Solectron sees revenues below forecasts
(UPDATE: Adds details, byline, includes TECH-SOLECTRON-GUIDANCE)
By Ben Berkowitz
LOS ANGELES, Oct 29 (Reuters) - Solectron Corp. (NYSE:SLR - news), the world's biggest contract electronics maker, said on Monday it sees fiscal 2002 revenues below its previous forecast because of weakening economic conditions.
Shares in Solectron closed down $1.80, or 12.3 percent, at $12.80 on the New York Stock Exchange. It was among the top 10 percentage losers on the NYSE, where it was one of the 20 most active stocks.
The news cast a pall on other contract manufacturers as well.
Shares in Solectron's major competitor, Flextronics International Ltd. (NasdaqNM:FLEX - news), fell $2.81, or 13 percent, to close at $18.91.
Shares in C-MAC Industries Inc. (Toronto:CMS.TO - news) (NYSE:EMS - news), which Solectron said in August it would acquire, fell 12.5 percent, or $3.17, to $22.22, also making it one of the top 10 losers on the NYSE.
The value of the Solectron-C-MAC merger fell from $2.7 billion in stock when it was announced on Aug. 9 to around $2 billion as of Monday's close. The premium on C-MAC's stock in the merger, which was 33 percent at the time it was announced, is now 1.1 percent.
Solectron shares are down 62 percent for the year and down 26 percent since the merger was announced; C-MAC shares are down 50 percent for the year and 2 percent since the merger.
``The markets have weakened significantly since we last spoke,'' Chairman and Chief Executive Koichi Nishimura said during an investor meeting.
``Based on our expectations as we see it today, the revenue picture appears to be below the low end of our guidance,'' he said.
In early August, the company had said it expected revenues in fiscal 2002 of $16 billion to $18.5 billion and cash earnings of 62 to 66 cents per share. However, Nishimura did not provide new specific guidance.
The company did reaffirm its guidance for the current quarter, its fiscal first, of sales in the range of $2.8 billion to $3.2 billion and cash earnings per share of 4 cents to 8 cents.
The Thomson Financial/First Call average estimate of 23 brokers is for earnings of 5 cents in the current quarter, and the estimate of six brokers is for revenue of $3 billion.
The First Call estimate of 25 brokers is for fiscal year 2002 earnings of 51 cents per share. Sixteen brokers put 2002 revenues at $15.6 billion.
``As far as the economy goes, I guess it's anybody's guess,'' Nishimura said on the company's outlook.
``I guess general consensus, it'll be four to six quarters of flatness,'' he added.
Nishimura said that after the four to six flat quarters, the sector would pick up sharply, and he said the company expects a 25 percent annual revenue growth rate after the recovery begins.
``Given the acquisitions which the company has made over the last 24 months, and difficult financial performance, we would view this meeting as very critical to the near-term performance of the shares,'' said Lehman Brothers analyst Lou Miscioscia in a research note on Friday.
FLEXTRONICS DOWN ON NEWS
The Solectron news comes days Flextronics posted a large net loss for its second quarter on Thursday and said it would cut 20 percent of its manufacturing space and 15 percent of its work force, or 10,000 jobs.
Most analysts cut their earnings and revenue estimates on Flextronics on Friday as a result.
On Monday, Flextronics announced it would acquire The Orbitant Group, the largest telecommunications equipment manufacturer in Sweden, in a deal expected to provide $500 million a year in additional revenues for the next three years.
Credit Suisse First Boston reiterated its buy rating on Flextronics after the announcement, and called it ``one of our top large-cap picks'' along with Jabil Circuit Inc. (NYSE:JBL - news) and Celestica Inc. (NYSE:CLS - news)
On Wednesday, Sanmina Corp (NasdaqNM:SANM - news), another major contract manufacturer, reported a profit in line with lowered guidance, and lowered its estimates for the current quarter, saying ``we're muddling along here at the bottom.''
On Oct. 22 C-MAC also lowered guidance, saying it would post a loss for its recently-completed third quarter, as opposed to the profit it had forecast, and that it would take a restructuring charge. |
