Mike McNamara, Chief Executive Officer Tom Smach, Chief Financial Officer

Alex Lanton, Engel Snyder Jim Siva, Citigroup Steven Fox, Merrill Lynch Bernie Mann, Morgan Stanley Kevin Castle, Bear Stearns Lou Nesocia, Cohen Michael Walker, Credit Suisse Matt Sharon, Thomas Weisel Partners Daniel Anderson, Pilot Advisors

Good afternoon and welcome to the Flextronics 4th Quarter Earnings Conference Call. All lines will be on listen only until the question and answer session of today’s conference. To ask a question please press *1; you will be prompted to record your name. Today’s call is being recorded, if you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. Mike McNamara, Chief Executive Officer. Thank you, Sir. You may begin.

Mike McNamara, Chief Executive Officer: Good afternoon ladies and gentlemen. Thank you for joining the conference call to discuss the results of Flextronics 4th quarter and fiscal year-ended March 31, 2006. To help communicate the data in this call, you can also view our presentation on the internet. Go to the investors section of our website and select calls and presentations. You will need to click through the slides so we will give you the slide number where we are referring to. On the call with me today is our Chief Financial Officer, Tom Smach. I will turn the first part of the call over to Tom to go through the financial portion of our prepared remarks. I will them provide some commentary along with our guidance for the next quarter and then open it up for questions. Go ahead Tom. Tom Smach, Chief Financial Officer: Thanks, Mike 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 prospective divestiture of our software development and solutions business and the expected gain and returns from the divestiture; the potential growth opportunities in our core EMS business; the success of our market-segment approach; the Nortel Agreement; revenue and margin growth; the success of long-term initiatives; our investments in component, design and ODM capabilities and in our manufacturing facilities; new customer opportunities; profitability; and anticipated use of available cash. These statements are subject to attendant risks that can cause actual results to differ materially. Information about these risks is noted in the earnings press release, on slide 20 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 in our other SEC filings. These forward-looking statements are based on our current expectations and we assume no obligation to update these forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements. In addition, throughout this conference call we will use non-GAAP financial measures. Please refer to the schedules to the earnings press release, slides 6, 7, and 8 of this slide presentation and the GAAP vs. Non-GAAP Reconciliation in the Investors section of our website, which contain the reconciliation to the most directly comparable GAAP measures. Slide 3 – As previously announced, we have entered into a definitive agreement to sell our software development solutions business to KKR. In addition, we successfully divested our network services in its semiconductor operations earlier in the fiscal year. Because we retained ownership interest greater than 20% in the network services business, we used the equity method of accounting for this investment; and therefore, cannot report this as a discontinued operation under GAAP. However, the software and semiconductor divestitures meet the reporting requirements for discontinued operations under GAAP because we are retaining a less than a 20% ownership interest in these businesses. We will use the cost method of accounting for the software investment and we have no continuing ownership interest in the semiconductor business. Therefore, under GAAP, our discontinued operations include software and semiconductor but not network services. Revenue in the March 2006 quarter for the core EMS business which excludes software, semiconductor, and network services was $3.5 billion which is an increase of $198 million or 6% from the year before. In addition to the $3.5 billion dollars of core EMS revenue, $66 million of software revenue has been classified as discontinued operations in the March 2006 quarter. Therefore, non-GAAP revenue which includes continued and discontinued operations totals $3.6 billion dollars which is the mid-point of our previously provided guidance. Slide 4 – During the quarter, Asia decreased on a sequential basis to 56% of total revenue; Americas increased to 24%; and Europe remained at 20%. With regard to market segments, communications infrastructure increased sequentially from20% of revenue to 23% in the March 2006 quarter. As expected, we saw a sequential decrease in the computers and office automation segment from 24% of revenue to 22% in the March 2006 quarter primarily as a result of the normal seasonal trend in our printer business. Revenue from hand held devices decreased sequentially from 30% of revenue to 26% in the March 2006 quarter as a result of normal seasonality. IC infrastructure increased sequentially from 6% of revenue to 7% in the March 2006 quarter. Industrial, medical, automotive, and other, increased sequentially from 10% of revenue to 12% in the March 2006 quarter while the consumer segment remained at 10%. Sony Erickson, HP, and Nortel all individually exceeded 10% of total revenues in the March 2006 quarter. Our top 10 customers accounted for approximately 61% of revenue in the quarter. Slide 5 – On a sequential basis, gross margin in our core EMS business increased 30 basis points to 6% in the March 2006 quarter. On a year-over-year basis, operating profit for the core EMS business increased $4 million or 4% to $104 million in the March 2006 quarter. Slide 6 – Excluding amortization and restructuring charges, net income amount of $98 million in the March 2006 quarter which represent an increase of 3% over the year of 2004. Excluding these same charges, net income per diluted share amounted for $0.16 in both the March 2006 and 2005 quarters. Slide 7 – During the March 2006 quarter, after tax amortization amounted to $7 million for continuing operations and $4 million for discontinued operations. After tax restructuring charges amounted to $45 million. As a result, GAAP net income per diluted share was $0.07 in the March 2006 quarter. Slide 8 – Return on intangible capital improved to 29.7% in the March 2006 quarter from 24.9% in the year ago quarter while return on invested capital which includes goodwill and intangibles has improved to 9.6% from 8.5% in the year ago quarter. Slide 9 – We ended the quarter with $1 billion dollars in cash and certificates of deposit. Including our under arm $1.3 billion with (inaudible) total liquidity was $2.3 billion dollars. Net debt is only $596 million at the end of March 2006 and has been reduced by $270 million during the last 12-months. Our debt to total capital ratio has been reduced from 25% at the end of March, 2005 to 23% at the end of March 2006. Slide 10 – Cash conversion cycle came in at an industry leading 10-days vs. 15-days in the year ago quarter. Slide 11 – Depreciation and amortization amounted to $327 million and net capital expenditures were $251 million in the fiscal year. Cash flow from operations during the year generated $591 million. This includes over $124 million of cash payment associated with our restructuring activities over the past 12-months. Cash flow from operations less capital expenditures generated $340 million of free cash flow during the year. During fiscal 2006 we invested $649 million in acquisition