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Solectron meets 3Q target
June 12, 2000: 5:43 p.m. ET

Acquisition delays weigh on top line; supply constraints expected to continue
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NEW YORK (CNNfn) - Solectron Corp. on Monday reported a fiscal third-quarter operating profit of $123 million, or 21 cents per share, meeting Wall Street's recently lowered expectations.

Revenue for the quarter ended May 26 was $3.6 billion, up 51.8 percent from the corresponding period last year.

Executives at Solectron, the leading supplier of electronics manufacturing services (EMS) on a contract basis, recently lowered their revenue projections for the quarter due to a delay in closing a key deal with Nortel Networks.

Even so, the actual results slightly exceeded the lowered forecast, and they would have been even higher had it not been for a shortage of some key components, executives said.

"We expect the supply-demand imbalance to continue through calendar year 2000 and into 2001," Koichi Nishimura, Solectron's chairman and chief executive, told analysts in a conference call Monday evening.

graphicSpecifically, the shortages have been most pronounced in capacitors and flash memory chips, which are in strong demand for portable computing and communications devices, Nishimura said.

He also said he expects the supply of dynamic random access memory, or DRAM, chips to tighten in the coming months.

Including one-time charges, Solectron's net income was $122.9 million, or 20 cents per share. The charges included merger-related costs of $25.5 million and restructuring costs of $6.5 million, the company said.

Moving ahead, Nishimura said he expects the company's fiscal fourth-quarter revenue to come in at between $4.5 billion and $4.7 billion, and its full fiscal year revenue to be in the range of $13.7 billion to $13.9 billion. He said fourth quarter earnings should be 26 cents per share, and the company's full-year earnings should come in at 84 cents per share.

Shares of Solectron (SLR: Research, Estimates) added 1-11/16 to finish 4.8 percent higher at 37-1/8 ahead of the earnings announcement Monday.

The Milipitas, Calif.-based company in early April agreed to buy several of Nortel's manufacturing plants in North America and Turkey for $900 million, and inked a four-year supply agreement with the company valued at roughly $10 billion.

In late April, Solectron executives said the component shortages and delays in closing the Nortel deal would result in sales of $3.4 billion to $3.5 billion, and earnings per share in the range of 20 cents to 22 cents. Previously, Solectron had told analysts to expect earnings of 21 cents to 22 cents per share.

Solectron is the world's largest contract electronics manufacturer and builds computers and other electronics products for companies such as Hewlett-Packard, Cisco Systems and Sun Microsystems. Back to top