Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Clint E. who wrote (18204)	10/31/1998 12:00:00 PM
From: Johnny Canuck	Respond to of 67830

NT conference call Part 1: fool.com Northern Telecom Q3 Conference Call A Fool Conference Call Synopsis* By Gregory Markus (TMF Boring) Northern Telecom (NYSE: NT) 8200 Dixie Rd, Ste 100 Brampton, Ontario L6T5P6 Canada 905-863-0000 nortelnetworks.com ANN ARBOR, MI (Oct. 27, 1998) /FOOLWIRE/ — Northern Telecom, Ltd. (Nortel) today reported results for the third quarter and first nine months of 1998. Third quarter results. Revenues from continuing operations increased 20% (after adjusting primarily for the impact of the disposition of MET and the GSM terminals businesses) compared to the same period last year, and increased 12% before the contribution of Bay Networks. As reported, revenues increased 18% to $4.14 billion from $3.50 billion for the same period in 1997. All dollar amounts are stated in U.S. currency. After adjusting for the impact of dispositions and one-time gains and charges, net earnings applicable to common shares from ongoing operations increased to $241 million, or $0.42 per share, a per-share increase of 45%. This compares to net earnings applicable to common shares of $153 million, or $0.29 per share, in the third quarter of 1997. Unusual items. The company recorded a number of one-time items during the quarter. Acquisition costs totaling $539 million related to the amortization of Bay Networks' intangible assets and other purchased in-process research and development from earlier transactions. The company also experienced a one-time pretax gain of $377 million, the majority of which related to the disposition of businesses and investments, including the sale of Nortel's advanced power system business and the sale of a cabinet manufacturing facility located in North Carolina. Those two items totaled $260 million of the $377 million gain. The remainder of the gain related to Entrust Technologies, which completed its IPO in August, together with gains from other minor dispositions. Nortel also recorded a one-time pretax provision of $388 million for the realignment and resizing of certain elements of Nortel's operations. Of this amount, approximately $260 million relates to severance costs. The process has been a success. Nine-month results. Revenues from ongoing operations for the first nine months of 1998 increased 13% on a year-over-year basis (11% before the contribution of Bay Networks). Net earnings applicable to common shares from ongoing operations for the first nine months of 1998 (after adjustments for the impact of dispositions and one-time gains and charges) was $597 million, representing an increase in earnings per share of 36% to $1.10 per share.

To: Clint E. who wrote (18204)	10/31/1998 12:04:00 PM
From: Johnny Canuck	Respond to of 67830

Geographic breakdown. Revenues for the third quarter of 1998 increased 21% in the United States over the year-ago period. Combined revenues from Asia/Pacific, the Caribbean and Latin America (CALA) grew 35%. Revenues in Europe increased 7%, even after the MET divestiture. Canadi an revenues rose 3%. Breakdown by product line. Revenues for the third quarter increased 15% for carrier networks and 33% for enterprise networks. Within carrier networks, broadband networks experienced very strong revenue growth over the same period last year, growing 45% and with considerable gains ac ross all geographic areas. Wireless networks revenues increased 17% in the third quarter compared to the third quarter of 1997, with substantial gains in the U.S. and CALA. Public carrier networks revenues decreased 12% relative to last year's third quarter, due primarily to substantial declines in Asia/Pacific and Canada. Enterprise networks revenues increased 33%, driven primarily by the contribution of Bay Networks. Revenues in the "other" segment decreased substantially in the third quarter of 1998 compared to the same period last year, due primarily to the impact of the disposition of MET and the GSM terminals businesses. Order growth. For the quarter, order input from ongoing operations of $4.15 billion represented an increase of 22% on a year-over-year basis (14% before the contribution of Bay Networks), after adjusting for the impact of the disposition of MET and the GSM terminals businesses. For the first nine months of 1998, order input from ongoing operations increased 16% to $12.2 billion compared to the same period last year (13% before the contribution of Bay Networks). Financial Highlights Gross margin for the quarter was 43.3% compared to 41.6% a year ago. This increase reflects the inclusion of Bay Networks and also a favorable product mix in all lines of business. Selling, general, and administrative (SG&A) expenses were $728 million, or 17.6% of revenue, in the quarter, compared with $659 million, or 18.8% of revenue a year ago. SG&A expenses continue to reflect investments to support Nortel Networks' global growth and investments in computer systems infrastructure.