related activity which includes payments to Nortel of $270 million. These divestitures of our network services and semiconductor businesses generated $519 million of cash during the year. Slide 12 – As previously announced, we have entered into a definitive agreement to sell our software business to KKR and a transaction valued at approximately $900 million. Upon closing, Flextronics expects to receive in excess of $600 million in cash; and we will hold a $250 million dollar face note with a 10 ½% paid in time interest coupon which matures in 8-years. Flextronics will also repay in a 15% equity stake in the business. We expect this transaction to be slightly accretive to our fiscal 2007 GAAP earnings per diluted share. The pre-tax gain on the sale is expected to be approximately $175 million. This transaction is expected to close during the summer and we will update you on the specific impact on our balance sheet and income statement at that time. We are not proceeding with any other divestiture plans at this time although we will continue to review our options. Thank you very much ladies and gentlemen; I will now turn the call over to Mike McNamara. Mike McNamara, Chief Executive Officer: Thanks, Tom. Slide 13 – Before discussing guidance, I’d like to take a few minutes to reflect on the results of our fiscal ended March 31, 2006. In terms of revenue and operating profits, we did less than we expected in FY06 and I will tell you why and how we plan to reverse this trend in fiscal 2007 and beyond. But, first let me remind you of some of the positive highlights of fiscal 2006. In my opinion, we had a very smooth and successful CEO transition. As you know, on December 31 Michael Marks retired as our CEO and become a non-executive Chairman. We planned and executed this transition in a very collaborative manner and I would like to thank Michael for his leadership and support he has provided to not only me personally, but also to our customers, suppliers, and employees. When we first began planning this transition we performed a comprehensive review and evaluation of the strategic and financial contributions of each of our operations and related strategies to increase shareholder value. We’ve tried to focus our efforts and resource on the reacceleration of significant growth opportunities in our core EMS business; which includes design, (inaudible) integrated manufacturing, services, components, and logistics. As a result, during the year we divested our network services and semiconductor businesses and recently announced of definitive agreement to sell our software business. By monetizing these non-core assets and substantial gains or procuring values, Flextronics will have generated cash proceeds in excess of $1.1 billion dollars assuming the software transaction closes as expected this summer. Other substantial improvements to our balance sheet from these divestitures, assuming the software sale closes, includes approximately $135 million dollar reduction of deferred tax assets and approximately a $1 million dollar reduction in goodwill and intangibles which significantly increases the company’s tangible equity; and therefore, enhances our financial position. In addition, we will have retained ownership interest in both software and network services business which should have provided additional (inaudible) cash and potential future upside when monetized. To sharpen our focus on the rapid increase in growth we expect in our core EMS business, we have organized our company’s resources around several focused market segments which is designed to bring more value and innovation to our customers, improve our competitiveness, and increase our market share. As a result, senior executives have been added from the outside or promoted internally to lead into the following seven market segments: computing, mobile, consumer digital, industrial semiconductor and (inaudible) goods, automotive, marine, and aerospace, infrastructure, and medical. Beginning in the 1st quarter of fiscal 2007, we will begin reporting our revenue customers much earlier these new segment categories and discontinue the revenues segments reported on Slide 4. Fiscal 2006 was a very strong year in terms of incremental business wins from both new and existing customers. I think you should begin seeing this, our new revenue growth rates, in the second half of calendar 2006 as there were revenue offsets we had to work through in our most recent fiscal year. Such offsets include such things as the Nortel transition delays, Semans and Alcatel, divesting their cell phone product lines and new product ramps that commonly ramp up slower then expected. In addition, because we are engaging customers much earlier in the new products and design and development process, ramp up to the next generation volume production takes much longer. At the start of the year, we originally thought that the Nortel transition would be completed before the end of fiscal 2006. Well this program has been delayed several times since our discussions began 2 ½ years ago, we exceeded out $1 billion dollar Nortel revenue objective in fiscal 2006. There is still one more system house to be transferred that is still being worked on by both parties. As a result, we still have a little more then $200 million of remaining installment payments to be paid to Nortel (inaudible) during the rest of the current calendar year. Slide 14 – Total revenue from hand held devices declined from $4.9 billion in fiscal 2005 to $4.1 billion in fiscal 2006. This year-over-year revenue decline was primarily due to Semans and Alcatel by vesting their cell phone business to Asian suppliers with broad manufacturing in-house during our fiscal 2006. As a result, cell phone revenues from these two customers in fiscal 2005 were more than $1 billion dollars higher than in fiscal 2006. A new program win with Kyocera offset some but not all of the year-over-year revenue decline from Semans and Alcatel. However, total quarterly hand held revenue is more than 6% higher in March 2006 compared to March 2005 which is the first time in more than a year that quarterly hand held revenue grew on a year-over-year basis and we expect this trend to continue. In fact, we expect hand held revenue to grow more than 25% on a year-over-year basis to a record high level of FY07. I would now like to review some operating metrics at the end of fiscal 2006 that we think demonstrate that we are executing under controllable aspects of our business and I am on Slide 15. For return on invested tangible capital has continuously improved each year from 7.9% at the end of fiscal 2003 to 29.7% at the end of fiscal 2006. Return on investment capital has also improved each year from 4% at the end of fiscal 2003 to 9.6% at the end of fiscal 2007. Tax diversion cycles also continuously improve each year from the 36-days at the end of fiscal 2002 to 10-days at the end of fiscal 2006. We generate more than $1.1 billion of cash from operating activities and divestitures during fiscal 2006 and expect to generate another $600 million from the sale of software in fiscal 2007. Net debt which is the total debt left cash in CD’s has improved from $1.1 billion at the end of 2004 to $596 million at the end of fiscal 2006 while cash has increased from $424 million at the end of fiscal 2007 to $1 billion at the end of fiscal 2006. We believe we are executing very well on the controllable aspects of our business. We are extremely pleased with our working capital management to strengthen the balance sheet and cash flow generation. Slide 16 – In