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

To: John Morelli who wrote (652)	4/23/1998 9:24:00 AM
From: 18acastra	Read Replies (1) \| Respond to of 1422

I expect them to come in-line with first call consensus of $.51. I believe they may start to show upside in the next quarter or two as some of their unprofitable facilities (mexico, 1 chinese facility) turn the corner. Although I think Flextronics at $51 is still cheap, over the last 2/3 days it has run up about $3. I get a little nervous that it is people playing it for the quarterly announcement, and that if they don't beat the Q, these guys may turn around and dump. If that is the case, then another good buying opportunity will be created in the mid/high $40's. At any rate, in these somewhat tumultuous times, for Flextronics to make earnings is even somewhat of an achievement relative to numerous other companies in the electronics industry that appear to be struggling. My opinion.

To: John Morelli who wrote (652)	4/23/1998 8:45:00 PM
From: kolo55	Read Replies (2) \| Respond to of 1422

Notes from Flextronics cc. Flextronics has posted an earnings presentation and letter from Marks on their company site. I have some notes from the cc that someone let me listen in on. These notes are simply my interpretations and any incorrect info or mis-readings are not anyone's responsibility but mine. And I cannot be certain that I heard all this correctly, as a lot of detailed information was covered. With those caveats: Revenues came in higher than analysts expected, at $331M versus a range of $310-315M by the analysts. The SG&A came in at 4.7% same as the last several quarters. The diluted EPS was 53 cents when the consensus was 51 cents. For the JunQ, the company feels that most analysts will raise their expected revenues to $360-370M range. The new acquisitions of Conexaco and Altatron were doing about $110M a year with flat growth prior to the acquisition, so they will add about $30M a quarter. (my comment: Based on this, an estimate of $360 to 370M for the JunQ seems very conservative; the actual number could easily be higher). They don't expect the new acquisitions to be accretive, but not dilutive either, in the next several quarters. The revenue line will be larger than otherwise, but the EPS will be the same. This could result in a temporary drop in margins. They had $19.9M in free cash flow, Capex of $27M, and depreciation of $9M in the quarter. For FY98, Capex was $98M, and for FY99, they estimate Capex at $80-90M. They had $10M of one time AT charges in the quarter (these charges are broken out on their website). Marks made general comments that included phrases like ".period of rapid growth, which we expect to continue." and ".grow at least the rate of the industry growth.". He also commented that outsourcing remains the main fuel for the growth, commenting "Large customers are including more core programs on their outsourcing list. These programs are quite large and as a consequence, the large players should exceed general industry growth rate." Among large customers, Ericsson at 21%, and Phillips at 17% were the two over 10% of revenues. Advanced Fiber fell below 10% due to the rapid revenue growth, although this account continues to grow. The top ten customers contributed about 75% of revenues. The other top customers included Ascend, Aspect Telecom, Auspex, Cisco, Microsoft/WebTV, Lucent, USRobotics (and maybe more, Marks rattled these off pretty quick). Nokia and Alcatel are 6 months to 1 year into building programs and relationships with these companies. An analyst asked whether these accounts could become $100M per year customers, and the response was "Yes, no question about it, these companies are early in the outsourcing process." Another Q: Is Cisco biz still growing? A: Yes. Flextronics did pick up new business in Europe from Motorola and HP in the latest Q. These were small programs, but hope to grow this business into more meaningful volumes. A lot of the analysts had some very complimentary things to say. Jim Savage of Alex Brown (with a Strong Buy recommendation currently) said "Amazing that this is the same company we talked about two years ago. We knew you said this is where you were going, but amazing how you got here so fast." One analyst did ask about whether they should consider raising their earnings estimates, given the strong growth this quarter. Dykes again has said he is comfortable with the $2.40 per share consensus for FY99, and suggested not to raise this estimate. Well a lot more was said, but all in all, a very good report with more to come. Paul