To: Clint E. who wrote (18204)	10/31/1998 12:06:00 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67830

NT conference call Part 3: Research and development (R&D) expenses were $616 million, or 14.9% of revenue, in the quarter, compared with $528 million, or 15.1% of revenue, in the third quarter of 1997. This reflects planned and ongoing investments across all Nortel Networks businesses. Investment and other income was $130 million for the third quarter, including $117 million in one-time gains. Cash and short-term investments were $1.9 billion at the end of the quarter, up substantially from the $495 million at the end of the second quarter due primarily to cash in hand at Bay Networks and the proceeds of certain divestitures. Days Sales Outstanding for the quarter increased by approximately five days relative to the year-ago period. Bay Networks merger. Nortel achieved a significant milestone this quarter with the completion of the merger with Bay Networks, the largest data networking merger in history. Management is very pleased with the integration accomplishments to date. Nortel's Enterprise Networks bu siness line, which includes Bay, is cited in industry reports that confirm the company's leading position in call-center markets. Bay did approximately $285 million in sales in the month of September, in line with Nortel management's expectations. RBOCs represented approximately 20% of Nortel's customer revenues prior to the merger and, going-forward, they will probably represent less than 20%. Customer financing. Nortel is highly competitive against Lucent Technologies (NYSE: LU), Ericsson (Nasdaq: ERICY), and others and does offer customer financing when appropriate. Nortel continues to be highly successful in laying off the commitments and has only about $500 million of customer financing on the balance sheet — and even a substantial proportion of that is in the process of being laid off. Nortel's customer financing practices are overseen by a committee of the board of directors. Guidance. Management currently expects to see 1998 revenue growth from ongoing operations, including Bay Networks, to be in the mid-teens. Looking beyond 1998, discontinuities in the telecommunications market, such as deregulation, globalization, the need for mobility, and the impact of the Internet, are creating opportunities for Nortel to provide solutions to traditional and new customers globally. Revenue growth is projected in the high 20% range for 1999, including gains attributable to the Bay merger. Bottom-line growth is projected to be consistent with a business model that has gross margins at 42%-plus, SG&A expense at 17% to 18% of sales, and R&D expense of around 14%. The tax rate has been creeping up slightly. Capital expenditures and depreciation and amortiz ation are expected to follow historical trends in 1999.

To: Clint E. who wrote (18204)	10/31/1998 12:10:00 PM
From: Johnny Canuck	Respond to of 67830

