Electronic Contract Manufacture (ECM) Sector Message Board

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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector

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To: kolo55 who wrote (1834)	10/14/1998 12:19:00 AM
From: Larry Unger	Read Replies (1) of 2542

Summary of FLEXF analyst comments issued today and yesterday: I have altered in order to not "copy" the article from the sources: Cowen - The analyst feels that FLEXF has established a significant base of business in the fast-growing networking and telecom segments (i.e. about 46% of revenue) which has allowed the company to avoid much of the concern over the PC inventory glut in the first half of the year. However, they noted that recent concerns about weakness in communications equipment spending put pressure on the stock, knocking the stock down from $39 to about $28 before rebounding back to $33. Although equipment spending in the communications sector appears to be slowing (e.g. weakness in Northern Telecom, Alcatel, and Ericsson), they believe greater penetration of datacom and telecom OEMs will drive outsourcing revenues moving forward. They are comfortable with Q2 estimate of 58¢ (+57%), a penny above the Street. They expect top line growth of 60% Y/Y and 7% Q/Q to $402MM with the possibility for an upside surprise from new programs from INTC and QCOM. They said gross margins should increase 10 b.p. Q/Q to 8.9%., while operating margins should increase by 20 b.p Q/Q to 4.9%. They felt that investors may still be concerned about FLEXF's significant manufacturing presence in Asia (23% of total floor space or 605 s.f.). However, they noted that most of the campus' production is consumed outside of Asia and the weakened currencies in the region lower local operating costs. Trading at just 11.3X C99, they reiterated that FLEXF is trading at a significant discount to the ECM universe (i.e. the average ECM trades at 13.7X C99). They believe FLEXF's P/E will expand moving forward due to its unique industrial park strategy with low-cost facilities around the world, diversified top tier customer base, and powerful earnings growth potential. Montgomery - expect good outlook

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