Electronic Contract Manufacture (ECM) Sector Message Board

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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector

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To: G.M. Flinn who wrote (2402)	8/3/2000 1:12:59 PM
From: rich evans	Read Replies (2) of 2542

Good Quarter for SCI and very good CC. Interesting to compare SCI to FLEX. Similar sales for Quarter and earnings. Actually SCI more on a cash earnings basis. Similar debt with SCI at a lower average interest. Similar ROIC. Similar estimates for 2001 at 10.5 bill and earnings.SCI has 25% teledata com and 40% PCs and PC boards. Flex has opposite. Both going into optical board assembly and some modules. Both got into enclosures. SCI with TAG and Flex with Chatham. Both got big contracts for CPQ servers, about 6% of for each in the server area. Both expanding and buying and acquiring strategic smaller companies but no longer legacy types. FLEX has gone into boards and ASICs with DIIG deal. SCI says not intersted as has aabout 25 PCB suppliers and sees no need although I wonder about the high end and optical boards. Both have same operating margin now.(Reminds me of old post that the ECMs would gradually have similar operating results as their mix would become more alike.This is happening with SCI which is driving TELEcom to the 40% goal which flex has now.) SCI says a operating margin of 4.5% may be come the norm in the industry. Anyway, with all these similarities, there is a big valuation difference, although it is becoming less. Growth in FLEX has been greater but is future growth going to be so dissimilar? These valuation differences of course can be applied to the other ECMs as well and could create profitable opportunties if one can switch around in a taxfree account. Everyone should listen to the SCI cc on the web as it provides a lot of bacground on the industry and where it is going , competition and optical assembly and component. This industry still looks good to me for some time. Rich

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