ITWO conference call part 1: fool.com i2 Technologies Q3 Conference Call A Fool Conference Call Synopsis* By Gregory Markus (TMF Boring) i2 Technologies (Nasdaq: ITWO) 909 E. Las Colinas Blvd, 16th Floor Irving, TX 75039 (800) 800-3288 i2.com ANN ARBOR, Mich. (Oct. 22, 1998) /FOOLWIRE/ — i2 Technologies announced record revenues and earnings for the quarter ended Sept. 30, 1998. Income Statement Highlights Total revenues of $94.2 million were 62% higher than third quarter 1997 revenues of $58.1 million. Operating profits were $10.9 million, or 11.5% of total revenues, compared to $5.3 million, or 9.1% of revenues in the year-ago period, excluding unusual items. Net profit was $7.8 million, versus $3.3 million in Q3 1997, excluding unusual items. EPS was $0.10 versus $0.05 a year ago -- a penny above the consensus forecast. For the first nine months of 1998, revenues grew 69% to $249.2 million, compared to $147.6 million for the first nine months of 1997. Excluding acquisition-related expenses, year-to-date 1998 net income was $18.3 million, more than triple the income of $5.8 million for the same period of 1997. For the third quarter, license revenues increased 57% over the year-ago period to $59.8 million. Service and maintenance revenues increased 73% to $34.4 million as compared with $19.9 million a year ago. License revenues accounted for 63% of total revenues, compared to 66% for the year-ago period. Repeat business accounted for 61% of license revenues (31 licenses), with the other 39% coming from new customers (25 licenses). By industry, 51% of revenues came from high-tech industries, with another 12% from the furniture industry, 8% from metals, 8% from consumer package goods (CPG), 7% from automotive, and the balance from miscellaneous industries. International revenues were in line with reduced expectations. The challenge internationally is not specific to i2 but reflects broader issues. The company expects to see improvement in Q4. The U.S. market generated 83% of total revenues, about where it was in Q2 1998. Once again, sales in the quarter were back-end loaded, as is typical in the software industry. Days sales outstanding increased to 98 days, and they are expected to increase in Q4 but decrease in Q1 1999. At the end of the quarter, headcount was 2003, including 687 in R&D. That compares with 1135 people at the end of Q3 1997, with 477 in R&D. i2 entered the quarter with 160 sales representatives. The company's ability to attract sales people is increasing. License Agreements A total of 56 license agreements were recognized at an average license of approximately $1.1 million. Fourteen licenses larger than $1 million were recognized in the quarter. The largest license agreement signed in Q3 was with Hewlett-Packard (NYSE: HWP), for about $11 million. Sun Microsystems (Nasdaq: SUNW) and the computer division of Toshiba (OTC: TOSBF) also signed license agreements with i2 during the quarter, as did Cisco Systems (Nasdaq: CSCO) and Casio (OTC: CSIOY). In the automotive sector, Visteon Automotive, a division of Ford (NYSE: F), announced a worldwide agreement to license i2's RHYTHM solution, and i2 also closed a deal with Navistar (NYSE: NAV). In aerospace, Boeing (NYSE: BA) and General Electric's (NYSE: GE) aircraft division chose i2 as a partner. In CPG, PepsiCo's (NYSE: PEP) Frito Lay division, Jurgens, and a large Japanese brewer signed licenses in the quarter. In the metals sector, Bethlehem Steel (NYSE: BS) signed additional licenses. Competitive Environment

To: Clint E. who wrote (18204)	10/31/1998 12:13:00 PM
From: Johnny Canuck	Respond to of 67830

ITWO conference call Part 2: On the competitive front, i2 saw reduced competition from traditional supply chain management (SCM) vendors. From the ERP (enterprise resource planning) vendors -- such as SAP (NYSE: SAP) -- i2 faced increased rhetoric, but this did not affect deals significantly. Year-2000 issues or economic uncertainty did not appear to have any unusual impact on closing deals. i2 feels that its offerings are particularly critical for companies facing challenging economic or competitive environments. PLANET 98 PLANET, an annual supply chain event, was held in September in Dallas and attracted over 3,400 participants from around the world -- nearly a three-fold increase over the previous year. i2 announced a new class of decision intelligence software called eBusiness Process Optimization (eBPO). The eBPO solution is made up of multiple planning engines acting in concert to analyze and optimize business processes across the enterprise, while enabling multi-enterprise collaboration with suppliers, customers, and partners. Traditional ERP software is not suitable for these processes. Other Highlights of the Quarter In August 1998, Gartner Group identified i2 as the overall leader in the supply chain planning field. The company continues to gain market share. i2 established a network of independently operated dealers across North America that will be 100% dedicated to serving the supply chain management needs of mid-sized companies. i2 also introduced RHYTHMWare, a prebundled group of i2's supply chain modules for factory planning and advanced scheduling. This optional offering is intended to address the most common planning and scheduling problems of mid-sized companies. Option Repricing In October 1998, i2's board of directors approved a stock option repricing program where all employees, excluding executive officers, can elect to have out-of-money options canceled and new stock options issued, resulting in a restart of the vesting period. Outlook Going into Q4, the pipeline appears stronger than it did going into Q3. Looking toward 1999, i2 is not yet complete with its plan for the year, and projections are complicated by factors largely outside of the company's control, particularly in Asia. Some analysts currently have models that project 1999 revenues above $500 million, and management is not comfortable with those projections. Although final planning has not yet been completed, management is considering guiding operating margins toward 10% for 1999 in order to invest more incrementally in product development and hiring. Replies to Other Questions The relationship with Oracle (Nasdaq: ORCL) is progressing well but is not yet yielding significant revenue. i2 believes that it will. Deferred license revenues were essentially flat sequentially. Many of i2's larger deals come from existing companies already familiar with i2's offerings. On the other hand, large deals are comparatively more difficult to close because they generally require more people or divisions to sign off on the deal.

