Flextronics International (FLEX) Message Board

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Technology Stocks : Flextronics International (FLEX)

FLEX 57.10

+0.3%

2:22 PM EST

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To: kolo55 who wrote (286)	7/16/1997 9:35:00 AM
From: 18acastra	of 1422

Paul - How do you think about margin expansion for Flextronics analytically? Why should gross margins go up? Jabil will be about a 12.5% GM business for FY 8/31/97. Flextronics is ballpark 3% lower. Why is Jabil so different from FLextronics? Why will Flextronics improve? What is your target GM% and EBITA%? My hypothesis is that more margin is made on value-added (assembly, testing, packaging, distribution) especially on more complex products. I think Jabil has both a higher component of value-added and a more complex product mix. Making a Pilot for US Robotics is good, but it is not as complex a product as a high-end router for Cisco. I think this hypothesis can also be tested when looking at where each company's square footage is located. Jabil is 58% US, 20% Europe, 20% Mexico. Flextronics seems to have about 50% of its capacity in China = lower value added assembly work. Jabil is also a slightly more well-oiled machine. Do you agree with my hypothesis? What is going to change at Flextronics to pull margins up?

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