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Technology Stocks : Jabil Circuit (JBL) -- Ignore unavailable to you. Want to Upgrade?

To: OldAIMGuy who wrote (6219)	6/24/2003 1:36:34 PM
From: Sam	Read Replies (1) \| Respond to of 6317

Tech manufacturer margins seen threat to shares Monday June 23, 2:42 pm ET SAN FRANCISCO, June 23 (Reuters) - Shares of contract manufacturers, up 10 percent on average since mid-January, remain vulnerable to a sharp drop because of pressure on already low margins, a Deutsche Bank Securities report said on Monday. ADVERTISEMENT The stocks of contract manufacturers, which make products for name-brand computer and electronics companies, have rallied on optimism about improving demand, but the rally is neither warranted nor sustainable, Deutsche Bank Securities analyst Chris Whitmore said. While demand appears to be stabilizing, not unlike periods in 2001 and 2002, and hope for a second-half recovery is "rampant," the potential for a mild recovery in demand will not necessarily translate into an earnings rebound, Whitmore wrote in his research note. Firming demand is "not fully offsetting the margin degradation resulting from the aggressive pricing environment," Whitmore wrote. Excess capacity, increasing competition from Taiwan-based companies and continued pricing pressure from customers are driving margins lower across the already low-margin contract manufacturing industry, Whitmore wrote. Investors considering contract manufacturers' shares should "stay on the sidelines," Whitmore wrote, noting he believed the shares were "overvalued and ripe for profit taking." The contract manufacturers covered by Whitmore are Flextronics International Ltd. (NasdaqNM:FLEX - News), Sanmina-SCI Corp. (NasdaqNM:SANM - News), Solectron Corp. (NYSE:SLR - News), Celestica Inc. (NYSE:CLS - News; Toronto:CLS.TO - News), Jabil Circuit Inc. (NYSE:JBL - News) and Plexus Corp. (NasdaqNM:PLXS - News) The companies, battered amid the long-running technology and telecommunications slumps, operate assembly lines that make scores of products for various companies. Among their customers are major high-tech companies such as International Business Machines Corp. (NYSE:IBM - News), Hewlett-Packard Co. (NYSE:HPQ - News), Apple Computer Inc. (NasdaqNM:AAPL - News), Nokia (NYSE:NOK - News; NOK1V.HE), Lucent Technologies Inc. (NYSE:LU - News) Nortel Networks Corp. (NYSE:NT - News; Toronto:NT.TO - News) and Cisco Systems Inc. (NasdaqNM:CSCO - News)