SAN JOSE, Oct. 25 -- Flextronics, the world's largest EMS company, reported net income of $92.6 million on revenue of $4.14 billion for its second quarter ended Sept. 30.

The results beat a year-ago net loss of $100.1 million, including one-time charges, on sales of $3.5 billion.

For the quarter the company took $34 million in restructuring charges and other non-operational tax adjustments. The cash conversion cycle contracted by two days to 16 days. Inventory turns improved to 10.9 turns from 10.5 sequentially.

Flextronics matched analysts' profits expectations, excluding one-time items, although it fell short of consensus projected revenue of $4.21 billion.

Part of the shortfall owes to inventory reduction at OEMs, analysts say. "There was an inventory build in the communications infrastructure market and that inventory correction is taking place," said analyst Chris Whitmore of Deutsche Bank. Sales from handsets declined about 11% sequentially and offset strong sales for CPU/office equipment and consumer electronics. Revenue from HP increased nearly 50%, DB said in a research note.

Flextronics guided for third-quarter earnings per share before items of 18 to 21 cents on revenue of $4.1 billion to $4.4 billion. For its fiscal fourth quarter, Flextronics expects earnings per share excluding items of 15 to 18 cents on revenue of $3.8 billion to $4.2 billion. Analysts' revenue estimates are higher for each quarter. However, Flextronics, which is taking over Nortel Networks' manufacturing operations, said revenue from that acquisition will not add to overall sales as quickly as once thought.

Chief executive Michael Marks said on a conference call that the December quarter may not be as strong as initially expected but the Mach quarter outlook remains solid. "It's not like we're seeing some big downturn because the March numbers look pretty solid," he said.

Flextronics did suggest that demand has slowed for consumer and communications gear. "This may be a result of some inventory reductions or it could be nothing more than some caution based on oil prices, the election and so on," Marks said. "In either case, we see that as not that big a deal, at least for Flextronics."

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