Good afternoon and welcome to the Flextronics Second Quarter Earnings Conference Call. OPERATOR INSTRUCTIONS I would now like to turn the call over to Mr. Michael Marks, Chief Executive Officer. Sir, you may begin.

Thank you. Ladies and gentlemen, thank you for joining the conference call to discuss the results of Flextronics' second fiscal quarter ending September 30, 2005. To help communicate the data in this call, you can also view a presentation on the Internet. Go to the investors' section of our web site and select earnings presentation. You will need to click through the slides, so we will give you the slide numbers we're referring to. On the call with me are Tom Smach and Michael McNamara. As you know, I will retire as CEO of Flextronics and will resume the chairman position in January, at which time Mike McNamara, our Chief Operating Officer, will become the CEO. When his announcement was made, we outlined the fact that Mike currently runs all of our core businesses EMS businesses, which have completed the recent, which haven't completed the recent divestitures, now represent almost our entire business. As we prepare for our transition, I have once again asked Mike and Tom to handle the majority of this call to discuss our business. Tom the start the call by going through the financial portion, then Mike will provide some commentary on the quarter and provide guidance, and I will wrap up with a few comments at the end, before opening it up to questions. Go ahead, Tom.

Thanks Michael, and good afternoon, ladies and gentlemen. Slide 2. Please note that this conference call contains forward-looking statements within the meaning of the Federal Securities laws, including statements related to the success of long-term initiatives, new customer opportunities, revenue contribution from new customers, margin expansion, growth rate, profitability, anticipated use of available cash, cash flow, and cash reserves. These statements are subject to attendant risks that can cause the actual results to differ materially. Information about these risks is noted in the earnings release in Slide 14 of this presentation and in the risk factors and management's discussion and analysis sections of our latest annual report filed with the SEC, as well as our other SEC filings. In addition, throughout this conference call, we will use non-GAAP financial measures. Please refer to the schedules in the earnings press release and Slide 7 and Slide 13 of the slide presentation, which contains the reconciliation to the most directly comparable GAAP measures. Slide 3. Because of the previously announced sales of our network services and semiconductor divisions during the September, 2005 quarter, our financial comparisons are somewhat difficult to follow. Revenue and profits from these divisions earned prior quarters versus part of the September 2005 quarter for the periods up to the sale date and will not be included in future quarters. After we give you the actual comparisons, we will summarize the results on an apples-to-apples basis by taking out the impact from divestitures. Please pay particular attention to this slide, as it contains the results with and without the impact from our divested operations. Revenue in the September, 2005 quarter was $3.9 billion, a decrease of $254 million from the year ago quarter. This decrease resulted from several items. First, the semiconductor and network services divisions contributed $187 million of revenue in the September, 2004 quarter versus $108 million in the September 2005 quarter, resulting in a $79 million less revenue on a year-over-year basis. In addition, Siemens and Alcatel, two extremely important customers for Flextronics during the past several years, divested their cell phone business to Asian suppliers during the past year. As a result, our September, 2005 quarter cell phone revenues from these two customers were approximately $250 million lower compared to our September, 2004 quarter. We continue to believe that new program wins that are expected to begin volume production in calendar, 2006 will be the source of revenue growth in calendar 2006 and 2007. Mike McNamara will address this more in a few minutes. Slide 4. During the quarter, Asia increased on a sequential basis to 57% of total revenue, Americas remains flat at 22%, and Europe decreased to 21%. With regard to market segments, communications infrastructure decreased from 24% in the June, 2005 quarter to 22% in the September, 2005 quarter, primarily as a result of the divestiture of our network services division. As expected, we saw a sequential increase in revenue from our computers and office automation segment, increasing to 27% of revenue in the September, 2005 quarter from 24% of total revenue in the June, 2005 quarter, primarily as a result of the back to school purchasing trend for inkjet printers, which are included in this segment. Consumer decreased from 10% in the June, 2005 quarter to 9% in the September, 2005 quarter, as the June quarter benefited from end of life product bills for Xbox, while we began the ramp up of this product's next generation in the September quarter. Handsets increased from 24% in the June, 2005 quarter to 26% in the September, 2005 quarter, as a result of on overall demand increase in this product segment combined with the ramp up a new program from Kyocera. Industrial, medical, automotive and other decreased from 12% in the June, 2005 quarter to 10% in the September, 2005 quarter, as a result of the divestiture of our semiconductor division combined with demand reductions from one of our automotive customers. Sony, Erickson and HP were the only customers in excess of 10% of total revenues in the September, 2005 quarter. Our top 10 customers accounted for approximately 