Flextronics International Ltd, the second-biggest contract electronics manufacturer, has cut about 7,000 jobs, or 10 percent of its workforce, and trimmed production capacity by 15 percent because of slowing demand.
The company took a US$276 million charge in the fourth quarter ended last month for the job eliminations and restructuring, spokeswoman Manuella Solomon said. Most of the worker and capacity cuts took place in North America, the company said. Flextronics plans a charge of US$10 million to US$20 million in the first quarter.
Three of Flextronics' biggest customers, cell-phone maker Ericsson AB, Cisco Systems Inc and Hewlett-Packard Co, have cut jobs and reduced sales and profit forecasts because electronics demand is slumping. Flextronics' rivals, including top contract manufacturer Solectron Corp, No. 3 Celestica Inc, and Jabil Circuit Inc also have cut jobs and missed growth targets.
"After Jabil and Solectron took hatchets to their numbers in March, it became pretty well understood what was happening to communications customers and to original equipment manufacturers," said Louis Miscioscia, an analyst at Lehman Brothers who has a "strong buy" rating on Flextronics' shares.
The company said it closed a printed circuit-board plant in Austin, Texas. It didn't give details about other plant closings.
The Singapore-based company's shares have fallen 30 percent in the past year.
Flextronics said it had a fourth-quarter loss of US$193.2 million, compared with net income of US$53 million a year earlier. Sales rose 40 percent to US$3.11 billion from US$2.23 billion.
Excluding acquisition-related expenses and other charges, the company said profit would have been US$108.9 million, or US$0.22 a share, in the recent quarter. On that basis, Flextronics was expected to earn US$0.24, the average estimate of analysts polled by First Call/Thomson Financial.
Flextronics expects fiscal first-quarter sales and earnings to be unchanged from the fourth quarter's, in line with analyst forecasts for profit of US$0.23 a share in the period. Excluding amortization expenses and certain other charges, the company had pre-split profit of US$76.5 million, or US$0.37, in the same period a year ago on sales of US$2.52 billion.
"The electronics industry is now undergoing a severe contraction," said Michael Marks, chairman and chief executive, on a conference call. "This is the most severe contraction in Flextronics' relatively short history." Smaller rival SCI Systems Inc yesterday said it will fire 5,100 people, or 15 percent of its workers, and close four plants to cope with the slowdown.
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