Case Labs Closing Doors.

[rtwjunkie]

Maximum tariff on steel is 25% and aluminum is 10% (Case Labs mostly uses aluminum if I'm not mistaken). They're saying 80%. No...they give a hint further down: "the default of a large account." In other words, they missed a debt payment and the creditor wasn't going to negotiate new terms; ergo, they're done. Odds are they weren't charging enough per case made and couldn't charge more because they were accepting back orders (they would have had to cancel the orders to reflect new prices and likely refused to). Also known as: poor business management. Tariffs are just a convenient scapegoat; this announcement was a long time coming.

Edit: Can't figure out who their "parent" company is. The debt that defaulted could be completely unrelated to their case manufacturing business. In which event, Case Labs could potentially be sold to another company in order to help settle the parent company's debt.

You hit the nail on the head Ford, coming to the same conclusion I did as I read it: they were bad at running a business, and margins were too low. Thus, one big default and they are in a hole they cannot get out of.

 

[StrayKAT]

Wait... Trump's tariffs are supposed to HELP American steel. And Caselabs touted being American made all this time. Were they just using shit Chinese product this whole time and jacking up the price?

Also, no pity for a company that sells $700 PC towers. Understandable if they made specialized equipment, but a tower is not.

 

[Bill_Bright]

This tariffs justification sounds like an excuse, particularly when they say they can't fulfil current orders.

I agree 100%. While I am totally against these tariffs (at least they way they were implemented against our friends and allies), this company is based in the US and this is clearly an attempt to cover up and deflect focus away from the mismanagement.

Raw materials are what percentage of the cost of their cases though? 10%? Not even? The bulk of their costs are likely labor. If they can't handle a 10% shift in prices, their margins in the first place are too small.

I agree. And yeah, the default of "a" large account added "greatly" to the problem. It sounds like they had too many of their eggs in one basket!

The aluminium industry seems to be in a bit of an uproar on the whole

And yet: http://www.infomine.com/investment/metal-prices/aluminum/6-month/

 

[Frick]

[QUOTE="Bill_Bright, post: 3884108, member: 2866
And yet: http://www.infomine.com/investment/metal-prices/aluminum/6-month/[/QUOTE]

Which is why I said it depends on their supplier.

 

[newtekie1]

How does one make $1.4 million with 8 employees? Probably just corporate for Case Labs (CPA, lawyer, CEO, customer service, etc.).


Raw materials are what percentage of the cost of their cases though? 10%? Not even? The bulk of their costs are likely labor. If they can't handle a 10% shift in prices, their margins in the first place are too small.

Small fabrication companies can easily do $1.4 Million in revenue in a year, especially if they are in the medical field like they are. Revenue isn't profit, it is just money taken in by the company. Subtract from that the cost of business. $1 Million of that could easily just be the cost of material.

Yes, the tariffs and the resulting destabilization of the metal market can cause wild price fluctuations. Yes, the price of raw aluminum in the global market has nearly doubled. It was selling for about $300 per ton in August of 2017, it is now selling for over $560 per ton. It is definitely not just a 10% shift in prices. A big reason for this is with the tariffs in place, a lot of producers are just cutting back production, causing a shortage. They cut their production back to half, the resulting shortage allows them to sell half the product at almost twice the price. And when the tariffs end, they go back to full production and all returns to normal. The problem comes with the small business that can not easily absorb and adjust to the increase in raw material costs that happens that quickly.

But obviously that's not the only reason, the big default is probably the main reason for closing, and caused a domino effect. And I'm guessing the default wasn't on the CaseLabs side, but was on the fabrication side of the business. They likely have large accounts that are constantly putting in orders, and as such likely extend those accounts credit. It is very easy for a small company to over extend credit to big accounts. You want to keep them happy, and you just see the orders coming in. They are happy because they can just call and make an order, and you are happy because the orders keep coming in. But you are taking out credit to order the supplies to make the product for that big customer. The big account keeps sending you some money every month, and it is enough for you to pay your credit bills, so all is good, right? But one day the big client suddenly declares bankruptcy... And you pull up their account and they owe you $250,000. Oops. You'll never see that money, and if you do it will be pennies on the dollar years down the line when the courts finally settle the bankruptcy. But your credit bill doesn't go away. You still owe $200,000 on the business line of credit just due to that big client. They are still going to expect you to make your $10,000 credit payment next month, but now you aren't getting any money coming in from the big client anymore.

Is it poor management on your side? Yes, but an easy mistake that a lot of small business make. But now you are in a situation where you've maxed out your credit, and can't afford to buy the raw material necessary to make your product, and a big reason you can't afford the material is that the raw material is now almost double what it cost last year. You can try to run by using the money coming in on new orders to pay for the materials for the old orders, but that system doesn't work. First, you have to pretty much double the price or your product. Second, this results in a large drop off of new orders coming in. Thrid, you're still not making enough to cover the next business line of credit payment.

