SAN FRANCISCO, Jan. 11 -- Decelerating sales growth and efforts to cut inventories across several product lines will hurt EMS vendors in the coming months, says a new report.

Investment bank Deutsche Bank today forecast EMS sales to slow through at least the first half of 2005. In a research note, analyst Chris Whitmore predicted 7% year-over-year growth for the industry in 2005.

"We remain concerned about the EMS industry's ability to meaningfully expand margins in the current business environment. We believe continued excess capacity, increasing competition from Asia-based producers and slowing near-term demand trends will likely result in continued margin pressure," Whitemore wrote.

Whitemore said that margin pressures and competition should be "somewhat offset" by restructuring and other cost-reduction activities.

The bank said fourth-quarter 2004 results should be in line with tepid expectations. "We believe most EMS vendors will report in line with our EPS forecasts, despite continued weak end-market demand in the December quarter." The bank's outlook for Sanmina-SCI was cited as "most cautious." "We expect Sanmina-SCI to post December quarter results at the low end of guidance," Whitmore wrote.

GREENVILLE, SC, Jan. 11 -- Kemet Corp. said today that December revenue was down 10% sequentially due to paring of inventories at its distributors. The parts maker said March revenue should improve compared to December.

Speaking at the Needham Growth Conference, chief executive Dr. Jeffrey Graves said, "During our last earnings conference call, we reported that Kemet distributors had built inventory of parts in the June quarter in anticipation of strong growth in their sales in the second half. When their sales growth was more moderate than they expected, in the September quarter they reduced inventory levels, resulting in reduced Kemet revenue in the September quarter. This inventory correction continued into the December quarter."

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LOUISVILLE, Jan. 11 -- Sypris Solutions Inc. today bottomed its outlook for the fourth quarter, citing cost overruns and higher training costs.

The company expects to report a fourth-quarter loss of $0.07 to $0.10 per diluted share, compared to prior guidance for earnings of $0.17 to $0.20.

Expected revenue is $121 million to $123 million, which is consistent with prior guidance of $120 to $124 million.

"In many respects, we paid the price for this year's rapid growth during the fourth quarter," said Jeffrey T. Gill, president and chief executive, in a statement. "We experienced inefficiencies associated with rapidly changing demand and continued steel shortages, cost overruns for the installation of new manufacturing cells, increased costs for training people for new programs and additional charges to reflect the growing nature and complexity of the business, among others."

Gill said that while the company has resolved the "vast majority" of its issues, some further short-term expenses are expedted.

A series of programs coming online during the first half are forecast to increase revenues by $50 million to $60 million annually.

The company left its revenue outlook unchanged, with 2005 sales forecast to be up 20% to $500 million to $520 million. It cut earnings to $0.75 to $0.95 per diluted share, versus prior guidance of $1.00 to $1.10.

Sypris is a contract manufacturer of aerospace and defense electronics.

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ANAHEIM, CA, Jan. 11 -- Next year's Measurement Science Conference will take place Feb. 27 to March 3, organizers said today.

The Measurement Science Conference consists of seminars, workshops and tutorials. The conference will be held at the Disneyland Hotel and Conference Center.

Also, the latest in measurement related equipment, systems and software will be exhibited. For details: msc-conf.com.

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WILSONVILLE, OR, Jan. 11 -- Mentor Graphics said preliminary fourth-quarter bookings and revenues suggest records in both categories, with revenues expected to exceed First Call consensus estimates of $204 million.

Bookings were up about 40% year-over-year. Backlogs rose 35% from a year ago, the company said.

However, special charges are expected to result in GAAP basis earnings below guidance. Pro-forma earnings are expected to modestly exceed consensus estimates.

Bookings was broad-based across all regions and product lines. North America

was up 15%, Europe 50%, and Japan and the Pacific Rim both up over 100% vs. last year.

Mentor will release fourth quarter and full year results after market close on Jan. 27.

ARLINGTON, VA, Jan. 10 -- Manufacturer-to-dealer sales of consumer electronics will reach a record-high of $125.7 billion in 2005, according to the Consumer Electronics Association, an 11% climb year-on-year.

CEA estimated 2004 would exceed initial expectations, reaching $113.5 billion, up 11% over 2003.

"These numbers reflect that consumer electronics is a hot industry," said CEA president and CEO Gary Shapiro. "Sales continue to surpass our expectations and break existing records year after year, because this is an everchanging industry that delivers innovative products that enhance consumers' lives."