addition to (inaudible) class working capital management, we continue to improve success in efficiencies as well. Annual CapEx reached a high of $711 million in fiscal 2001. Our annual CapEx decreased to $251 million in fiscal 2006, but as you can see in the slide we are planning to invest healthily for the reacceleration of significant growth opportunities in our core EMS business. CapEx is almost $500 million more than depreciation in fiscal 2001 compared to the last 5-years in which CapEx was less than depreciation. We expect CapEx to be about $400 million and the depreciation to be about $325 million in FY07. We are also increasing the throughput on fixed asset as revenues continue to grow and fixed asset base continues to decrease. The fixed asset to sales ratio was 16% at the end of fiscal 2002 and has since decreased to 10% at the end of fiscal 2006; we expect this trend to continue in FY07. Our major long term initiatives continue to work well and we continue to see customer (inaudible) and vertically integrated EMS services which incorporate design components, manufacturing, and logistics. We look to provide all of these activities from our industrial parts as a big competitive advantage. As a result, we are investing heavily direct capacity in China, India, Ukraine, Brazil, and Mexico. Our printer circuit operation continues to form very well. We are expanding our rigid circuit capacity in China with a new factory that we expect to come online in December 2006 quarter. The new flexible circuit factory in China should also begin volume productions in the September 2006 quarter. We are also expanding our existing HDI factory in China. Obviously, we are making significant investments in our future. We think these investments will not only help us meet our revenue growth rate expectations while yielding better profits and return for our shareholders, but will also improve our competitiveness and enhance our capabilities. Slide 17 – We continue making significant investments in our design and vertical integration capability. For example: as previously disclosed last quarter, we opened a engineering design center and have now increased our cell phone design engineering by over 300 engineers at this location. We have also acquired the WWL, a small but talent-rich Hong Kong and China based company engaged in the design, development, and manufacturer of a variety of digital products. We are also making organic investments in various technologies in our ODM and component businesses including camera modules to power supply and other technologies such as TV tuners. With regard to our ODM business, we now expect to more than triple our cell phone units, ship to 5 different customers in FY07 to approximately 17 million units up from last quarter’s estimates of 12 million units. (Inaudible) expand 14 different platforms with over 4,000 variants. In addition, we currently have 60 ODM phones in development which should generate significant unit volume growth in FY08. We are very pleased with our progress in this business unit. With regard to our camera module business, we finished the fiscal year with an estimated 15-18% market share which we believe puts us in the number one position. We have diversified our customer base substantially and expect significant revenue growth in FY07. As you can see from this slide, camera module profits in FY07 where adversely affected impacted by start up costs. We added two new camera module factories during FY07 and have increased our head count by almost 4,000 people. We experienced poor utilization rates and yields in the camera module factories as they ramped up from almost no revenue in FY05 to approximately $500 million in revenue in FY06. We expect to be able to absorb these start up costs and cross back over to profit building in FY07 with further margin upside in FY08. We believe we will build a critical mass in the camera module business in FY07 to be able to expand research and development activities in other various component technologies without adversely impacting future operating results. We strongly believe in our ability to create long term value from these types of investments. Because (inaudible) in more mature, we are able to better absorb start up cost and R&D investments from our factory expansions and are realizing strong profitability in this business unit. We expect to replicate this module and ODM camera modules and other component technologies. Longer term, we ultimately expect the rate of earnings growth in these businesses to exceed the individual revenue growth rates. Slide 18 – We will continue to provide guidance for only one quarter at a time for the June 2006 quarter we are currently expecting revenue from continuing operations which excludes the software business in the range of $3.7 billion to $3.9 billion. Assume a tax rate of 7-10% next year; we are currently expecting total net earning in the June quarter to be in the $0.16-0.17 per diluted share including this lift continued up range. Quarterly GAAP earnings per diluted share are expected to be lower than the guidance year-end by approximately $0.03 per diluted share reflecting quarterly intangible amortization expense and stock based compensation expense. We decided to divest certain non-core assets and more to a market segment approach. We anticipated that this strategy will allow us to achieve substantial growth in our core EMS business. As a result, the mix of our business is undergoing a change. We are seeing a significant amount of outsourcing opportunities in our core EMS business that are broadly distributed across most end markets. We are focused only on the significant growth opportunities that meet our financial requirements. Many of these opportunities are high volume programs that typically involve lower margins initially but the potential for margin and a half in overtime as we increase our vertical integration. We remain optimistic that a number of these opportunities will result in additional revenue in the second half of calendar 2006 and beyond. As a result, we will be ramping up our investment and start up costs for such things as head count, equipment, and factory expansions that are required for this anticipated growth. Slide 19 – We also recently announced that our Board of Directors is authorized to repurchase of up to $250 million of our outstanding ordinary shares. There are a number of attractive opportunities to deploy our cash in a manner which maximizes earnings and long term shareholder returns. We expect to invest in working capital to support the rapid increase in growth we expect in our core EMS business. Other attractive opportunities include paying down debt or repurchasing stock or a combination of both. This slide demonstrates in an overly simplistic manner where we will invest in profitable revenue organic growth first as compared to buying our shares back. This slide shows that a $250 stock buyback would be about one (inaudible) accretive to FY07 consensus estimates vs. investing the $250 million in revenue that we can earn a 15% return on invested capital which would generate approximately $0.04 of accretion to FY07 consensus estimates. Of course, we could be both if liquidity allows. Slide 20 – There are real risks in operating in this business which includes the macro economics or technology slow down among other things. Please pay particular attention to this slide and in light of the current market conditions. I will now turn the conference call over to the operator for questions. Please limit yourself to one question and follow-up.