To: Clint E. who wrote (18204)	10/31/1998 12:15:00 PM
From: Johnny Canuck	Respond to of 67830

JBIL conferenca call Part 1: fool.com Jabil Circuit Q4 Conference Call A Fool Conference Call Synopsis* By Gregory Markus (TMF Boring) JABIL CIRCUIT INC. (NYSE: JBL) 10800 Roosevelt Blvd. St. Petersburg, FL 33716 (813) 577-9749 jabil.com ANN ARBOR, Mich. (Oct. 6, 1998) /FOOLWIRE/ -- Jabil Circuit Inc. (NYSE: JBL) today reported earnings for the fourth fiscal quarter and the 1998 fiscal year ended August 31, 1998. Jabil is an electronic manufacturer of circuit board assemblies for international original equipment manufacturers in the data communications, personal computer, computer peripheral and automotive markets. Jabil offers circuit design, board design from schematic, prototype assembly, volume board assembly and system assembly services from automated manufacturing facilities in Florida, Michigan, California, Idaho, Scotland, Italy, Malaysia and Mexico. Fiscal Fourth Quarter Revenue increased 4% to $317.6 million compared to $305.2 million for the same period of fiscal 1997. Pro forma net income, which excludes the one-time, non recurring charge for the Hewlett-Packard (NYSE: HWP) acquisition, was $13.4 million or $0.35 per share for the fourth quarter of 1998, compared with net income of $18.0 million, or $0.47 per share for the same period of fiscal 1997. During the quarter, Jabil completed the acquisition of Hewlett-Packard's LaserJet manufacturing operations for $80 million and recorded a one-time acquisition-related charge of $24.4 million, consisting of $10.1 million in write-offs for in-process research and development, $10 million for workforce-related expenses, and $4.3 million in other expenses. This resulted in an after-tax charge of $0.39 per share. Jabil's actual net income for the fourth quarter, including the above-mentioned charge, was a loss of $1.8 million or a loss of $0.05 per share, compared to $18.0 million or $0.47 per share for the same period of fiscal 1997. Fiscal Year 1998 Fiscal year revenues increased 31% to $1.28 billion, compared to $978.1 million in fiscal 1997. Pro forma net income was $69.8 million or $1.81 per share, compared with net income of $52.5 million or $1.37 per share for fiscal 1997, increases of 33% and 32% respectively. Fiscal year gross profit increased 43% to $161.7 million compared to $120.9 million for fiscal year 1997. Pro forma operating income for fiscal year 1998 increased 29% to $105.9 million, compared to $81.9 million for fiscal year 1997.

