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Technology Stocks : Solectron

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To: shane hartman who wrote (257)	9/14/1998 7:11:00 PM
From: Steven E. Cutcliffe	Read Replies (2) of 493

highlights from today's conference call: Sales were up 32% sequentially from the end of the May 98 Quarter in part due to acquisitions of NCR site and IBM NC site. Top customer list is as follows HP 13% of sales, NCR 11% of sales, CSCO 10%. Management says still seeing a very steady market picture with signs of some pickup. Seeing pickup in PCs and pc related equipment, typical of this time of year. Work stations were up to 21% of sales because of the NCR site acquisition. While the fiscal 99 consensus for revenues ranges between $7.2b and $8.6b, management says that the analysts that are maintaining the low end of the range have not yet contemplated the acquisitions that have been done. Thus believes that the low end of the range will come up. The Ingram deal while not shipping product yet, is a completely new segment of the market. The gross margins of 9.2% could have been as much as 10% had it not been for the new business from the NCR site. Site was acquired under the condition of delivering new business and showing cost improvements. In addition new site startups in Mexico, Brazil and China are just now beginning to turn around and are approaching breakeven. Without NCR and w/o new site startup activity net margins would have approached 6%. Tax rate should remain relatively stable going forward. Y2K effort for company may cost about $35m to bring company up to compliance but is subject to a great deal of variance. Thus can't promise productivity improvements in estimates at this time but this figure is already in management's guidance for next year's earnings. Backlog up to $1.278b from $1.028b end of previous quarter. Some challenges in some spots (china not as robust as would like, France still struggles) but over all very good growth, new product markets, some baked in future productivity improvements in startups and newly acquired sites net of Y2K one time costs.

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