Flextronics sees sales up in current, coming qtrs
(UPDATE: Adds further analyst comment)
SAN FRANCISCO, Sept 10 (Reuters) - Flextronics International Ltd. (NasdaqNM:FLEX - news) Chief Executive Michael Marks said on Monday he expects revenues at the contract technology manufacturer to reach record levels in the current fiscal second quarter, with sales rising further in the third quarter.
But Marks said the Singapore-based company is facing pressure on its margins due to the slowdown in the technology industry, even as the slump forces more brand-name manufacturers to outsource production and assembly operations.
``We are extremely bullish about our business. We expect a record revenue quarter this quarter. We expect revenue up again next quarter. We expect next year to be a really big year,'' Marks told investors at a Banc of America Securities conference.
``This severe downturn, or recession or depression, from a technology standpoint is clearly driving more demand for outsourcing,'' he added.
The consensus forecast of four analysts polled by Thomson Financial/First Call was for revenue in the current quarter of $3.2 billion. The consensus of three analysts for the fiscal third quarter was for revenue of $3.4 billion.
``It's a reaffirmation,'' said Banc of America Securities Paul Fox. ``It's good because in this tech environment, companies still seeing revenue growth are fairly rare.''
Louis Miscioscia, an analyst at Lehman Brothers, said that Flextronics' revenues are being driven by the company's strength in adding new manufacturing programs, including a contract as the sole supplier of XBox consoles for Microsoft Corp. (NasdaqNM:MSFT - news)
Marks also said that the downturn, while increasing revenues, was putting pressure on profit margins.
``Margins are under some pressure as you'd expect. Capacity utilization in our own facilities is not as high as it was in the boom times. Plus the customers are in trouble, so that puts a lot of pressure on prices, which we accommodate to some extent,'' he said.
Analysts are expecting margins to improve in the December quarter for Flextronics, as new outsourcing agreements come on line, such as XBox and an agreement to make mobile phones for Sweden's Ericsson (NasdaqNM:ERICY - news), said Fox.
Marks said demand in the contract manufacturer's end markets, such as cell phones and video game machines, was down between 40 percent to 60 percent.
``Most of the end markets are down by 40 to 60 percent, and we are going to have a record revenue quarter this quarter, said Marks, who is also chairman. ''So when we talk about the end markets being terrible, don't read that as terrible for us."
Flextronics shares were down over 3 percent at $17.82 on the Nasdaq on Monday in late afternoon trade. The shares have lost about 38 percent since the start of the year and have traded lower in seven of the past 10 sessions. |