To: Clint E. who wrote (18204)	10/31/1998 12:18:00 PM
From: Johnny Canuck	Respond to of 67830

JBIL Part 2: Actual net income for fiscal year 1998 increased to $54.7 million or $1.42 per share (diluted), compared to $52.5 million or $1.37 per share (diluted) for fiscal year 1997, an increase of 4%. Jabil Circuit President Thomas A. Sansone said, "We are pleased to report record fiscal 1998 results that were above our expectations and continue on track to our key financial goals. These results are a gratifying accomplishment in light of the simultaneous integration of our first major acquisition and the overall turmoil in the global marketplace." Income Statement: Sequential Trend Highlights Revenues in the fourth fiscal quarter increased by 3% over third-quarter revenues. Gross margin decreased to 11.5% of revenue, reflecting initial operations of the H-P acquisition, lower utilization in Scotland, and start up costs in California. Gross margin was somewhat better than anticipated due to firming production levels in the latter portion of the summer and lower than anticipated startup costs in the acquired H-P operations. Sales, general, and administrative expense (SG&A) increased $2.2 million to $15.1 million, or 4.8% of revenue. This increase reflects administrative resources for the former H-P sites, additional information technology resources and expansion of corporate staff. Research and development expense (R&D) decreased by $137,000 to $928,000, or 0.3% of revenue. Pro forma operating income, excluding acquisition related charges, decreased to $20.5 million, or 6.4% of revenue. Interest expense decreased by $167,000, to $555,000, or 0.2% of revenue. Income taxes were 33.0% of income. (Normalized tax rate is 35.0%). Pro forma net income after taxes was $13.4 million, or 4.2% of revenue, as compared to 5.6% in the prior sequential quarter. Pro forma earnings per share for the period were $0.35 on an average 38,447,000 shares during the period, fully diluted. Balance Sheet: Sequential Trend Highlights Cash flow from operations was approximately $15 million for the fourth quarter. During the quarter, Jabil increased its existing credit facility from $100 million to $225 million and funded the H-P acquisition. The H-P acquisition was funded by cash of $40 million and $40 million of the company's credit facility. Significant balance sheet items included approximately $37 million for inventory and approximately $25 million for machinery and equipment and $7 million for intangible assets. Management anticipates that working capital associated with this acquisition will be consistent with Jabil's overall corporate goals -- that is, days sales outstanding (DSO) below 40 days and inventory turns of 10 or better. Cash balances were $23 million at the end of Q4, as compared to $43 million at the end of Q3. The decrease was due to cash used to purchase the H-P operations, offset by cash generated by operations. Accounts receivable increased by $2 million sequentially to $126 million. Calculated days sales outstanding (DSO) was 36 days, consistent with Q3. Inventories increased by $39 million sequentially, to $123 million, primarily attributable to the inventory for the H-P operation (noted above). Inventory turns were 9, as compared to 12 in Q3, predominantly due to the acquired H-P inventory. Jabil anticipates that inventory turns will return to the overall goal of 10 in the next quarter. Fixed assets increased by $39 million to $225 million reflecting $25 million in capital expenditures relating to the H-P acquisition and $24 million of other capital expenditures, offset by $10 million in depreciation. Depreciation for fiscal year 1998 was $33.5 million. Long-term debt increased by $40 million to $90 million. The debt-to-capitalization ratio is 27%, with total liabilities-to-equity ratio at quarter's end of 1.1 to 1.

To: Clint E. who wrote (18204)	10/31/1998 12:24:00 PM
From: Johnny Canuck	Respond to of 67830