Thank you we will now begin the question and answer session. If you would like to ask a question, please press *1 – you will then be prompted to record your name, to withdraw your request press *2. One moment please. Our first question comes from Alex Lanton, Engel Snyder

Good afternoon, before I ask a question guys – we didn’t get the Press Release until about a quarter after 4. I don’t want the problem was but it doesn’t give you a lot of time to crunch the numbers before the call starts. The other thing (inaudible) either getting it our earlier perhaps or maybe having the call at 5:00 so that we can have a little bit more time to prepare. Now, my question is first on the segment, the first segment on the slide industrial, automotive, medical and other was 12% of sales vs. 13% last year. That’s a sector that have been doing well, there’s been a lot of new business written in the past year so I am wondering why your sales in that sector were down it was down about 8% if you use those percentages. Tom Smach, Chief Financial Officer: You know, Alex, we haven’t spent much time analyzing that. We’ve been in a market segment transition for the last 6-months where we re-categorized these different segments and the different business units within these segments, and to be honest with you we’ve been so focused that looking at that data in that way I can’t give you an exact answer of why the industrial, medical, and automotive was down. I mean really each of those could be pretty robust segments for us going forward. In fact, we’ve actually taken industrial, medical, and other, and automotive, and actually broken those into 3 different business segments going forward because we think that the growth that we are seeing and maybe to some of our (inaudible) wins haven’t come through and shown yet. But, we actually think they each justify their own segment out of the 7 segments, so we are actually quite (inaudible) in the future and I guess I can’t exactly respond to that because I have looked at so much of the data differences now.

What other segments you mentioned you went over very quickly, too? Tom Smach, Chief Financial Officer: Alex, before Mike does that, I’d just like to add, we do have one customer that provides certain automotive parts that had a financial situation in terms of filing bankruptcy and I will say that we experienced a revenue decline from this very large customer in that category. But, I am not going to say who it is. There was one customer that was down substantially in the last couple of quarters. Alex, we are going to take a look into that and we’ll send you an e-mail on that.

What are those segments again? Tom Smach, Chief Financial Officer: Computing, mobile, consumer digital – which we consider things like printer imaging and digital cameras and those types of consumer products; 4th category industrial, semiconductor and light good; 5th category automotive, marine, and aerospace; 6th infrastructure; and 7 medical. So what we said in the call as well is that going forward we are going to be able to start reporting in those categories, so you will see the revenue in the breakdown in the pie charts that goes around those segments and I can show you we’ll be real (inaudible) as to when those are going up and going down and what the reasons are as we have real good targets and goals and expectations around each one of them now – but, they are a little bit different of a slice.

Second question when you divested the software business on April 16, you twice referred to accelerating growth, reacceleration of the growth rate and increased growth rate and you intend to invest some of those proceed in that and you’ve talked about that, but you haven’t done a lot to quantify that. There were a number of new wins announced about a year ago by the company and you went over those in some detail and including – it was $2 billion from Nortel we already had and then there was another $3 billion you mentioned a year ago in Kyocera and a couple of $2 billion dollar pieces that would be ramping over the next 2-years and you gave the time frames, but since then you really haven’t had much to go on. Could you give us an update of that and of what you (inaudible) a year ago in terms of ramp ups and also what’s been added to it since then. Having one quarter of guidance doesn’t give anyone very much visibility. Tom Smach, Chief Financial Officer: We just said we are a little uncomfortable dividing more than one quarter of guidance. We have a little bit of variability in our market and we have chosen that we are not going to be promotional about our future and we are going to let the results speak for themselves. This next quarter, we are going to seem some increase in revenue levels somewhere between 37 and 39 as they way it looks now. And then, kind of what we’ve always said in the past as the second half of this year we expect the top line to grow pretty nicely. In fact, probably 3-months ago we were thinking that we were going to spend about $250 million in capital and we now expect to be spending about $400 million in FY07.

Is that capital expenditures or does that include working capital? Tom Smach, Chief Financial Officer: No, that is just capital expenditures, no working capital increase. We anticipate that this growth in the second half we – when it comes it really comes – and we don’t want to be promotional like I said. But, we are anticipating that that second half will happen and I think you’ll see some of the revenue substantially increasing in September and December and I think it will carry on through to the March quarter. I think you will see that but we haven’t quantified it – a lot of the September quarter business is still a little bit of a show me thing and we kind of have to wait on that consumer market cycle to kick in September, but I can say we are pretty confident in it to the point of putting up quite a bit of square footage and purchasing quite a bit of capital to support it.

That is sequential growth you are talking about? Tom Smach, Chief Financial Officer: Sequential, year-on-year, kind of everything.

But it is sequential from the 37 to 39. Tom Smach, Chief Financial Officer: Yes, definitely.

Our next question comes from Jim Siva, Citigroup

I have a corporation question and a quick follow-up. On your guidance of 3.7 to 3.9 as well as EPS, I want to be clear; does that indeed exclude any software revenues in earnings? Tom Smach, Chief Financial Officer: Jim, it excludes the revenues from software. And that is going to be somewhere in the range of $70 million-ish next quarter. But, it does include the earnings from the software because our total earnings include discontinued and continued operations. It will be discontinued operation will contribute about a penny and a half of the total earnings guidance. But, it is included, obviously that is included in total net income.

And then second, could you give us an update – last quarter the New York Health Calgary facility, I believe you said, was pushed out from March to the June quarter. Can you give us an update on the timing of that and how they are going? Tom Smach, Chief Financial Officer: Yes, based on the many delays and changes we’ve had over the last 2-years, I think you guys have seen those and I think we disappointed often by thinking that revenue was coming at a certain time frame and it was always slipped, it always seemed to slipped, I don’t know how many times we slipped the system house but – it is probably 5 or 6 I would think. So, for us to guarantee that they system house is going to close when it closes, you know we just cannot do that. There has always been so much uncertainty in this program that we cannot guarantee what it will or won’t do. I think what we need to do is just looking towards it and which we are and we’ll let you know when it closes.