Case Labs wasn't a big company, and I don't think their parent company was either. From what I remember, CaseLabs was born because the fabrication business needed a new CAD workstation, and they weren't happy with the available cases on the market at the time, so they decided to make their own. Then they decided to start marketing their case. The fabrication company wasn't that big either. So a big hit like this can kill a small business very easily.

So, were the tariffs part of the reason CaseLabs went under? Yes. Were they the only reason? No.

 

[Bill_Bright]

Which is why I said it depends on their supplier.

True. But then companies that need raw materials should have more than one supplier.

 

[John Naylor]

C'mon folks ... no one took Economics 101 ? Until you have sat in the CEOs / CFOs seat, don't pretend to understand corporate finances. First let's actually read all the words in the sentence " Like the 2nd amendment folks leave out the words "well regulated", note the tweet actually says "in part".

1. Look what happens when oil goes up by 1% ... by the time the cost increase reaches the consumer, it's 10 times that. Because everyone up and down the supply chain, will use the opportunity for a bit of price gouging.

2. The cost of doing business is greatly affected by economies of scale. Since things cost more, volume will drop. Again, every one up and down the supply chain is affected. Just because your output drops xx %, the cost of insurance, keeping the lights on, labor, ongoing liabilities remains the same.

3. So due to the above, the price must increase more than the 25% because orders are dropping 30% and that won't change the rent of the cost of utilities. This effect multiplies up the supply chain and the numbers can get very significant. Not 80% but 40 - 50% is certainly in the realm of possibility.

4. With the trade deficit with china as well as the national debt increasing to , the US dollar has also been weakened on the world market, and with a weakened dollar, cost of imported goods is again inflated.

5. Finally the volatility and uncertainty of the market with more threatened increases has sellers hedging their bets to cover potential losses.

 

[Bill_Bright]

I agree with everything you said - in theory.

But the fact remains, this company in particular seemed have several other issues at play, including little to no cash reserves. Too much reliance on a single client. Too little income - perhaps due to little variety in products.

The PC market has been in decline for many years now. Perhaps they should have diversified more and not specialized primarily in high-end "niche" products. That's a management decision.

 

[Hood]

Case Labs could have tried to become more mainstream, by producing a more affordable option and pushing it to builders and O.E.M. boutiques, dropping the expensive options and concentrating on making a great universal case. They kept a faulty business model that was not sustainable through the lean times, and are now paying for their lack of foresight. Look at what companies like Corsair had to do to remain profitable - they made their name with their first case, the flagship 800D, then they released cheaper options, and now have lots of well-made budget options that cover all segments of the maket, and are selling very well. Corsair is smart, they keep updating their flagship case, and it's existence makes up for all the $50-$100 cases that pay the bills. Sure, it would be a shame to dilute an iconic brand, but survival has a price in any endeavor. Like Tesla, they should have started expensive and sporty to build the brand rep, then used profits to produce an everyman model with mainstream appeal and price.

 

[DeathtoGnomes]

I had thought that CaseLabs imported a case or two?

 

[newtekie1]

Case Labs could have tried to become more mainstream, by producing a more affordable option and pushing it to builders and O.E.M. boutiques, dropping the expensive options and concentrating on making a great universal case. They kept a faulty business model that was not sustainable through the lean times, and are now paying for their lack of foresight. Look at what companies like Corsair had to do to remain profitable - they made their name with their first case, the flagship 800D, then they released cheaper options, and now have lots of well-made budget options that cover all segments of the maket, and are selling very well. Corsair is smart, they keep updating their flagship case, and it's existence makes up for all the $50-$100 cases that pay the bills. Sure, it would be a shame to dilute an iconic brand, but survival has a price in any endeavor. Like Tesla, they should have started expensive and sporty to build the brand rep, then used profits to produce an everyman model with mainstream appeal and price.

The thing is, I get the impression that the CaseLabs portion of the business was never really the money maker for the company. It was a side venture by a few geeky people that happened to own a fabrication business that has the resources to make really high quality cases. They weren't doing it to make significant amounts of money, they did it because they were enthusiasts that saw a need and wanted to fill it to help other enthusiasts out(similar situation to Danger Den, IIRC).

I also don't think the CaseLabs part of the business is what killed the company, the fabrication side died and took CaseLabs down with it.

 

[neatfeatguy]

I agree 100%. While I am totally against these tariffs (at least they way they were implemented against our friends and allies), this company is based in the US and this is clearly an attempt to cover up and deflect focus away from the mismanagement.
I agree. And yeah, the default of "a" large account added "greatly" to the problem. It sounds like they had too many of their eggs in one basket!