Digital television continued to be a frontrunner, with sales rising 78% to $10.7 billion. Unit sales were up 63% to 7.3 million. Sales of LCD TVs topped $2 billion in 2004 and will surpass $3 billion in 2005. Plasma TVs will experience similar growth as unit sales reached 853,000 in 2004 and then grow to over 1.4 million units in 2005.

MP3 player unit sales more than doubled, to over 6.9 million units and revenues tripled to $1.2 billion. CEA forecasts revenues will hit $1.7 billion on 10 million units sold and in 2005. Satellite radio and video navigation are also helping to drive the aftermarket category. Mobile navigation devices sales topped $782 million in 2004, up 35%. Navigation device sales will hit $935 million in 2005, CEA said.

Flash media card sales rose 200% to more than $3 billion in 2004, CEA estimates. Demand for storage will push the market to nearly $6 billion this year.

Portable PC product revenues were up 10% to a record $17.2 billion. 2005 revenues are forecast to surpass $18 billion.

Phones with built-in digital cameras have helped add to the projected growth of 15% in revenues in 2004. Unit sales topped 79.6 million units and will grow to 89.2 million units in 2005. Wireless will reach a new high of $11.3 billion in 2005, CEA forecasts.

ANGLETON, TX, Jan. 10 -- Benchmark Electronics will add a third manufacturing site in Asia by the end of the quarter to meet increased customer demand.

The contract manufacturing provider said today it will lease a facility in Ayudhaya, Thailand, 30 miles north of the Bangkok Airport. This 60,000 sq. ft. facility will be the company's second in Ayudhaya.

The new plant will perform systems integration.

Benchmark said the facility will be fully operational by the end of the first quarter. The company currently operates 17 facilities worldwide, including four in Asia.

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VANCOUVER, Jan. 10 -- Nam Tai Electronics Inc. reported fourth-quarter sales rose 40% to $150 million, a new record and ahead of the company's Oct. 29 guidance of $135 million.

December sales topped $55 million, up 70% year-on-year, and also beating the EMS provider's previous monthly high set in June 2004.

For the year, sales topped $530 million, up 30% over 2003 sales.

The company attributed the growth to FPC subassemblies, CMOS sensor modules for mobile phones and LCD modules.

Joseph Li, chief executive said in a press release, "We are extremely pleased with the sales, which exceeded our original upper guidance. High oil prices and a strong yen has resulted in greater outsourcing, especially by Japanese manufacturers during the period, which resulted in additional orders from our customers.

The company has factories expected to come online after March.

The company also stated that chief financial officer Charles Wong and his assistant, Joseph Silva, have resigned for personal reasons. Both were in their probationary periods. Li will assume the CFO position on an interim basis.

LANCASTER, PA, Jan. 7 -- Bulova Technologies, a contract electronics manufacturer, today announced it has raised $6 million in mezzanine capital for future expansion.

The financing, provided by NewSpring Ventures and TRF Urban Growth Partners, will fund a planned expansion in December.

"This financing will provide the resources to continue to grow the company and to take advantage of both organic opportunities and potential acquisitions," said Stephen L. Gurba, president and chief executive.

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Privately held Bulova was founded in 1942 as a subsidiary of the Bulova Watch Co.

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SAN JOSE, Costa Rica, Jan. 5 -- A pair of suppliers of electronics materials and equipment will team to deliver a one-day seminar on lead-free manufacturing here later this month.

On Jan. 19, DEK, a provider of screen printers, and Kester, a supplier of solder materials, will  cover new lead-free alloys, wave soldering, reliability and the global impact of compliance.

Technical papers including "Effects of cooling Speed on Microstructure and Tensile Properties of SnAgCu Alloys" and "Chip Scale Package Rework Considerations: Using Solder vs. Gel Flux" will also be presented, and the impact of lead-free on screen printing will be addressed.

While many courses leave out any discussion of Pb-free's impact on mass imaging, recent research conducted by DEK has shown that paste application method (squeegee vs. enclosed head), stencil material, stencil manufacturing method and machine accuracy all have a tremendous impact on the successful implementation of lead-free manufacturing, the companies said.

The seminar will take place at the Melia Callari Hotel. For more information or to register contact Craig Brown, DEK Americas general manager, at 908-782-4140, x 226.

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