Our next question comes from Steven Fox, Merrill Lynch

Hi and good afternoon. First another clarification, Tom – on Slide 4 the percentages, those are based on sales including discontinued sales? Tom Smach, Chief Financial Officer: Yes, Steven that is total sales.

And then Mike, just on the comment about 25% revenue growth in handsets – can you break down the proportion coming from having Kyocera’s full year and your new ODM wins and whatever else the other proportion is from? Mike McNamara, Chief Executive Officer: Yes, I think it’s probably mostly new wins. There is probably a small amount coming from Kyocera. Though Kyocera were transitioned over last year and we were probably fully running in July or so, maybe August we were at full runway with Kyocera. So, we did get about 9-months of that revenue in and we ended up getting kind of the big block of it which goes from August to December. So, I think Kyocera may have an extra $150 million this year relative to last year and then the rest is all of the customers. I would say it’s substantially driven by either further growth from the existing customers or just new customers.

And that is largely ODM related wins in terms or new wins or is it split evenly, how would you describe that? Mike McNamara, Chief Executive Officer: Well the ODM business is substantially out. Last year we did probably 4-5 million units and this year we expect, as I mentioned, like 17. There is going to be a portion of that. Sometime our own ODM business, even cannibalize some of the existing business so the programs we are doing ODM on are the next generation programs which may be in the past may have been designed by one of our customers where we are designing it this time. Sometimes that is incremental business in terms of revenue, sometimes it is not. But, we are actually experiencing, I would say, pretty much across the board expansion of each of our existing customers and I think we’ve probably added 4 or 5 customers as well.

And then Tom real quick, option expense in dollars for the quarter coming up? Tom Smach, Chief Financial Officer: It is going to be about $8 million for the quarter.

Our next question comes from Bernie Mann, Morgan Stanley

Hi good evening. Question for you on the component side of the business – it looks like from the one chart knowing what the operating income was for the first 3 quarters of fiscal 2006 that the losses in fiscal 2007 actually accelerated and then you said that you expect to get back to profitability there in fiscal 2007. Is that going to be more of the second half of the year or is it going to be more in the June time frame – can you provide some contacts around that? Tom Smach, Chief Financial Officer: Yes, you know when does it occur it is probably really, you know that appreciation in terms of (inaudible) it is probably occurring sometime as we speak now I would say. I would say it is already making the transition and the cut over – it is a good point, last year we were hoping to have a lot these component businesses to actually increase margins as opposed to decrease margins. Last year they decreased margins as you can see from that chart. We had such acceleration in the revenue from year-on-year that we just had to absorb this. We added many customers and we had an enormous amount of design wins, each one of these camera modules you have to win one by one. It was just too much for us to handle adding the factor that and the people (inaudible) so this year we expect it to be at EMS margins as you can see and then next year we expect it to be not only contributing but we expect it to be solid enough and have a high enough revenue and profit base that is can actually fund the R&D activities of other component business without adversely affecting our results.

But, I guess this should clarify it – so we are in losses in the March quarter, where they around $20 million there? And do you think you could break even in the first half of the calendar year? Tom Smach, Chief Financial Officer Yes, I don’t know exactly how much we lost. Again you are talking about the current component business or all the other components in the ODM businesses?

The components business, how you should break that out. Tom Smach, Chief Financial Officer: Yes, just the components business is only losing probably about $4-5 million per quarter. I think that transitions easily in September, maybe even in the June quarter.

Our next question comes from Kevin Castle, Bear Stearns

Hi good afternoon. Mike, your slide with Nortel that mentioned that you guys exceeded the $1 billion dollar expectation for the fiscal year, is this contract still on target for $2 billion dollar overall (inaudible)? Mike McNamara, Chief Executive Officer: Yes, we actually anticipated about at about a billion this last year and we ended up with about $1.25 billion, maybe we were a little bit conservative in terms with our forecasting. You know this year that rate has grown so we are actually at a run rate that is higher than that $1.25 million or billion right now and to the extent of the system houses close on schedule then I would say we’ll still be on track for that $2 billion dollar number. But again, what I said before, you just never know because there have just been so many delays and changes that we have just don’t want to warrant that is a done deal in anyway.

Part of the deal was clearly you guys sourcing components for both for the circuit boards and then closures and I think you guys were able to do some of that early on and then maybe some of the latest Calgary’s been thinking more than expect time to close. After Calgary closes, first can you actually detail what you expect Calgary to add either quarterly run rate once closed or on an annual run rate and then what do you expect in terms of additional components to still flow into Flextronics from other potential suppliers? Mike McNamara, Chief Executive Officer: Yes, this is a tough question. We probably have Nortel in 10 different countries and have pretty complex supply chain as you can imagine. It is hard to boil that down to one answer. The Calgary facility itself is expected to add around close to $800 million of revenue on an annual basis and there are a variety components that we participate in whether it be the mechanicals, or the assembly, or the boards, or whatever, and it is hard to say exactly what adds or doesn’t add. From our standpoint it doesn’t add much revenue. Alternatively it is meant to, as it is goes into these systems houses, it provides some incremental margin gains. We don’t know exactly what that number looks like and the timing as what time it contienues to change and tweaks along with. Whatever market conditions that Nortel has is in the status of their waters and whether they are ramping or not ramping, etc. so. In terms of saying, we are on track at this point. Assuming the system house closes to be about $2 billion dollars of revenue.

