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

To: Fenton White who wrote (2364)	1/5/1998 8:59:00 AM
From: Caroline	Read Replies (2) \| Respond to of 6317

I'm officially "jealous." Thanks for replying to Barbara. You make some good points. CB

To: Fenton White who wrote (2364)	1/6/1998 9:38:00 AM
From: kolo55	Respond to of 6317

Finally something substantial from Fenton- but still wrong. You wrote:3COM is adjusting all of its inventory. JBIL statement is: we do not make any of the modems that 3 com is adjusting inventory therefore the modem inventory adjustments will not adversely impact JBIL bottom line. [They did not address the other items that JBIL makes for 3 com and the push back of those specific products.] 3Com, in its conference call, said that most of the inventory reduction ocurred in the last Q and that the inventory reduction is almost complete. Therefore, the impact on Jabil should have been seen in the quarter just completed, and the current quarter will see a resumption of "business as usual". The really soft products in 3Com's lineup is the USR modems, and Jabil doesn't make these. You wrote:JBIL said that 3Com will continue to account for 20-21% of net revenue. If, for example, you have a 30 day pushback in AR/orders and prices for your products decrease 10-15% due to competition 3com could still account for 21% of net income while return to the investor shrinks 20-25% You are really confused on how the ECM companies are paid. They essentially get paid based on the volume of assembled components they make; the material costs are just passed through to the OEM(turnkey business) or the materials simply provided by the OEM(consignment business). Jabil's unit price is set by competition with other ECM companies, and Jabil has a very efficient manufacturing system. Also the other ECM company facilities are fairly fully loaded with work, such that they are building new facilities. If competition in the networking business impacts 3Com's margins, it has no clear impact on Jabil at all!! In fact, if lower networking equipment costs spur sales volume increases, then Jabil's revenues and earnings could actually increase!! You clearly do not understand the Contract Manufacturing business model. 3Com's networking business is expected to grow 30-40% this year in terms of revenues; unit volumes could grow even faster, and unit volumes will drive Jabil's revenues and earnings. Paul