Apr 30, 2002
Steve Harmon asks investors to recall what Michael Dell of Dell Computer did for the PC industry by using just-in-time manufacturing, streamlined processes and tight supply-chain vendors. �But Dell pales in comparison to what Flextronics (FLEX) does for the world�s leading networking, computer, medical, consumer and telecom firms,� Harmon says. The contract manufacturer just reported a Q4 profit of $5.7 million ($0.01 per share) vs. last year�s loss of $0.41 per share.
When the economy recovers, Harmon sees Flextronics benefiting from a surge in sales of consumer and corporate electronic gear. The firm enjoys key relationships with dozens of branded products in those sectors. As the components used in those sectors become increasingly commoditized, Flextronics stands to benefit by leveraging its inventories and suppliers to use parts across various product lines. �That translates into savings from big contractors who get the benefit of Flextronics� economies of scale,� Harmon says.
Flextronics now makes many of the electronics components in Microsoft's new XBox, and Harmon sees that deal bringing in $1 billion a year. "XBox serves as an example for Flextronics' adaptability," Harmon says. That's important as the firm had been very heavily exposed to the telecom industry and is now diversifying its client base. Harmon just issued a buy sign and advises maintaining a 20% stop loss limit.
For more on Steve Harmon's advice see "Hotline," April 26, 2002, Broadband Investor. Steve Harmon puts investors at the forefront of the convergence of technology, entertainment, communication, commerce and fiber-optics.
