Solectron to Cut 12,000 More Jobs; Sees 3rd-Qtr Loss (Update4)
By J. Kyle Foster
quote.bloomberg.com
03/20 19:50
Milpitas, California, March 20 (Bloomberg) -- Solectron Corp., the world's No. 2 maker of electronics for brand-name companies, will fire an additional 12,000 workers. The company forecast its ninth straight quarterly loss, and the shares fell 8.8 percent.
Solectron predicted a third-quarter loss, excluding some costs, of 1 cent to 4 cents a share and said sales in the quarter ending in May will be $2.6 billion to $2.9 billion. The company, which had 75,000 employees in December, was expected to earn 1 cent on sales of $3.1 billion, the average Thomson Financial estimates.
``I am not pleased to deliver this guidance, but it is where we are today,'' Chief Executive Officer Michael Cannon said on a conference call. Cannon joined Solectron as CEO 11 weeks ago. ``There is more work to be done.''
The job cuts are on top of 40,000 firings already completed since 2001 and previously announced plans for another 1,000 by the end of August. Solectron, which assembles computers and networking gear for companies such as Hewlett-Packard Co. and Cisco Systems Inc., has closed plants and moved production to lower-cost regions as clients have scaled back orders.
Solectron shares fell 30 cents to $3.11 in extended trading after the report. They had dropped 7 cents at 4 p.m. in New York Stock Exchange composite trading and have declined 59 percent in the past year.
``It's difficult to get excited about this stock,'' Needham & Co. analyst Jesse Pichel said in an interview. Pichel, who rates Solectron shares ``hold'' and doesn't own them, said the job cuts may take a year to complete.
Solectron had a net loss of 35 cents a share on sales of $3.03 billion in the year-earlier third quarter.
Second Quarter
The company also will eliminate 3 million square feet of manufacturing space. The consolidation and job cuts will cost about $300 million over the next ``several quarters,'' Chief Financial Officer Kiran Patel said on the call.
Solectron's second-quarter loss declined to $110.8 million, or 13 cents a share, in the period ended Feb. 28 from $126 million, or 15 cents, in the same period a year earlier. Sales fell 5.3 percent to $2.82 billion from $2.97 billion, it said.
The company said in December that sales would be $2.8 billion to $3 billion. Analysts surveyed by Thomson Financial expected sales of $2.95 billion.
Excluding some costs, Solectron said it would have had a loss of 1 cent a share, matching the average estimate of analysts surveyed by Thomson Financial.
The Milpitas, California-based company is cutting more expenses, ``streamlining the management structure,'' and replacing some computer systems, Cannon said.
`Still Awful'
``Business is still awful and they just have too much capacity,'' Needham's Pichel said of Solectron and rivals such as Flextronics International Ltd., the world's largest maker of electronics for other companies.
Lucent Technologies Inc. has said it ended a contract with Solectron. Solectron will lose about $500 million in annual revenue from Lucent and an unidentified video-game console maker after this quarter, Patel said.
Lucent halted a three-year agreement for Solectron to build fiber-optic cable, which provided $50 million in revenue each quarter. The video-game company contract was worth $70 million a quarter, Patel said.
``Here they are closing plants and then lose $500 million in business,'' Pichel said. ``It's a moving target that these contract manufacturers are constantly chasing.'' |
