April 24, 2008 - Flextronics International Ltd. (FLEX-NASDAQ) offers turnkey manufacturing services to the world's leading electronics companies, including Cisco Systems, Dell, Eastman Kodak, Ericsson, Hewlett-Packard, Kyocera, Microsoft, and Xerox. The company's services range from design engineering, through manufacturing and assembly, to distribution and warehousing. It manufactures and assembles printed circuit boards, electromechanical components, subsystems, and complete systems for a wide range of makers of networking and telecommunications equipment, computers, consumer electronics, and medical instrumentation. It has factories on four continents.

It swallowed Solectron last year, finalizing the deal on October 1, 2007. That put the company in better position to serve the computing and telecom infrastructure end markets. There were costs associated with assimilating the new company: 19 plants were closed and related costs deducted between 19 cents and 27 cents in the fourth quarter (ended March 31). Expect better results going forward as the new entity is meshed with the parent.

Look for better demand from mobil phone service operators as many are trying to cut costs from production, outsourcing eletronics manufacturing to low-cost providers. That should help FLEX get through the current economic slowdown. Analysts believe mobile phone revenues will grow by at least 10% this year. They think sales from computing, industrial, medical and automotive will increase even stronger. The weak spot: the consumer digital end market where demand is sluggish.

The company added Avail Medical Products to its core business in January, expecting medical revenues to grow by 90% because of it. FLEX is negotiating to buy Arima Computer, a service design firm that should help build its notebook computer products. And one more company is in its sights: CEAG's Mobile Power unit, a producer of power supplies and chargers for cell phones.

All of these additions have hurt earnings in the recent past and will likely to show up for a few more quarters as the new acquisitions are consumated and related expenses are taken. But these new firms are adding revenues and will quickly contribute to profits. Looking beyond the next one or two quarters, there should be meaningful improvement to the bottom line.

In particular, earnings per share (eps) is forecast to be 92 cents a share for 2007, up from 71 cents in 2006. This year, look for $1.10 and $1.25 next year. For a stock selling below $10 a share, the p/e becomes rather compelling, especially for a stock that has shown an average annual p/e range of between 12 and 40 over the last 10 years.

Other numbers: Debt is 27% of capital. Net profit margin was 2.4% in 2007 with expectations of 2.7% this year and 2.8% next year. Return on Equity was 8% last year and expected to reach 10.5% this year and next. Analysts expect revenues to grow by 9.5% a year, on average, over the next 5 years while eps increases by 13.5% a year, on average. That compares to sales growth of 4.5% a year, on average, in the last 5 years, and 1% a year eps growth in the same time period.

It seems like the pieces are in place for Flextronics to show improved sales and profits. As soon as all associated costs for new acquisitions have been expensed, the bottom line should grow noticeably. And with global sales outside the U.S. accounting for 78% of revenues, the slow U.S. economy won't affect the company much, if at all.

- Company Web site: www.flextronics.com