SAN JOSE -- Solectron Corp. reported a second-quarter profit of $30.4 million, reversing a loss of $2.2 million last year. Revenue fell 10.8% to $2.46 billion from $2.76 billion a year ago, just beating analyst estimates and at the high end of the company's forecast.

For the quarter, the gross profit was $29.7 million, excluding charges and one-time items. Income from continuing operations was $17.1 million, up from a $3.1 million loss a year earlier. The company said $13.3 million of its net income were due to discontinued operations. 

Cisco and Nortel were Solectron's top two customers during the quarter, accounting for $452 million (18%) and $292 million (12%), respectively, of sales. Solectron is expected to lose much of the Nortel business soon as the telecom gear maker transfers its manufacturing to Flextronics. Sales to Cisco grew 10% sequentially.

Inventory turns fell half a turn to 7, while invetory levels grew 9% sequentially due to cost-of-goods sold increases. Solectron cited poor inventory management in program ramps for the increase. However, Cisco plans to roll out its Lean initiative during the November quarter, which could mean higher inventories at Solectron.

Solectron guided for third-quarter earnings, excluding items, of 3 cents to 5 cents a share on revenue of $2.5 billion to $2.7 billion.

In a research report, Deutsche Bank analyst Carter Shoop said he expects Solectron to restructure its higher-cost manufacturing areas starting in the second half of the year.

• Prev
• Next