61% of revenue in the quarter. Slide 5. Gross margin increased 30 basis points to 6.8% from 6.5% in the year ago quarter. Operating margin increased 20 basis points to 3.4% from 3.2% in the year ago quarter, representing the eighth consecutive quarter of year-over-year operating margin improvement. Slide 6. Excluding amortization, restructuring, and other charges, our September, 2005 quarter net income amounted to $101 million, which represents an increase of 3% over the year ago quarter. Earnings per diluted share amounted to $0.17 in both the September 2005 and 2004 quarters. Slide 7. During the September 2005 quarter, after tax amortization amounted to $15 million and restructuring charges amounted to $45 million. We also took a $15 million reserve against our accounts receivable from Delphi, who recent filed for bankruptcy. Our total pre bankruptcy petition accounts receivable from Delphi amounts to approximately $45 million. It is important to recognize the considerable amount of judgment required to assess the ultimate realization of these pre petition receivables, and we will continue to monitor and reevaluate their collectability. We've used our best judgment in determining the appropriate reserve, based on the information currently available. The network services and semiconductor divestitures resulted in a pre-tax gain of $71 million. We recognized a non-cash past expense of $99 million, resulting in after-tax loss on these transactions of $28 million. The $99 million tax expense is a non-cash charge associated with the utilization of deferred tax assets. After all these items, we reported a GAAP net loss in the September, 2005 quarter of $2 million, compared to gap net income of $93 million in the year ago quarter. This resulted in zero earnings per share in the current quarter compared to $0.16 in the year ago quarter. Slide 8. Return on invested tangible capital improved to 27% from 25% last quarter and 24% in the September, 2004 quarter, while return on invested capital, including goodwill, has improved to 10% from 9% last quarter, and is equal to the September, 2004 quarter. Slide 9. We ended the quarter with a record high $1.2 billion in cash, up from $830 million last quarter and $695 million in September 2004. Total debt has decreased by $197 million since last quarter and by $231 million since September 2004. Therefore, net debt has been reduced by $517 million since last quarter and by $687 million since September of 2004. Net debt is only $439 million at the end of September 2005. Including our undrawn $1.35 billion revolver, total liquidity was a record high $2.5 billion. Our debt-to-capital leverage ratio of 23% is equal to our lowest level in two and a half years. Slide 10. Cash conversion cycle came in at an industry-leading 16 days versus 20 days last quarter. Despite the transition of facilities from to Flextronics, which includes complex communications infrastructure products, which, by their nature, have slower inventory turns, we've been able to maintain inventory at 41 days, which with along with good control over accounts receivable and accounts payable has resulted in this industry-leading metric. Slide 11. Depreciation and amortization amounted to $85 million and net capital expenditures were $54 million in the quarter. Cash flow from operations generated $381 million, including an increase of $79 million in the sales of accounts receivable. The aggregate cash proceeds received from the divestitures of the network services and semiconductor divisions was $519 million, resulting in a pre-tax gain of $71 million. I want to emphasize that the cash proceeds of $519 million were received tax free, as the tax expense associated with these transactions is a non-cash charge associated with the utilization of deferred tax assets. During the September 2005 quarter, we invested $339 million in acquisition-related activity. We made an installment payment to Nortel in the amount of $132 million. As part of our previously announced plan to delist our Indian-based subsidiary, Flextronics Software Systems, previously known as Hughes Software Systems, we acquired a portion of minority shares outstanding for $107 million in cash, taking our ownership to 88% of the company. The remaining cash acquisition payments relate to various earn out and hold back settlements from historical acquisitions, along with the acquisition of a Brazilian enclosure operation that we expect to produce a very good return on investment. We also repaid a total of $200 million of debt during the quarter. To summarize our cash flow for the quarter, we were quite pleased with the results. Free cash flow, which is cash flow from operations less CapEx, generated $327 million, which closely approximated the $339 million used to fund acquisitions. The divestitures generated $519 million, which closely approximated the $200 million reduction in debt and the $320 million increase in cash. As previously outlined, we expect to continue to use our available cash for working capital as needed, to fund positive MPV core growth opportunities or be redeployed back into our capital structure to maximize earnings and long-term returns for our shareholders, including further retirement of debt or repurchase of stock. We have not yet repurchased any stock because we were restricted from doing so by Singapore law, which, is scheduled to be changed in January of 2006. Until we redeploy the remaining divestiture proceeds, the divestitures are one penny per share diluted, although they have substantially improved our balance sheet and reduced goodwill and tax deferred tax deductions, which are very positive for the Company on a longer-term basis. Thank you, ladies and gentlemen. I will now turn the call over to Mike McNamara.

