Listened to Flextronics at Montgomery conference.
Thanks to some assistance from a SI poster, I got a chance to listen to the Flextronics presentation at the Montgomery conference on Thursday. I also participated in the breakout session discussion and got a chance to talk to Marks and Dykes in a small group.
The questions in the breakout were pretty general, and most of the
participants weren't well versed in the company's operations. After the breakout, I asked Micheal about the SJ ECM company purchase. When I suggested that the company they were buying was doing about $100M per year, he corrected me, and said the number was closer to about $75M per year. He said the deal is done, the papers have been signed, now just waiting for the close, which should be well before April 1st. They are already working together on some customer business with the company they are aquiring.
When I asked whether the deal would be all equity, or involve cash or
debt assumption, he replied that it was an equity transaction. I asked about move from one shift to three shifts, and whether this would increase revenues substantially; he seemed to hedge a bit, and suggested that this might be true over time, but it would take some time to ramp the plant up. I suggested the ramp in revenues would overwhelm the equity dilution caused by the issuance of 10-15% additional shares, and suggested the deal would be accretive. Bob Dykes immediately took issue, and said the equity used in the transaction was less than 10%. In fact, he reminded me that they have discussed the deal as 'not material', and they couldn't use this term unless the new equity amounted to less than 10%. Marks then said he couldn't promise the deal would be accretive now, but over time as the ramp occurs in their plant, they had hopes it would accrete to earnings (looks to me like don't want to raise the bar too high too soon on higher revenues and earnings- they want room to beat estimates and not fall short).
There appear to be quite a few rumors at the acquired company, that this buyout is happening.
On another subject, Marks confirmed that their Neutronics revenues in 98 calendar year would hit $300M as previously projected, up from $150M in 97 calendar year. Marks said Hungary would eventually become the company's first $1B revenue center (in the longer run). He said that "Hungary is going to be huge". He also mentioned that SCI just started building a facility there, that they hoped to do $350M in revenues from.
Marks felt the stock was a great buy here.
Based on his comments on the SJ acquistion, my comments in my previous post(click on the number of the post I am responding to) are too bullishly aggressive. OTOH, the number of shares issued will be less than 2M shares(10%), and I got the body english that the number should be much less, say 1 to 1.5M (looks like patroller wins the guessing game here). Still based on the good news that just seems to keep coming, I think it will just be a matter of time before the analysts revise estimates for fiscal 99 upward.
Paul |
