Apr 22, 2002 Los Angeles, CA
Fiscal fourth-quarter results for contract manufacturer Flextronics International Ltd.FLEX.O might prove disappointing because of weakness reported by a competitor in two markets also important to Flextronics, two analysts said on Friday.
On Thursday, Flextronics competitor Sanmina-SCI Corp. SANM.O said it had experienced weakness in its fiscal second quarter in printed circuit board, or PCB, manufacture and also in its product enclosure manufacturing business.
"With respect to bare PCBs and enclosures, Flextronics faces a similar mix profile and higher operating loss than Sanmina-SCI," Bear Stearns analyst Thomas Hopkins said in a client note on Friday.
"Although we are encouraged by the improvement Sanmina-SCI is seeing in these markets, it is not enough for Flextronics to generate the 2 cents to 3 cents per quarter EPS gains we had been modeling," he continued.
Hopkins cut his March quarter earnings estimate to 12 cents from 13 cents and lowered his fiscal 2003 earnings estimate to 70 cents from 82 cents.
Flextronics reports its fiscal fourth-quarter and year-end results next Thursday.
Hopkins said the likelihood of any shortfall was "particularly true if Xbox momentum fades." Flextronics makes the Xbox game console for Microsoft Corp. MSFT.O , a contract some have estimated would be worth $1 billion a year to Flextronics.
On Thursday, Microsoft said weak sales in Japan and Europe meant it would not meet its target of shipping 4.5 million to 6 million units by the end of June. It now expects a range of 3.5 million to 4 million units.
In a client note on Friday, Kaufman Bros. analyst David Miller said he thought weakness in the telecom and data network markets made it possible Flextronics could miss his estimates for revenue of $3.2 billion and earnings per share of 14 cents.
"In addition to the weakness in specific end markets, we believe the company has not experienced a substantial improvement in its printed circuit board fabrication or enclosure businesses; two areas where there remains a significant amount of operating leverage," he added.
Flextronics shares were unaffected by the outlook, trading up 1.3 percent at $16.73 in early-afternoon trade on Nasdaq.
