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Solectron's Loss Narrows

The manufacturer's fiscal third-quarter revenue rises 29% as it loses $65 million.

June 18, 2004|Alex Pham | Times Staff Writer

Solectron Corp., a contract manufacturer for top technology companies, significantly narrowed its third-quarter loss as sales picked up after a long slump.

The Milpitas, Calif., company, which counts Cisco Systems Inc., IBM Corp. and Nortel Networks Corp. among its customers, on Thursday reported $3.04 billion in sales in the fiscal quarter ended May 31, up 29% from the same quarter a year ago. It lost $65 million, or 8 cents a share, compared with a $2.7-billion loss, or $3.24, in the previous year.

Without charges related to its restructuring and one-time expenses from retiring a portion of its debt early, Solectron earned $13 million, or a penny a share. Analysts polled by Thomson First Call had expected it to break even on $3.05 billion in sales.

"Solectron's results came in pretty much in line with prior expectations," said Lou Miscioscia, an analyst with Lehman Bros. in New York, which has done investment banking for Solectron in the last year.

Consumer demand for electronics and devices will continue to grow in the next year, driving business for Solectron and other manufacturers, he said, "but the pace will be rather gradual."

Solectron's shares fell 1 cent to $5.08 on the New York Stock Exchange before the earnings announcement. They gained 9 cents in after-hours trading.

"We made solid progress on all financial metrics, including returning to pro forma profits one quarter before we had projected," Solectron Chief Executive Michael Cannon said in a conference call with analysts.

Since taking over as CEO in January 2003, Cannon has restructured the company to reverse its string of losses. He initiated the sale of seven subsidiaries, all acquired during a spending spree that began in the late 1990s. Solectron is expecting to raise more than $500 million in cash from those sales.

In addition, the company has tried to pare down its debt. It cut $2 billion in debt in the third quarter, reducing interest expense by $21 million a quarter. The company now has $1.25 billion in debt.

Cannon also continued the company's quest to trim payroll. Since 2000, the company has eliminated 37,300 positions and moved facilities from the U.S. to low-cost countries such as China. It now employs 66,000, with 15,000 in the United States.

He projected that the sales would continue to grow, reaching between $3.05 billion and $3.2 billion in the current quarter.

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