SAN JOSE -- Flextronics on Tuesday reported a second-quarter GAAP net loss of $2.4 million on net sales of $3.9 billion, down 4.9% from a year ago quarter. The company reported net income of $92.6 million last year.

For the period ended Sept. 30, the world's largest EMS company took after-tax charges of $103.8 million. Excluding items, net income rose 3% to $101.3 million.
The company guided for December quarter revenues of $4 billion to $4.2 billion and March 2006 quarter revenues of $3.6 billion to $3.8 billion.

In a press statement chief executive Michael E. Marks said, "Our year-over-year revenue comparisons are adversely impacted by the divestitures of our Network Services and Semiconductor divisions along with the impact from two European OEM customers divesting their cellphone businesses during the past year. We expect the December quarter revenue comparison to be the last quarter adversely impacted by these customer actions."

For the quarter, return on invested tangible capital rose to three points to 27%. Cash conversion days decreased to 16, from 20 days sequentially. Operating margin rose 20 basis points to 3.4%, exclusing one-time items, up from 3.2% a year ago.

At quarter's end the company had a record $1.2 billion in cash, up from $830 million. Total debt fell $197 million sequentially and is now $439 million.

On a conference call Tuesday night, the company said sales of handsets increased during the quarter, while industrial and medical gear fell.

Inventories rose about $200 million, about half due to lower-than-expected demand from Nortel, and component shortages for cellphones.

Sony-Ericsson and HP each made up more than 10% of sales during the quarter. Flextronics' top 10 customers accounted for 61% of revenue during the quarter.

Delphi, which just filed for bankruptcy, owes Flextronics about $45 million, company officials said.

Incoming CEO Mike McNamara said ODM and EMS business for handsets is expected to ramp in 2006. Also, the company won a Kyocera program worth an estimated $1 billion. Flextronics also reported three design wins with MNCs in power supplies.

The firm is investing in camera module capacity in China and elsewhere, and in metals, plastics and assembly capacity in Asia. Its Multek bare-board group will open a rigid-flex factory within 60 days in China.

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