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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: Larry Unger who wrote (1794)	10/2/1998 1:02:00 PM
From: kolo55	Read Replies (2) \| Respond to of 2542

OK- now I understand. On a long term basis, I believe Jabil and Solectron are their preferred assemblers, with Sanmina providing backplanes and backpanels. Also SMOD provides a lot of memory modules etc. Other ECM companies do get a lot of business as well, since Cisco is so big. Flextronics gets about 8% of revenues from Cisco(my guess) and others get significant contracts. Incidentally, you might be interested in this anecdotal story. Initially Cisco used Solectron for assemble almost exclusively. When Cisco grew so rapidly, it moved over 10% of Solectron sales, and Solectron was reluctant to take more Cisco business. Solectron suggested Cisco find an alternative supplier, and thus the relationship with Jabil was born. Cisco and Jabil now seem to be married at the hip. I suspect that Jabil's recently announced 'grenfield plant' in San Jose is to get closer to their major customers Cisco, Quantum, HP, and 3Com (as well as the new business they seem to be picking up from Bay Networks). Over the last year, each of the Big 4 customers each contributed about 20% of Jabil's revenues. Of course with new contracts to Gateway, Dell, Bay Networks (Nortel), and rumored contract with Lucent, this concentration on a few customers will be diluted. Only HP among the current Big 4, should see their percentage of Jabil's revenues grow in fiscal 99 (unless there are more big deals in the works with Cisco etc). Jabil seems to win business from customers who need to have large circuit boards assembled for large switches, routers, servers etc. In short, the backbone of the internet. I have been surprised that they seem to be picking up a lot of business in the PC sector; Gateway computers and Dell laptops and HP printers. OTOH the Lucent rumor is consistent with Jabil's market niche of switches etc. If Lucent is outsourcing, and Lucent says they are, I would expect Jabil to pick up a fair amount of the Lucent business. Sanmina also would benefit for the same reason. Yours is a good strategy, I believe. I would pick Jabil and Sanmina to execute it. I own a lot of Jabil. I would consider buying Sanmina in here, by buying ALRN shares soon to be converted in a merger, if I wasn't so positive (and exposed) with my JBIL/FLEXF positions. Paul