And just so I clarify it, I think that what you are saying then is, Calgary is roughly $800 million annually. Right now I suppose those components will be falling into the systems house regardless of how supplies them, but once you are maybe able to get yourself either approved on the ADL or what have you then maybe the mix actually become richer over time as Flextronics might supply those verticals. Mike McNamara, Chief Executive Officer: Exactly, and some of the verticals even today we are supplying to Calgary already. Even above the $1.25, maybe we are at a $1.5 billion run rate right now, so the (inaudible) revenue really would only be 500 if you look at it from that standpoint.

And then originally when this deal was announced back in 2004, I thought you guys said that roughly half of the overall value of the deal you expected to be potential components content that you could supply, does that still hold true and if so, what do you think it is just to add to the run rates you have. Mike McNamara, Chief Executive Officer: Yes, I think the original expectation was around a $1 billion, I think that is right and I think we anticipated that it would take 3-years to get there when we first started. Now granted there were a lot of delays through that period. But I suspect right now we are probably way we are probably half that buy in that are in verticals at this point.

What about $500 million? Mike McNamara, Chief Executive Officer: Yes…

And then, last thing – maybe this is a question for Tom, is any part of Calgary currently factored into your top line guidance for the June quarter? In terms of that closing, anything at all Tom Smach, Chief Financial Officer: Yes, I think our range is sufficient to cover it whether it closes or not, Kevin. I am comfortable with the range with or without it.

Ok – and I guess the very last thing, is your handsets seem to be down maybe a little bit more than expected in the quarter, obviously you see a lot of seasonality but a lot of people out there are actually seeing quite a bit less seasonality in handsets in this March quarter. Was there a particular reason, maybe some end of lights on other platforms or customers moving around or anything that might have contributed to that? Tom Smach, Chief Financial Officer: Not really, it might be the product cycle or the particular products that we are doing; some products are very, very high. Maybe we don’t have the same mix of those with others. But, we are way bullish about our cell phone business. I mean, very, very bullish. We’ve added a number of customers early and wins are turning around our revenues should go up at least a $1 billion dollars this year over last year in terms of what we already see. It might be a little bit of a dip but fundamentally the diversity and the number of wins, the types of products we are building are all very positive for this year relative to last year. I think it will come back just fine.

Our next question comes from Lou Nesocia, Cohen

Mike, it looks like you obviously are doing a lot of different things over there at FLEX, maybe you can just sum up any of the other strategy changes that you are in the midst of. Obviously going to these different sectors that you are tacking the market and I guess some of the sales obviously, I was just wondering if that was actually at your trying to get back to running core business. And then maybe if you could also comment on another Press Release that most likely, nothing more, but obviously (inaudible) who owns the company just what the thoughts are for it. Mike McNamara, Chief Executive Officer: We are getting a lot of traction for those market segments and what we’ve done with these market segments is that we integrated them into almost entire business units which really have the design all the way through to the potentially operational control. It allows them an opportunity to focus over the end products, etc. on their core business within that segment. So, we are carrying on with that strategy, design is an important part of our strategy. We continue to do what is valuable in terms of adding value to the customer but also as well to be able to design our supply chain and also the design in our vertical. So that strategy has not changed it is just that we integrated all those functions into each of the business units where before we ran them in a functional way. I think that is real positive, we continue to grow component technologies. The component technologies that we believe can have a tremendous amount of value over time in terms of their own market value to the extent we (inaudible) to monetize it and at the same time we can use them as vertical integrations into any one of these market segments. We will continue to do that and identify and develop components and bring them to the business to the extent that they that we feel we can create value for the customer and be able to get a competitive advantage in the marketplace. I think that strategy will hold the mesh that is certainly a cornerstone of going forward and the market strategies allows us a lot more focus, a lot more know how, a lot more knowledgeable investment is about how we go at it and certainly and hopefully the guys who are running these businesses can attack the market for a lot more intensity. On the multech front, multech is certainly a crown jewel today as it relates to operating earnings. It is contained to grow at the top line very, very effectively; I can see it going to the bottom line very effectively. We are adding a lot of capacity so we do not anticipate that to change in the near horizon so we continue to see very nice organized growth and very nice profit growth. We also find that to be quite synergistic with the rest of our business and one of the things that Tom said earlier we’re not planning on breaking this out going forward because our thinking is that we’ll probably just keep this and (inaudible) it to our existing business like it is today. We find a lot of synergy with it and as a result of these findings, as long as we can find synergy we’ll probably keep them internally. And alternatively, it’s the market capital for the circuit boards to go up to a bout 30 we’ll probably be a seller.

And one quick follow-up on a different topic, Nortel is going through a pretty big evaluation internally. Can you comment on any initial reads you might be getting on that just how you feel about strategy of your customers going forward? Mike McNamara, Chief Executive Officer: Yes, you know Nortel is going through multiple management changes and we’d be on our (inaudible) in trying to get those deals done and I think I said once before there is not ability from the analysts for others but it is a miracle that this thing is still moving right along here. But, Nortel has a new management team now. They have a new supply chain strategy and they are for sure out testing the marketplace in terms of competitiveness and pricing and that sort of thing. You know alternatively we have a contract and to the extent something changes away from our contract or anything, we’ll certainly let you know but we have certain contractual provisions about what is allowed and what is not allowable. We do not have rights to all the businesses as you probably know, but certain pieces of it and certain amounts. Yes, without question, we are aware that the new management team is out trying to sort out of its’ own supply chain strategy and doing a lot of testing in the marketplace.

And how are you feeling so far with how it is going with respect to just you all? Mike McNamara, Chief Executive Officer: That is a point that I don’t think any real changes. I think we have to wait and see what that looks like. Again, sometimes we have the contract requires different things. Sometimes we have competitiveness clauses, sometimes we have they have rights to go and take the business, sometimes you know we’ve had this contract for 2 ½ years maybe they’ll cut the old and move one thing and not another those are all that we’ll just continue to work with Nortel as the best we can to be a good customer.

