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

To: Jeffery E. Forrest who wrote (445)	12/13/1997 5:45:00 PM
From: kolo55	Read Replies (1) \| Respond to of 1422

I'm using forward looking numbers. Hi Jeffrey, thanks for checking out the SEC filings. There is further info in Marks letter to shareholders and the press releases on the Neutronics purchase. See this link: flextronics.com The discrepancies you pointed out are mainly because you're using numbers 'looking in the rear view mirror' while I'm questimating my numbers 'looking throught the windshield'. Lets take your points one at a time: First we need an estimate for the next 12 month revenues, so I'll put my estimates on a 98 calendar year basis (versus the 98 FY which ends March 98 and the 99FY which ends Mar 99). The company had projected revenues for the 98FY at $1B and had only done $407M in the first six months. Even though I don't think they would have hit the $1B without the Neutronics deal, I still think they would have done more than $300M easily in the upcoming MarQ due to the startup of the facilities in Mexico, SJ, and China this fall and increased revenues from Karlskrona. So assuming a modest growth of 10% in the baseline revenues, I get an estimate of the base case revenues for Flextronic in the next calendar year of about $1265M before the Neutronics purchase. Neutronics was expected to do $170M this 1997 calendar year, and I have heard is expected to do $300M in 1998 calendar year due to new contracts. So I get a total revenues of at least $1565M for next calendar year. I wrote: Ericsson is about 25-30% You responded: Ericsson accounts for 30% of net sales, Ericsson only contributed about $122M over the last six months, but I understand revenues are picking up significantly this quarter as some anticipated new products are finally introduced. Based on annual projected revenues from Ericsson of $350M that were projected when the deal was finalized last spring, I get 350/1565= 22.4% of sales. But I understand that Flextronics may get more business from Ericsson, also the actual revenues depends on the $/krona exchange rate, so I expect that somewhere between 25-30% of Flextronics revenues next year will be from Ericsson. Marks raised $96M by selling stock in a secondary at 47, and $150M by selling bonds, in October. If he uses some of this money and acquires or expands to do more Ericsson business, which I think is likely, then my estimate of 25-30% could be low; also my total revenues of $1565M for next year will be low. I wrote: Advanced Fibre is about 10% You responded: Advanced Fibre accounts for 11%, UP from 3% from same period last year. Based on the 11% number for the last six months, I estimate that Advance Fibre is doing about $90M a year, and I guess that this could grow by as much as 70% over the next calendar year to $150M. This would put Advanced Fibre at slightly less than 10%. Advanced Fibre is growing rapidly, and Flextronics is the sole source supplier, from what I understand. Essentially I'm guessing that growth in Advanced Fibre's business will keep this customer a major customer over 10%, but I could be wrong. I wrote: Neutronics reported about 55% of their sales of $170M were to Phillips. You responded: In actuality, 60% of Neutronics net sales in the 6 month period ending June 30, 1997 were to Phillips. Neutronics had net sales of 142.6 million for the 12 month period ending June 30, 1997. The Marks letter estimated Phillips generated 55% of Neutronics anticipated sales for 1997, which Flextronics has forecasted as $170M. Since I don't know how much of the increase to $300M in 1998 will come from Phillips, if any, I can't project an accurate number for Phillips. But using 55% of $170M gives at least $94M, plus Flextronics already did some business for Phillips (according to the last 10K). I guess that would put Phillips about 8%, but my guess is that some of the new contracts that has increased Neutronics forecasted revenues to $300M next year, have come from Phillips. So I still think Phillips may contribute 10% of revenues for the next calendar year. I wrote: Since I posted, I see that 18acastra says Phillips is about 20%. You responded: Actually his post shows a figure of 10%. Perhaps you misread or he edited after you read his post? Exactly, we were both editing our posts and we were both posting at the same time. Sorry for the confusion. You wrote: I'm assuming that Ericson, Advanced Fibre, Microsoft, Thermoscan and USRX are the top 5? I don't think so. I estimate that Microsoft, and Thermoscan are about $40-50M a year each. The new plant in Guadalajara is making product for Lucent, and although this is a consignment contract, I still think Lucent may break into the $40-50M range. From what I understand from a post on this thread, the Cisco business in San Jose could now be generating revenues at a $60M annual clip. And whoever gave Neutronics the contracts that pushed their forecast next year to $300M from $170M this year, if its not Phillips, should move into third place. So my guestimate for top 10 customers for 1998 calendar year: 1. Ericsson $350M+ 2. Advanced Fibre $150M 3. Phillips $120M+ 4. new Neutronics customer(?) $100M (?) 5. Cisco $60M 6. Lucent $40-50M 7. Thermoscan $40M 8. Microsoft $40M 9. USRobotics $30-40M 10. Ascend $30M(?) (sole source for Max TNT access ports) I know there are a lot of guesses in this list, and there could be some customers for China capacity that I'm not even aware of, but this is my best guess looking forward. I agree that Neutronics will have a big impact; between Ericsson and Neutronics, I believe that Flextronics has taken the lead in the hot European ECM market. One other thing I want to caution you on; due to the secondary offering, the stock issued to pay for Neutronics, and outstanding incentive options, I use 21M outstanding shartes in my calculations. Hope this answers most of your questions. Paul