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Technology Stocks : Flextronics International (FLEX)
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To: Judy Muldawer who wrote (1127)7/16/1999 1:07:00 PM
From: rich evans   of 1422
 
I think Flex results and future forecasts are being misinterpreted. The company indicated 750mill+ for Q2 but said margin would go down because of ramp up expenses, and assimilated new acquisitions for their IT,training, ramps etc. But with the hgiher volume they should be getting some SGA leverage in the 2nd half. They also said to hold estimates for Q2 where they are using the new acquisitions as 0% net margin until they could get their forecasts/computer modeling together later in Q2 and then would advise. They indicated Q3 would be once again very strong and their strongest quarter with similar sequential % gains as in the past. So if we use 750 mill for Q2 and about 900 for Q3 and assume Q4 will be flat like last year we get 3 bill in revs. Only Q2 should have much of a margin hit and in fact margins could do better in 2nd half if SGA goes down toward announced long term target of 3%. Tax rate they said stays at 12%. Using I think 54 mill shares diluted and a blended 3% net margin I think will give a good estmate for year end March of 2000 plus about 2 cents a quarter in amortization. That is how I came up with 1.80 a share thereabouts so stock now at 27 times earnings PE forward which is the average for Tier I companies according to keith Dunne. Looks like a buying opportunity with this pullback especially if it continues into the 40s.

Rich
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