other nations at greatly reduced wages. And SCI continued to expand, purchasing Nokia factories in Finland and Britain and tripling the capacity of a factory in China that made optical devices for Hitachi.
In 2001, Randy Furr, president and CEO of San Jose, California’s Sanmina Corporation, approached Sapp about buying SCI. After eight weeks of negotiations, Sapp and Furr agreed to merge the two companies. Sanmina acquired its competitor for $6 billion in cash, stock, and debt. Sanmina chairman Jure Sola, would run the newly formed Sanmina-SCI Corp. In 2001, it sold its plant in Arab to developers, and sales of plants in the Huntsville area followed. The strategy greatly increased financial returns, earning it $10.4 billion by September 30, 2006. Now a global business, the California-based company has plants and offices in 18 countries on five continents.
SCI had been a key figure in the reinvention of Huntsville as a national high-technology hub. It also helped improve Alabama’s image, create multimillionaires, fuel the stock boom, and pioneer contract manufacturing. On the downside, the company and its leaders continued Alabama’s pattern of suppressing labor demands for higher wages and protections, and when Sanmina purchased it, jobs and tax revenue left Alabama and the United States.
Kellner, Tomas. “Critical Mass.” Forbes, May 26, 2003; http://www.forbes.com/forbes/2003/0526/130.html
Roche, Timothy. “This Merger Wasn’t Rocket Science: Bulking up to Survive, Sanmina Buys SCI, Formerly Space Craft Industries.” Time, August 13, 2001.
Siegel, Barry. “High-Tech Revives Town but Prosperity Has Limits.” Los Angeles Times, April 26, 1983, n. p.