Timex Corporation, USA, the third largest watchmaker worldwide, saw its seven-year old Indian arm make losses last year. Timex, with annual sales of $3 billion and 13 million watches has a presence in 32 countries. The company's strength lies in being the lowest cost producers of watches in the world.

The desi Timex Watches was set up as a joint venture between Timex and the Tata group's Titan Industries in 1992, with a capacity of 2.5 million watches. The promoters then had a 58 per cent stake of the Rs 40 crore equity split equally between them. The significance of the joint venture was that Titan would use Timex's cost competence to make an entry into the low-value segment. Timex would save on setting up a nationwide distribution network.

The strategy worked. The venture saw Timex establish its brand nationwide at a low cost. But liberalisation and increasing competition from theunorganised segment meant that lower-end operations were not enough. Timex needed to enter the upper end of the market as well, which meant head-on competition with Titan. Hence, it was but essential to part.

This conflict of interest between partners led to the marketing agreement being terminated in March 1998. The two partners formally parted in April, the only question being the price to be paid by Timex to take over Titan's stake. Haggling over this saw a somewhat unfocussed Timex Industries making losses in the second half of 1997-98.

For 1998-99, it made a loss of Rs 17.28 crore on sales of Rs 66.52 crore. The story continued in the first quarter of 1999-2000 also. In the first quarter, it made a loss of Rs 4.98 crore.

It is only now that Titan has decided to part with its stake in the venture at Rs 30 per share. With Timex gaining control, a lot of brand-building support can be expected. There is also the added allure that India would be a vital sourcing base. India's low labour costs are itsrecommendation. The average wage for a factory worker in India is 35 cents per hour, compared to $1.3 in Phillipines where Timex has 90 per cent of its global production.

As far as distribution strengths are concerned, Timex has around 70 franchisees and 3000 multi-brand outlets. With the ownership issue resolved, Timex will increase its involvement in the company and it is only a matter of time before it turns around. The share price has already moved up, in the wake of the stake transfer, from Rs 15 in March 1999 to Rs 27. The countdown has begun. Long term investors with a two-year perspective would do well to invest at the current prices.