SAN FRANCISCO (Reuters)—Flextronics International Ltd., the worlds biggest contract electronics manufacturer, on Tuesday posted a small net loss as revenue declined and set financial targets below Wall Street expectations.
Flextronics shares fell nearly 14 percent in extended hours trade on the Inet electronic brokerage following the news. Shares of other contract manufacturers also fell.
"The reason for the revenue shortfall and for the second half of their fiscal 2006 is a combination of weaker than expected end-market demand and slower than expected ramps for new programs," said Deutsche Bank analyst Carter Shoop.
Shoop was expecting an operating income margin, excluding items, of 3.4 percent and he said Flextronics reported an operating profit margin of about 3 percent, excluding items.
"Everything was just a little bit softer in September than we anticipated, and everything was a little bit softer even than that in October," said Flextronics Chief Operating Officer Michael McNamara on a conference call, adding that the one exception was cell phones, which "showed very good strength."
The maker of products for Microsoft, Dell, Alcatel and others said it had a net loss for its second fiscal quarter ended September 30 of $2.4 million, or nil cents per share, compared with a year-ago net profit of $92.6 million, or 16 cents per share.
Revenue declined to $3.88 billion from $4.14 billion, largely due to the Flextronics divestiture of its semiconductor and network services divisions and the sale by two large customers of their cell phone business to Asian companies, which took over manufacturing themselves.
Excluding items, Flextronics had a per-share profit of 17 cents, compared with the average Wall Street estimate for a profit of 19 cents, according to Reuters Estimates.
For the current quarter, Flextronics said it expects earnings per share before items of 18 cents to 20 cents on revenue of $4 billion to $4.2 billion.
On that basis, analysts currently expect Flextronics to earn a profit of 25 cents a share, on average, on revenue of $4.59 billion.
The company, based in Singapore, has won a $2 billion contract with Nortel Networks and a more than $1 billion contract with Kyocera Corp. that should boost results heading into calendar year 2006.
Executives said on a conference call that demand looked a bit softer than expected going into the holiday sales-fueled December quarter, and pointed to a fall on consumer confidence.
The Conference Board earlier on Tuesday said that its confidence index fell again to 85 in October from 87.5 in September, a month in which it plummeted.
"Its certainly not a very rosy outlook by the Conference Board, said Thomas Smach, Flextronics chief financial officer, in a telephone interview.
Based on Tuesdays closing price, shares of Flextronics have fallen about 13 percent so far this year while the Morgan Stanley High Technology index, of which Flextronics is a component, is little changed.
Shares of Flextronics fell to $10.45 in after-hours trade. During the regular trading session on Nasdaq, they rose 7 cents to close at $12.10.