And yet: http://www.infomine.com/investment/metal-prices/aluminum/6-month/

Which is why I said it depends on their supplier.

Place I work at, the owners were in a bit of a panic when the assets of Russian, Oleg Deripaska, were frozen and he had ties to a large aluminum producer back around the start of April. The handful of aluminum suppliers we purchase from, there were spikes in several highly used alloys for about a 6-8 week span. We had issues getting and keeping a proper supply of 6061 alloy. That would explain the sharp spike in price in the chart @Bill_Bright linked.

Large orders of some of the alloys were put in and we had trucks and trucks of aluminum billets coming in for the past 6 months. They've slowed down now that things have settled, but it wouldn't surprise me if the addition of tariffs coming through and the whole issue with the spike in prices for aluminum that started back in April. Last I read up on it, about a month after the asset freeze on Oleg, he distanced himself from the aluminum company he was tied to.

That spike in price and the delays we saw from a few alloys could have been a big enough hit for Case Labs to push things past the breaking point if they were already struggling. Thus, pushing backorders out further and making materials they require to become harder to obtain or spike in price to a point they were losing out on backorders they were trying hard to fulfill.

 

[Hood]

I also don't think the CaseLabs part of the business is what killed the company, the fabrication side died and took CaseLabs down with it.

They could have spun it off. I wonder what will happen to any IP and tooling they own? It would be nice if one of the larger companies kept their designs and supply of replacement parts alive, while taking the better ones mainstream for economy of scale. For instance, Cooler Master could call it the Master Lab series, and capitalize on Case Lab's reputation.

 

[newtekie1]

They could have spun it off. I wonder what will happen to any IP and tooling they own? It would be nice if one of the larger companies kept their designs and supply of replacement parts alive, while taking the better ones mainstream for economy of scale. For instance, Cooler Master could call it the Master Lab series, and capitalize on Case Lab's reputation.

It depends on how things are structured with the corporations. It is hightly likely that CaseLabs doesn't even own any of the equipment used to make the cases. Caselabs is probably nothing more than just a bunch of case designs. The tooling to actually do it is owned entirely by the California Fabrication Company. And because CaseLabs does low volume production runs, the company can only really as a part of a larger fabrication company.

 

[FordGT90Concept]

It was selling for about $300 per ton in August of 2017, it is now selling for over $560 per ton. It is definitely not just a 10% shift in prices.

10% in final purchase price. Let's pretend there's 50 lbs of aluminum (including waste from production) in their $700 case, that's 1/40th of a ton so $7.5 worth of aluminum before, $13.5 now. A $700 case, that was 1% of the final purchase price is now 2%. My original 10% estimate was clearly off by a lot. If they can't withstand a 1% change in their product cost, they're doing it wrong.

It depends on how things are structured with the corporations. It is hightly likely that CaseLabs doesn't even own any of the equipment used to make the cases. Caselabs is probably nothing more than just a bunch of case designs. The tooling to actually do it is owned entirely by the California Fabrication Company. And because CaseLabs does low volume production runs, the company can only really as a part of a larger fabrication company.

I get the impression that the parent company had 8 employees and Case Labs had over 100. In other words, it was pretty much just Case Labs at the end. Maybe they could get bought out but I wouldn't get my hopes up. This isn't a buyers market. Too much is in flux.

 

[phill]

This is definitely going to upset @blindfitter and his big Caselabs build.. I wonder what he'll do now!!

Such a shame.. Bit like Danger Den stopping trading in a way I suppose.. Two big is companies just making cases (Danger Den did do a few water cooling products but I don't recall them being a major player?? (please someone correct me if I'm wrong there...)

Either way it's a shame.. I'm not such a fan of most of the cases on sale today, takes me long enough as it is to buy something less important than a case as it is!

 

[newtekie1]

10% in final purchase price. Let's pretend there's 50 lbs of aluminum (including waste from production) in their $700 case, that's 1/40th of a ton so $7.5 worth of aluminum before, $13.5 now. A $700 case, that was 1% of the final purchase price is now 2%. My original 10% estimate was clearly off by a lot. If they can't withstand a 1% change in their product cost, they're doing it wrong.

You are assuming that CaseLabs was the primary revenue generator, I highly doubt this was the case. The fabrication business was probably their primary source of revenue. And the cost of material is very often the largest cost in mass fabrication. The cases were a niche product, it wasn't a huge business. They weren't carried at any of the computer retailers, AFAIK. Newegg didn't care them, Amazon only sells a select few of their accessories, and Microcenter doesn't have them either. Everything was sold directly their the CaseLabs website, and was basically a custom order.