Our next question comes from Michael Walker, Credit Suisse

Thanks, first a question on the model – it looks like in terms of your guidance discontinuing operations for June that you are guiding for margins to be up pretty substantially about 30 basis points sequentially. What is driving that? Tom Smach, Chief Financial Officer: Well, Mike, I think we have a range of expectations out there so I am not sure exactly what your particular assumptions are on revenues or profits but, I think it just depends on if you are using the low point of revenues and the high point of earnings or vice versa. So, I think there is a range of potential outcomes of margins and we can sensitize it using revenues on the high end and profits on the low end and vice versa to get the range of margin expectations.

What are the key influencers or drivers of margins in the June quarter? Mike McNamara, Chief Executive Officer: That is a broad question. You know, we have a lot of different businesses but, I think one of the key drivers – camera modules are still our lead components, business is still not contributing. But, in the transition period this quarter where it probably will. The ADM businesses are still a drain in us in that mostly $17 million phones will be back unloaded not surprisingly they’ll all be out to hit the September season or predominately out to hit the September season. How much growth, you know we have a lot of capital coming in which we even begin to anticipate 3-months ago so we are planning on growth in the business. Quite a bit, we are getting a lot of traction with our strategy and depending on how much that grows it will depend on whether or not we are going to have an impact of start up costs or not. If it grows nicely and steadily, the start up costs will be all alternatively if we have some accelerated growth we could easily end up adding a lot of people and a lot of facilities and a lot of equipment and be something in a little bit of start up costs which will put a near turn download pressure on margins. I think it all depends on the bundle and there are a lot of different levers that we are managing. We do have a couple of new facilities coming online with multech which will be a little bit under utilized right up front because they come on line just over the next couple of quarters here. Very confident being able to fill those up pretty quickly, very, very confident – a near turn might be a little bit under utilized this year so I think there is a lot of investment and I think it is almost a little bit of a transition as we are now focusing on our core enough the opportunities that we are seeing are really strong.

Just as a second question, in terms of you expect to use your proceeds from the ventures in capital that you have – you had a slide that said if you can find opportunities of return 15% that would be better than doing a stock buyback which is certainly true – but just noticing that on a continuing operations basis, your operating margins are 2.9% they haven’t been there since the end part of 2004, so you’ve struggled to come up with those kinds of opportunities in the last 2-years. Do you expect to be still heavily engaged from an inquisitive stand point on the design/non-core assembly side or are you really going to dial down to focus on assembly and components? Mike McNamara, Chief Executive Officer: We are going to focus on creating dominant market positions in each one of those segments. And, each one of those different segments are going to have a little bit of different answer about how it creates a dominant position. But, in some cases it is going to need to be more design intensive, in other cases it may need more verticals to support it. So, I think the answers are a little bit different depending on where you go, but we will I think to talk about it in a holistic view, we’ll continue to do acquisitions but I think they’ll be substantially less than what we have done in the past. I think our appetite and a lot of our existing infrastructure is actually getting more robust – so I think the amount of things that we need to acquire are less and less as we go through the years. So, I think to the extent that we do sign an acquisition that allows us to win enough segments to dominate it we will for sure do an acquisition just as we did with the WWL acquisition last quarter – the consumer marketplace we just didn’t have much in the way of digital cameras and audio video devices and those sorts of things and this allows us a full platform of ODM products and ODM design capability to take advantage of that. I would expect us to transition into very strong growth and those kinds of products in the EMS way. So I think each one is a different answer but we will continue to look at acquisitions but I think we will be less acquisition active and I think we’ll be more focused on those acquisitions and I think we are going to end up having a tremendous amount of organic growth opportunities and complimented by acquisitions but probably to a lesser extent. Tom Smach, Chief Financial Officer: Mike, just another thing I’d like to add on the operating margins this quarter. As you know, in the March quarter seasonality drives your revenue base down. In fact, seasonally we are down almost $600 million so that drives our SG&A percentage up as a percent of total sales. So sequentially our gross margin actually improved by 30 basis points as $2 million remained about flat but SG&A is a percentage of sales actually increased by 40 basis points. So, I think as we move away from the seasonal down quarter in March, put that revenue line back up to the more normal or growing level you’ll see that SG&A percent lever breakdown to getting close to 2 1/2 % as we move through the year.

Our next question comes from Matt Sharon, Thomas Weisel Partners

Yes, thanks – I’d just like to and I am sorry about this, but just go back to Nortel again. It sounds like your guidance doesn’t really reflect any of the incremental business from Calgary, does that imply then that there is a chance that it may not happen at all this quarter or do you have any visibility into that? Tom Smach, Chief Financial Officer: Matt, as you know, we take a broad range of potential expectations across the very large revenue and customer base. So, we try to roll off some sensitivity analysis in terms of what a likely outcome is in the aggregate when we put revenue values out there. So, I don’t think you can ask us to respond what a particular customer is doing in the aggregate revenue range that we have out there. I just don’t – it really just doesn’t work that way.

Well, I bring it up only because it has been an issue quarter after quarter and this is the first time where you are saying we are not going to give any indications until it is done whereas previous quarters you’ve talked about it, I guess that is the concern. Tom Smach, Chief Financial Officer: I don’t think that is it. We are trying to get the, it seems like every time we’ve adjusted Nortel or every time we’ve said Nortel we’ve come back to you and said our revenues are going to be down and our (inaudible) is going to be down because of Nortel. And what we are trying to do is to build a range so whether it comes in or it doesn’t come in we have a range sorted out that we have confidence in that we can deliver some predictability. I mean, Nortel is not the only swing in this whole set of revenue. There is a lot of revenue there for next quarter, $37 billion to $39 billion. You know, Nortel is going to swing in $150 million, I mean there is a lot of other pieces out there that have a lot of variables to them that can make up for it as well. So we just try to provide a range that we have flexibility that continue to hit it independent of what happens with Nortel.

