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Technology Stocks : Flextronics International (FLEX) -- Ignore unavailable to you. Want to Upgrade?

To: solderman.com who wrote (422)	12/4/1997 11:05:00 AM
From: 18acastra	Read Replies (1) \| Respond to of 1422

Wrong!!!! Flextronics has Ericcson profitability guaranteed under purchase contract. Secondarily, Flextronics continues to win new business from Ericcson anyway as they win new programs that were not included in original deal. There is no risk to Ericcson, on the contrary things regarding FLEXF/Ericcson relationship are stronger than originally expected. Additionally, having listened to Merrill analyst comments on Ericcsson/Nokia downgrades, they are more of a market sentiment call than anything else. They still expect robust growth, and are not changing earnings growth estimates of 20%-25%. Both these companies have foward P/E's in the low 20's (relative to FLEXF at 15). The downgrade was more sentiment/valuation/lack of earnings upside related. It is not to do with the fundamentals of the companies changing in any way. SE Asia is only 4%/5% of Ericcson and Nokia business. Key in Robbie Stephens downgrade is that their estimates were well above consensus and they were bringing estimates in line. At $1.76 per ADR, they are still showing growth of 26% (not too shabby). Robbie just had ridiculously high estimates to begin with. Both Ericcson and Nokia have robust futures in terms of growth. Doesn't matter to me what their stock price does as long as they continue to grow (and analysts that downgraded still showing 20% growth) and continue to outsource business, which they will. Stockmarket is just uneducated when it comes to understanding relationship between Flextronics and Ericcson and future prospects. Tying FLEXF in to analysts downgrades is just short-term noise. Also remember Flextronics growth comes more from winning new programs from Ericcson than the organic growth of Ericcson anyway. My opinion.

To: solderman.com who wrote (422)	12/4/1997 11:19:00 AM
From: 18acastra	Respond to of 1422

Snippet from June 30. 1997 10-Q indicating Ericcson guaranteed profit: "Gross profit margin in the three months ended June 30, 1997 was favorably affected by cash payments from a customer received under the Company's agreement with that customer as a result of production volumes for that customer that were lower than previously scheduled." In that quarter, Ericcson revenue was $15mm-$30mm below plan due to slippage on a new product introduction. You can see from the Q that Ericcson had to make up the difference with a cash payment. So you see it doesn't matter what happens with Ericcson because FLEXF is contractually protected. My opinion.