MILPITAS, CA -- Solectron Corp. Thursday night reported fiscal first-quarter net earnings of $20.2 million on sales of $2.46 billion. Last year, the EMS firm showed a profit of $58.2 million, while sales dropped about 9% from $2.69 billion a year ago.

For the quarter, sales were up 2% sequentially, but margins fell 50% to 0.9%, falling short of analyst expectations. Solectron cited supply chain costs and expenses associated with new program ramps for the shortfall.

The firm saw sales growth for semiconductor test gear while networking fell, in part due to a 5% sequential drop in sales to Cisco. Solectron is also expected to lose share due to the transfer of certain programs for Northern Telecom to Flextronics.

At quarter's end, Solectron had $350 million less in net cash sequentially and cash cycle days rose by seven, to 41 days.

Solectron guided for second-quarter sales from continuing operations of $2.3 billion to $2.5 billion. It was the fifth straight quarter that the company lowered its outlook.

In a research note, Deutsche Bank analyst Carter Shoop forecast the company would continue to lose share in the EMS sector despite becoming more aggressive on pricing and acquisitions.

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