Thank you, Tom. Slide 12. Before I discuss guidance, I would like to take a few minutes to reflect on the quarter. This quarter was particularly complex to understand, and we, therefore, tried to provide as much data as possible in order for you to understand the impact these moving parts had on our financial results. Competitively, we are in very good shape. Our major long-term initiatives continue to work well, and we continue to see customer adoption of vertically integrated EMS services, which incorporates design, components, manufacturing, and logistics. The ability to provide all these activities from our industrial parts is a big competitive advantage. We continue to believe we are executing very well on the controllable aspects of our business, and continue to generate good cash flow and operating profits. Our pipeline of potential opportunities continues to be robust. We remain optimistic that a number of these opportunities will become reality over the next several quarters, and will provide additional revenue and profit growth in calendar year 2006 and beyond. As outlined in the last quarterly conference call, new business wins at a ramping in 2006 and fiscal year 2007 include Nortel, a $2 billion program, Kyocera, a billion dollar program. These new programs are going very well, and we continue to be bullish about the other new wins expected to ramp next year. For instance, we have for an increase in business from a number of handset customers, for both the EMS business and ODM products. We're also making significant progress diversifying our printing and imaging business away from inkjet printers, but we expect only a $100 million in revenue contributions from these new programs in FY '06. We expect more than one billion of revenue contribution on run rate basis from these new customers in FY '07. We've also added three new server and storage customers, a customer that keeps computer and peripheral space, and will award a substantial increase in business from an existing customer in semiconductor equipment space. Once again, we expect little revenue contribution from these customers in FY '06, but we expect more than $1 billion in incremental revenue basis on a run rate basis from these customers in FY '07. I'd like to remind you that these new customer wins will not only contribute to revenue growth next year, but also to margin expansion as we penetrate the vertical integration opportunities further, with Nortel, Kyocera, along with most of these other new program wins. While near term demand has slowed temporarily for the products we are supplying to our customers, we are investing heavily in the significant programs expected to ramp in calendar year 2006 and beyond. While these investments are impacting near-term margins, we think margins will expand as these programs reach full potential. Some of these investments include the Nortel immigration costs, Kyocera start-up costs and other program start-up costs. We are investing in camera module capacity in both China and Malaysia, and we believe we will be able to capture 20% or more of the worldwide camera module demand. Until we get these new camera module factories at the proper utilization and yield levels, short-term margins are impacted, but we expect to see the margin benefits soon. We're also investing heavily in metals, plastics, and assembly capacity in Asia. as well as building an industrial park in India, and a manufacturing logistics and repair operation in Juarez, Mexico. The continued investment in our power supply business has just yielded three design wins with major multinational OEMs in the printing and imaging and handset segments. Our pretty third in Ford operations continue to perform very well, and we are expanding our rigid circuit capacity in China. The new flexible printed circuit factory in China is scheduled to begin production within the next 60 days. Obviously, we are making significant investments in our future, and we think these investments will yield higher margins and better returns for our shareholders, while improving our competitiveness and enhancing our capabilities. Slide 13. The September quarter is always a very difficult quarter with regard to demands visibility, because of the lack of activity and information flow during the summer months of July and August. Beginning in mid-September, we began seeing forecast reductions for many of our customers, with the exception of handset customers. This trend has continued through October. As a result, we now expect modest growth in the December quarter. We encourage you to pay close attention to these slides as we have tried to quantify the impact of the divestitures has on our guidance. For the December 2005 quarter, we are currently expecting revenue in the range of $4 billion to $4.2 billion, compared to revenue of four billion in the year ago quarter, excluding the revenue from network services and semiconductors. This revenue guidance reflects a year-over-year growth rate of zero to minus to 5%. Please keep in mind that the December of 2005 quarter will be the last quarter that includes significant cell phone revenue from Siemens and Alcatel, so our comparisons moving forward won't be distorted by the impact of these companies divesting their cell phone business. We are currently expecting earnings in the range of $0.18 to $0.20 per diluted share, excluding amortization, restructuring, and other charges. Our guidance does reflect the$0.01 of dilution from