Yes, the material was a very small part of the CaseLabs business. But the CaseLabs business was a very small part of all of the business done by the company. Mass manufactured parts like they do at their main business has small profit margins. When they are selling 1000 unit orders of metal enclosure, the cost of material is likely 70-80% of the final price they sell it for. That is just how manufacturing is.

I get the impression that the parent company had 8 employees and Case Labs had over 100. In other words, it was pretty much just Case Labs at the end. Maybe they could get bought out but I wouldn't get my hopes up. This isn't a buyers market. Too much is in flux.

What would give you the impression they had 100s of employees? Their revenue? My revenue last year was $250,000, and I have one employee, myself. CaseLabs did niche high end cases, they were not a large company. They run the business out of a small 7,000 Sq.ft building, and I bet a large portion of that is dedicated to the machining workshop. I doubt there are anywhere near 100 employees working there.

 

[Xzibit]

I get the impression that the parent company had 8 employees and Case Labs had over 100. In other words, it was pretty much just Case Labs at the end. Maybe they could get bought out but I wouldn't get my hopes up. This isn't a buyers market. Too much is in flux.

Case Labs
Current estimates show this company has an annual revenue of 178500 and employs a staff of approximately 3.

I got the impression they were making cases out of left over sheet metal they ordered for CFC. They are housed in the same unit.

 

[Mr.Scott]

This is definitely going to upset @blindfitter and his big Caselabs build.. I wonder what he'll do now!!

Such a shame.. Bit like Danger Den stopping trading in a way I suppose.. Two big is companies just making cases (Danger Den did do a few water cooling products but I don't recall them being a major player?? (please someone correct me if I'm wrong there...)

Either way it's a shame.. I'm not such a fan of most of the cases on sale today, takes me long enough as it is to buy something less important than a case as it is!

DD and Swiftech were the only decent water cooling manufacturers for years around the socket 462 era. So I would say DD was a major player at one time.
Swiftech still is.

 

[hat]

I saw a lot more from Danger Den around the Core 2 Duo era. These days, not so much. Everyone looking for a good cooler either goes for a CLC like my Corsair h70, or a giant air cooler, with the exception of a few of us who still do custom water. There's more options now that are simpler and cheaper so that kind of stuff just isn't around as much.

 

[FordGT90Concept]

What would give you the impression they had 100s of employees?

https://www.owler.com/company/calfab
Probably not remotely accurate. Not sure where Xzibit is getting his info but probably more accurate.

In any event, aluminum price maybe did have a major impact on CalFab. Assuming so, they should have condensed their message to "our parent defaulted and Case Labs is now defunct because of it." They need not say any more than that. Tariffs maybe contributed to CalFab becoming insolvent but Case Labs shut down because of CalFab being insolvent, not because of the price of aluminum.

Last I looked at Case Labs website like two weeks ago, they said they were no longer taking orders because the backorder list is so extensive. In other words, it wasn't a lack of interest in their products that was the problem, it was the lack of capacity to fill demand. No one buying a $200+ custom case is going to care about a few dollar adjustment due to material costs.

Any way you shake it, Case Labs closing has little to do with tariffs and a lot to do with an unpaid debt (parent or otherwise).

 

[newtekie1]

Any way you shake it, Case Labs closing has little to do with tariffs and a lot to do with an unpaid debt (parent or otherwise).

If the parent dies partly because of tariffs, and CaseLabs has to close because the parent dies(and they were likely the same company actually), then the tariffs are one of the reasons for CaseLabs closing.

 

[eidairaman1]

DD and Swiftech were the only decent water cooling manufacturers for years around the socket 462 era. So I would say DD was a major player at one time.
Swiftech still is.

I guess thermalright and koolance werent?

 

[Bones]

I saw a lot more from Danger Den around the Core 2 Duo era. These days, not so much. Everyone looking for a good cooler either goes for a CLC like my Corsair h70, or a giant air cooler, with the exception of a few of us who still do custom water. There's more options now that are simpler and cheaper so that kind of stuff just isn't around as much.

Believe it or not I found a brand new (Never used) DD block for 754/939 last year - Cheap.
Still had the plastic film on the bottom of it and had been there for so long I had to remove it with acetone, would not simply peel off as it normally would.

I agree - It's getting harder to find the good stuff be it a block, PC case or whatever else and you have to dig around to find it.

 

[Mr.Scott]

I guess thermalright and koolance werent?

Thermalright never did any water cooling. They had 1 waterblock ever.
You're probably thinking Thermaltake. TT and Koolance were both minor league compared to DD and Swiftech.
Koolance is a better company now compared to back then. TT is still pretty much minor league as far as water goes.