MILPITAS, CA -- Solectron Corp., a provider of electronics manufacturing services, today reported second-quarter sales of $2.76 billion, down 4.5% from last year and up 3.6% sequentially.

The GAAP loss from continuing operations narrowed to $5 million, from $90 million in the second quarter of last year.

The company had non-GAAP net income from continuing operations of $40 million, excluding $45 million of charges. The company took a one-time charge of $40 million for the pending sale of one of its Japanese facilities, a $3 million restructuring charge and a $2 million charge related to its convertible note exchange offer.

The company reported sequentially improved revenues due to stronger demand in the networking, computing and storage and industrial markets. Revenues from communications, consumer and automotive were weaker in the second quarter.

However, in a research note Friday, Deutsche Bank said Solectron is losing share at key accounts and has done a poor job of forecasting end demand. The investment bank lowered its earnings estmates for the May quarter. 

Sales from Cisco increased 23% sequentially, while sales from Nortel rose about 5%.

Cash flow from operations was about $280 million.

In a statement, Mike Cannon, president and chief executive, said, "While we are pleased with sequential growth in second quarter revenue, we are not seeing the anticipated growth from several customers primarily in the consumer and computing markets. We now expect that second-half revenues and earnings will not be higher than first-half results."

He guided for fiscal third-quarter sales of $2.6 billion to $2.8 billion.

Inventory turns were 7.9 and the cash conversion cycle was 45 days, an improvement of six days from the prior period. Capital expenditures were $34 million, and depreciation and amortization was $51 million.