JBIL PArt 3: Average return on assets for the fourth fiscal quarter was 11%, with an average return on equity of 21.7%, excluding the effects of acquisition-related charges. Average return on assets for the fiscal year was 15%, with an average return on equity of 32.7%, excluding the effects of acquisition-related charges. Comments on Q4 Results Fourth-quarter revenue and operating earnings were higher than anticipated, reflecting a mid-summer rebound in production for both the communications and peripherals sectors. The communications segment grew slightly sequentially as a result of increased production levels for most communications customers offset by cutbacks in production of one large product line in Scotland. The peripherals segment grew 46% over the preceding quarter as initial production for H-P LaserJet products commenced, offsetting continued softness in data storage products. The PC segment remained flat sequentially as increased production levels for desktop business PCs offset end-of-production for some other desktop PCs and notebook products. The automotive segment declined 27% sequentially reflecting typical seasonal levels of production associated with auto model changeover, along with moderate impact from the General Motors (NYSE: GM) strike in the summer. The consumer segment declined 58% due to the end-of-life of an unsuccessful set-top box product. New Factory Sites Guadalajara. The Guadalajara work force has expanded to more than 800 employees, with plans for additional business units throughout FY99. This new location was profitable in Q4, and Jabil is already considering a significant expansion there as the plant approaches its first anniversary. Boise, Idaho and Bergamo, Italy. Both acquired sites resumed operation with minimal disruption after the close on August 3. The acceptance rates among the former H-P employees was over 90%, and laser printer business unit volumes continue at levels consistent with prior expectations. Jabil is promoting its culture and business practices at these sites. Jabil has identified a site for construction of its own facility at Boise and plans to move from the leased H-P site to the new site by the end of FY99. Plans to utilize these sites for additional customers are under active development. California. This greenfield project in San Jose continues on track with plans for relocating the current San Jose prototype and research and development operations in the new facility in the next several months. This site will concentrate on serving mid-volume turnkey manufacturing requirements for current and new customers and will help serve as a platform for product transition to multinational production in high volume plant sites. Jabil anticipates production for existing customers in Q2. Start-up costs associated with this new plant are expected to total approximately $0.02 per share in Q1 and approximately $0.01 in Q4. The site is anticipated to contribute to operating income in Q3. Business Outlook Overall business levels are positioned to expand above targeted levels for FY99. Near-term production levels have recovered from the inventory correction of the spring and summer, while the long-term outlook benefits from the increased use of outsourcing in the industry and an in creasing share for Jabil from customers. The overall level of new business development activity continues to be extremely active, with a noticeable interest from OEMs having strong traditions of vertical integration.

To: Clint E. who wrote (18204)	10/31/1998 12:25:00 PM
From: Johnny Canuck	Respond to of 67830

JBIL Part 4: Near-term revenue and operating profits are expected to rebound more sharply in Q1 than previously anticipated, with revenue now expected to increase by 42%, reflecting the first full quarter of contribution from the former H-P facilities and growth in all business segments. Production levels in communications, peripherals, and computer segments are anticipated to rebound briskly in the fiscal first quarter and equal or exceed targeted growth rates on a sequential quarterly basis throughout the remainder of the fiscal year. The communications segment is expected to account for slightly more than 40% of Jabil's total revenues in FY99 as revenue growth meets or exceeds 30% on an annual basis. Jabil announced that it had begun a significant new manufacturing relationship with Nortel Networks, formerly Bay Networks. (This is the unnamed new communications customer mentioned in the last quarterly conference call.) Nortel Networks is currently in the process of consolidating from approximately ten current suppliers and has chosen Jabil as one of its few global contract manufacturers. Current plans call for modest production in Q1, with increasingly significant levels of production in Q2 through Q4. Management anticipates that Nortel Networks may account for at least 10% of Jabil revenues by the end of FY99. The peripherals segment is expected to grow sharply in Q1 as full production at the H-P printer sites is realized. Revenues in Q2 is anticipated to be above targeted rates in printers and storage products. Visibility beyond Q2 is more limited, but management estimates revenues to be sequentially flat in the seasonally slow spring and summer quarters. It is anticipated that the peripherals sector will account for approximately one-third of Jabil's revenues in FY99. The PC segment is expected to grow above targeted rates in Q1 as production for desktop assemblies expands to a broader base of assemblies and multiple sites. Growth at targeted rates is projected for the balance of FY99. Design efforts continue for Jabil's new notebook PC customer, and management anticipates significant production levels of mother-board and docking station products in Q3. These products have the potential to become a 10% customer, although design revisions and multi-plant product launches are likely to defer that potential until Q1 of fiscal 2000. Management projects that the PC segment will account for approximately 14% of total revenues in FY99. The automotive segment is expected to grow sharply in Q1, reflecting increases from seasonally slow levels in the summer. Production is expected to be sequentially flat in Q2. This segment looks to account for 7% of FY99 revenues.