So you are talking about an incremental $200-400 million or so in revenue, could you give us an idea then of where you would expect sequential growth obviously there is some seasonality coming back in handsets but are there other areas where you are looking for growth quarter-over quarter? Tom Smach, Chief Financial Officer: Yes, I think we will start seeing, independent of Nortel, let’s set that on the side, for sure handsets will be up. For sure printing and imaging will be up slightly, I think the industrial, medical, automotive block will be up. I would say that almost every segment will be up, maybe IC infrastructure will be kind of flattish but that is a very small segment, Matt, I think everything else will be up sequentially.

Ok and just on the ODM it sounds like the unit ramp is going nicely, can you give us an idea of once you ramp $17 million does that profitable – what gets you, what unit number gets you to the mid-single operating margin that you have been targeting longer term. Tom Smach, Chief Financial Officer: You know that probably gets us pretty close to profitability I would say, our target profitability. But again, it needs to ramp and it hasn’t yet and it is pretty much backend loaded but we are chasing a lot, as I said, the (inaudible) kind of release cycle that a lot of these products are on. And, the other thing when we say $17 million just to put a word of caution in there; that is what we see today that doesn’t mean we can’t book more keep in mind. But it also is no guarantee that these units will sell through like our customer thinks they will. We do not have control of that piece; we just listen to what they tell us. So, it could be up or down from there. The important part is we ended up getting a broad base of design wins, we have them rampant and we have good strong forecasts that will start hitting in September and December – you’ll see them then. And we think we have a pipeline of either of one or just about one or kind of getting the wink from the customer that completely absorbs our R&D expenses and stuff so hopefully soon enough here we won’t have to be complaining about that at all. But we are today still. We have a nice pipeline and we are looking really strong and that by the way in FY07 pipeline that I talked about at $17 a lot of that has carryover in FY08 and there is also design wins for the FY08 period that we are working on to date so it looks real good to us so we are very pleased with our ODM. Why don’t we take one more question.

Our next question comes from Daniel Anderson, Pilot Advisors

Hi guys, how are you doing? On this handset business the 17 million, obviously we can only guess as to how much they’ll actually sell into the market or whatever but we did $4 million or so in the last year and we look at it and say ok can we say I can do half of what you guys think you can do at 17 – do we at least get to at least break even on this business? Mike McNamara, Chief Executive Officer: Probably, not… Daniel Anderson, Pilot Advisors: So, to break even you think is around the 12 million units – I mean there’s got to be… Mike McNamara, Chief Executive Officer: Yes, maybe 12-15, you know we think for sure we’ll break even next year for the entire year. I mean that is just supporting whether or not we are going to be breaking even for September/December kind of period so next year we anticipate definitely breaking even. So I think this year will be a transition year for us as we go into that – basically what we can say about $8 million pretty we are being really, really conservative and you never know what will happen. But, then again it is too late and we are still selling. There is still opportunity here to actually re-grow that number as well so; we need both sides of that number.

What exactly should I think about sort of the loss from this ODM, cell phone, handset business whatever you want to call it for fiscal 2006? What was the burn on it? Mike McNamara, Chief Executive Officer: Mostly an investment, we ended up (inaudible) our R&D costs for out of control last year. We took a lot of our operations in Europe where there was a tremendous amount of design being done and we moved a lot of that competence into China so we probably ramped down Europe last year by probably 150-200 people, and we ramped up leaving China with about 300 people and so we really operationally we went into a real transition year. This year we kind of got rid of that additional burn that occurs in Europe and now we just need to get the products by the Beijing design center sold in the market place.

So just to put a number on it, is it fair to say you lost at least $10 and $20 million on this business in fiscal 2006? Mike McNamara, Chief Executive Officer: Yes, that is correct.

So you can have it swing at least like that. Ok, and then on lastly on this Nortel – I understand what you said, Tom, it makes sense but if you knew for certain, and I think it is fair that I just clarify this, if you knew certainly without a doubt that Nortel is going to transfer on May 15 or whatever mid-May that would be roughly $100 million, I know this is not in the big scheme of things it just doesn’t matter, if you knew certainly that you were getting that $100 million in sales you would not adjust your revenues upward at least a little bit, wouldn’t you, on your guidance if you knew. Tom Smach, Chief Financial Officer: Well I wouldn’t, Dan. As you know you just have to have cushions and offsets and there are pushes and pulls through the whole customer base so, if it comes in and contributes to revenue at the level you are suggesting maybe it provides an offset or maybe it ends up being an upside. But, I think we are comfortable with the range and we think that is our best estimate that we can give you at this time.

And not to be a debt horse, which I am certainly doing, but if you look at this Nortel thing, there is a very important overhang here on your company and your growth, if you look at Nortel and your discussion with them and as close as you must be to some sort of idea of a day when it was supposed to transfer, is there anything different between these discussion and qualitatively they give you any sense of more confidence or less confidence or anything qualitatively? Tom Smach, Chief Financial Officer: I would just say qualitatively over the last 2+ years there have been continuous delays and we are just not going to give any guarantees and we’ll let you know exactly what happens when.

Ok fair enough and my last question and I know I was only supposed to ask two, but my last question is on the ramp up of all this stuff that is going on and the investments going into it – you have to assume a small amount of burn for the back half of fiscal 2007 on the new revenue. I think that is the only way to do it, right. You have to think about a little bit of burn from the new business and then huge incremental swing in fiscal 2008 is that the way you guys think about it? Tom Smach, Chief Financial Officer: That is exactly how we look at it. We look at it as if we have a good back half of the year here we’ll have some of these costs to bring it up and it usually takes time to guide in our verticals. We would anticipate it would all be in investment for next year at which point we should have quite a top line if we are right?

The street number that is out there right now – it’s has to be at least somewhere in the area of where you guys are thinking, is that true? Tom Smach, Chief Financial Officer: Well, Dan as you know we only guidance one quarter at a time so we’ll answer that question next call.

Alright, I gave it a shot. Thank you, guys.

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