the sale of network services and semiconductor divisions. Excluding this $0.01 impact, we are expecting EPS growth of zero to 5% in the December, 2005 quarter, compared to the December 2004 quarter. For the March 2006 quarter, which is the first quarterly comparison not affected by Siemens and Alcatel exiting the cell phone market, we are currently expecting revenues in the range of $3.6 billion to $3.8 billion, compared to revenues of $3.4 billion in the year-ago quarter excluding the revenue from network services and semiconductors. This revenue guidance reflects a year-over-year growth rate of 6% to 12%. We are currently expecting earnings in the range of 16% to 18% per diluted share, excluding amortization, restructuring and other charges. This also reflects the $0.01 dilution from the sale of network service and the semiconductor division. Excluding this $0.01 impact, we're expecting earnings per share growth of 6% to 19% in the March, 2006 quarter compared to the March, 2005 quarter. Quarterly GAAP earnings per diluted share are expected to be lower than the guidance provided herein by approximately $0.03 per diluted share, reflecting quarterly amortization expense. The timing and the amount of restructuring and other charges cannot be estimated. With regard to the margin impact from these divestitures, they have reduced future quarterly margins by approximately 100 basis points, SG&A as a percentage of sales by approximately 65 basis points, and operating margin by approximately 35 basis points. Thank you, ladies and gentlemen and I'll now turn the call over to Michael Marks.

Thank you. Let me just take a minute to try to summarize. There's a lot of data here, and as we said in the call, lots of moving parts and difficult to make comparisons. what you have here is a relatively flat performance for over a year ago from this quarter and December quarter, primarily resulting from the big, the huge downdraft from Siemens and Alcatel on the cell phones. And as you can see from the numbers of the guidance going forward, we're saying that, at the end of the December quarter we're through that. You can see we are now forecasting pretty good growth starting again in the March quarter, and we think that growth is going to accelerate through calendar year 2006 as these new programs come on. If you will, a pause in what's been very good growth and improvement in operating profits and earnings over the last couple of years and, we think, with a relatively short period, two quarters of reasonably flat performance, that growth will resume again. In the meantime, we're generating lots of cash. We said we would, we are, I think that our cash flow performance in the quarter was a little better than we expected, not including the divestiture, which obviously have put a lot of cash on the books. For September, we generated a lot of cash. In December, we expect to do it again. In the March quarter of 2006 and on during, into the year, the growth and revenue and margins should resume and, of course, we'll start to use a little bit more cash into working capital, which is what I think we all want to see. It's the natural thing. We're in great shape. The programs are coming along really well. We are investing heavily, as Mike talked about, in ramping up a lot of new programs, and I think most of you who've been following our Company and our industry for some time, know that, when you have new programs in place, you don't really make money on them early, because you have a lot of investment in up front engineering and capacity expansion, all that stuff. So that's all going on. The Nortel program is going just as we had expected, doing very well. Margins in that program will continue to increase as it matures. So overall we think we're in very good shape. We're nearing the end of my tenure as the CEO. I think that we've got a very good run ahead of us. Competition in the industry, I think, as most of you know, we've talked about this, and many of you talked to Tom, know that the industry's kind of settling out into sort of winners and losers, and we think we we'll be able to continue to pick up share on some of the weaker players over time. We're seeing that in the new programs we're winning and think that that's going to continue. So we'll continue to generate cash. With a little bit of luck here, we're going to be in a situation where we can buy back stock on weakness, which is what we have suggested we would like to do with some of the excess cash we're generating. And we're hoping that we'll be in a position to do that beginning in the March quarter. In the meantime, since we were not able to do that, you can see that we used some of the excess cash flow to buy back our stock. We continue to improve our balance sheet and we're going to continue to do that over the next year. With that, let me talk to you about the risks. There are real risks of operating this business, which includes the macroeconomics or technology slow down among other things. Please pay particular attention to this slide in light of current market conditions, and that is Slide 14. I didn't mention that. As the operator begins to poll for questions, I want to mention we'll be hosting our fall investor and analyst meeting in New York City on November 8. Additional details on the meeting will be forthcoming. With that, let me turn the conference call over to the operator for questions. Please limit yourself to one question and one follow-up. Thank you.