To: Clint E. who wrote (18204)	10/31/1998 12:26:00 PM
From: Johnny Canuck	Respond to of 67830

JBIL Part 5: The consumer products segment is expected to grow above targeted rates as production for appliance assembly increases at multiple sites but is expected to account for less than 3% of FY99 revenues. As noted previously, management expects that changes resulting from product mix (principally the acquisition of the H-P operations) will cause gross margins to normalize at approximately 11% in FY99. Gross margins in Q1 are expected to be 0.3 to 0.4 percentage points below that targeted level due to startup costs associated with Jabil's new site in California and are expected to increase to 10.8% to 11% in the balance of FY99 as a result of increasing production for new customers, new products, and the absorption of the startup costs for California. Operating income is expected to increase in Q1 by approximately 39% sequentially and by 9% sequentially in Q2. Management's current outlook for operating income growth for FY99 is near 31%, or slightly above the company's long-term goal of 30% annual growth. SG&A expense is anticipated to decline to 4.2% of sales in Q1, somewhat above the targeted goal of 3.5%. SG&A expense as a percent of sales is anticipated to approach the long-term goal over the course of the fiscal year as revenue expands. Interest costs are anticipated to increase to 0.5% of revenues in Q1, reflecting financing of the acquisition of the H-P laser-printer operations. The tax rate is expected to increase to 35% in Q1. In response to a question, management indicated that an EPS forecast in the area of $2.15 for FY99 is consistent with the company's guidance. Capital expense in FY99 is projected to be around $80 million with depreciation of $51 million. Responses to Questions Capital controls in Malaysia do not really affect Jabil's operation there. Malaysia continues to be a low-cost production location that serves customers in that region and elsewhere. Customers accounting for 10% or more of revenues in FY98 were: Cisco Systems (Nasdaq: CSCO), 21%; 3Com (Nasdaq: COMS), 18%; and Hewlett-Packard, 11%. By segment, communications accounted for 52% of revenues in FY98; computers, 16%; peripherals, 19%; automotive, 8%; consumer products, 4%, and miscellaneous, 2%. By region, Asia accounted for approximately $150 million in revenues in FY98; Europe, $225 million; and North America the balance -- around $900 million. "Box-build" (i.e., assembling a completed system) accounts for approximately one-third of Jabil's revenues. With the H-P operations acquisition, box-build will account for a smaller percentage of total revenues, even though box-build revenues are expected to increase in absolute terms. In FY99, systems assembly revenues are projected to be around $450 million to $480 million, as compared with around $400 million for FY98. Jabil is not experiencing any unusual pricing pressures or margin squeeze; projected changes in margins are attributable to changes in product mix. The industrywide slump earlier in the year was probably attributable mostly to customer uncertainty in light of financial turmoil in some regions of the world, which prompted customers to draw down inventory. That inventory drawdown has run its course and underlying demand is once again driving the industry. For Jabil, that favorable industrywide development is supplemented by the company gaining a number of significant new customers and gaining market share. Industry analysts estimate that only 14% of the world's electronics manufacturing capacity is held by contract manufacturers, with 86% held by traditionally vertically-integrated OEMs. Many of the latter are now actively considering outsourcing -- in the telecommunications equipment industry, to cite one prominent example. This could result in a very positive long-term trend for contract manufacturers such as Jabil. Telecommunications equipment represents perhaps a $3.4 billion market as soon as two years from now for contract electronics manufacturers.