EMS . . . Solectron reported a 1st quarter 2003 (November) pro-forma loss per share of $0.01 versus our $0.03 loss estimate and the Street's $0.02 loss projection on revenue of $3.14 billion compared to $2.925 billion forecast. Gross margins rose 40 basis points sequentially to 7.5%, inline with projections but management of SG&A expense was somewhat disappointing. Inventory levels fell by $61 million or 3% sequentially to $1.8 billion and declined as a percentage of revenue from 60% in 4th quarter 2002 (Aug) to 58% in Q1:F2003 (Nov), which compares to a 47% average for the MLNA EMS Universe. Solectron's operating cash flow was a negative $7 million in the quarter due to lackluster inventory burn and cash-related restructuring charges. Solectron recorded $102 million in restructuring charges as part of the company's previously announced restructuring initiative and a new $50-75 million charge was announced for the remainder of 2003. Solectron announced new program wins with undisclosed customers in the automotive, consumer electronics and communications market. For 2nd quarter 2003, analysts are reducing sales projection by $75 million to $2.925 billion but maintaining pro-forma loss per share estimate of $0.02. For 2003, analysts are reducing our sales estimate by $63 million to $12.41 billion and raising our pro-forma EPS estimate from breakeven to a profit of $0.02 per share. Analysts are initiating a 2004 sales estimate of $13.6 billion (+10% Year/Year) and GAAP EPS projection of $0.20.
Last night, Jabil reported 1st quarter 2003 (November) sales of $1.068 billion compared to $1.035 billion estimate with cash EPS of $0.15, which was inline with the Street consensus. Gross margin was 9.1% and down 60 basis points sequentially from 9.7%, while cash operating margin fell from 3.9% to 3.7% due to the impact of integrating acquisitions (with lower margin business) and moving programs to lower-cost locations. Inventory levels rose by $48 million or 12% sequentially to $444 million due to recent acquisitions, including the Philips transaction. New customer wins announced last night included programs with Abbott Labs, Emerson Electric and Symbol Technologies. Jabil generated operating cash flow of $90 million in the November quarter, the eighth consecutive quarter of positive operating cash flow. Jabil took a restructuring charge of $26 million ($9 million was cash-related) and a integration charge of $3.7 million (for Philips and Lucent transactions) during the quarter as previously discussed. For 2nd quarter 2003 (Feb), analysts are raising our sales estimate by $100 million to $1.18 billion due to the addition of sales from the Philips transaction, but lowering cash EPS estimate from $0.17 to $0.16.
Semiconductor Equipment . . . Tektronix (maker of testing equipment) said sales in the third quarter that started Dec. 1 will fall about 3 percent from the $203.6 million in the year-earlier quarter. Tektronix was expected to report sales of $210 million.
Semiconductors . . Micron started with Underperform at RBC. Price target is $9.
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