Warren Ligan - Investor Relations Paul Read - Chief Financial Officer Mike McNamara - Chief Executive Officer

Matt Sheerin - Thomas Weisel Partners William Stein - Credit Suisse Jim Suva - Citigroup Alex Blanton - Ingalls & Snyder Joe Wittine - Longbow Research. Steven Fox - CLSA Louis Miscioscia - Brigantine Advisors Ryan Jones - RBC

Welcome to the Flextronics International first quarter fiscal year 2010 Earnings Call. (Operator Instructions). At this time for opening remarks and introductions, I would like to turn the call over to Mr. Warren Ligan, Flextronics' Senior Vice President and Investor Relations and Treasury. Sir, you may begin.

Welcome to Flextronics' conference call today to discuss the results of our fiscal 2010 first quarter ended July 3, 2009. On the call today is our Chief Executive Officer, Mike McNamara and our Chief Financial Officer, Paul Read. The presentation that corresponds to our comments today is posted on the investor section of our website under 'Calls and Presentations.' We will refer to each slide number, so you can click to the appropriate slide. On the call today, Paul will review our financial results, Mike will then comment on our quarterly performance, business highlights and outlook, key opportunities and guidance for the second quarter ending October 2nd, 2009. After Mike's presentation, we will take your questions. Please turn to slide two. This presentation contains forward-looking statements within the meaning of US Securities Laws, including statements related to the revenue and earnings guidance, our expectations about future operating margins, the expected charges and savings associated with our restructuring activities, and our expectations regarding end market demand for our products and our business in the current economic environment. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these statements, are based on our current expectations, and we assume no obligation to update them. Information about these risks is noted in the earnings press release on slide 16 of this presentation, and in the risk factors and MD&A sections of our latest Annual Report filed with the SEC, as well as an in our other SEC filings. Investors are cautioned not to place undue reliance on these forward-looking statements. Throughout this conference call we will reference both GAAP and non-GAAP financial measures. Please refer to the schedules to the earnings press release on slide six of the presentation and the GAAP versus non-GAAP reconciliation in the investor section of our website, which contain the reconciliation to the most directly comparable GAAP results. Now I'll turn the call over to Paul.

Thanks, Warren. Good afternoon, everyone. Please turn to slide three in the presentation. We're very pleased with our first quarter performance with both revenue and EPS coming in at the higher end of our guidance range. Our first quarter revenue amounted to $5.8 billion, an increase of $200 million or 4% sequentially. Adjusted earnings per diluted share was $0.08, which represented an increase of 167% sequentially from $0.03 in our March quarter. Adjusted operating profit of $90 million increased 78% sequentially and our adjusted operating margin expanded 70 basis points sequentially and to 1.6%. These improvements, while partly aided by the leverage created by the increased revenues, were driven primarily by the realization of cost savings from our announced restructuring activities and other focused actions to reduce discretionary spending. Interest and other expenses declined sequentially by approximately $18 million to $29 million, primarily driven by reduced interest expense resulting from further reductions in our borrowing levels, coupled with improved foreign exchange results. The tax benefit for the first quarter amounted to $1.8 million, which positively impacted our adjusted net income. This result was better than our forecasted effective rate range as a result of achieving favorable settlements in various tax jurisdictions. Finally, our adjusted net income for the first quarter was $63 million, increasing sequentially by 191% from $22 million in our fourth quarter Please turn to slide four. This slide displays each market segment's quarterly revenue and percent of trended revenue for the past five quarters. Revenue from the Infrastructure segment was $1.9 billion, which comprised 32% of total revenue. On a sequential basis, our Infrastructure business remained flat and showed signs of stabilization. We continued to be confident in our broad offering and ability to maintain and grow market share in this segment. Revenue from the Computing segment was $1.1 billion, which comprised 19% of total June quarterly revenue. On a sequential basis, we saw expansion of 11%, which reflective of the initial ramping of several of our previously announced notebook wins. Revenue from the Mobile segment was $1.2 billion, which comprised 21% of total revenue. On a sequential basis, we grew revenue 7%, as we continue our portfolio transitions with expansion of business with several new customers most notably RIM, which has secured a position as one of our top 10 customers. Revenue from our Consumer Digital segment was $646 million, which comprised 11% of total revenue and increased 16% sequentially, driven by successful expansion into new markets. Finally, our Industrial, Medical, Automotive and Other category comprised 17% of our first quarter revenue and decreased 7% sequentially. We have broadened the available market by expanding the product categories in this segment and we should see modest growth going forward. As we discussed last quarter, we have been encouraged by signs of stabilization in some geographic regions and markets we serve. This was further evidenced by some growth in the few of these segments and relative flat sales performance in other. While we anticipate challenging industry conditions to continue through fiscal year 2010, we remain optimistic about our ability to capture market growth opportunities, as we believe the company's cost structure and extensive diversification of service offerings are well aligned with customer requirements. Please turn to slide five. With revenue showing signs of stabilization and our restructuring activities in full gear, we are now starting to realize the resulting margin improvements. Sequential adjusted gross margin and adjusted operating margin expanded by 30 basis points and 70 basis points respectively in the June quarter. As discussed last quarter, we have quickly executed on our restructuring plans to resize our business and are seeing the benefits in sequential margin expansion. As we continue to execute on our restructuring plans, we are confident that our activities will achieve their intended cost savings and contribute to further margin expansion in the coming quarters. Adjusted selling, general and administration expenses, which include research and development costs, totaled $170 million in the first quarter of fiscal 2010, compared to $185 million in the fourth quarter of fiscal 2009, representing an 8% decrease sequentially. On a year-over-year basis, we have reduced our quarterly adjusted SG&A spend by 25% or $57 million. We are now operating at a level that was last seen in the September quarter of calendar 2007, which was prior to the Solectron acquisition. As a percentage of revenue, adjusted SG&A was 2.9% in the June quarter and is approaching our targeted level. We are very pleased with our management of operating expenses and our continued focus on driving down discretionary spending, while improving our capabilities and market competitiveness. Please turn to slide six. During the June quarter the company recognized after tax restructuring charges of $64 million on a $107 million impairment charge related to the reduction in the estimate recoverability of a certain non-core investment and note receivable. As we have mentioned on previous calls we intend to monetize non-core assets and benefit from the cash generated from these dispositions. Also during the quarter, the company recognized after tax intangible amortization and stock-based compensation of approximately $21 million, and $16 million respectively, compared to $25 million $9 million respectively in the prior quarter. After reflecting these items the GAAP net loss was $154 million, compared to the GAAP net loss of $249 million in the prior quarter. GAAP loss per share for the June quarter was $0.19. Effective for the June quarter the company was required to adopt a new accounting treatment for our convertible debt, FSP APB 14-1. This new standard essentially requires a bifurcation of convertible debt between its liability and equity components. The impact of this adoption as of the June quarter end was an $19 million decrease in the carrying value of our convertible debt, a $233 million decrease to retained earnings and $252 million increase to additional paid in capital. Historical financial results in this presentation have been restated to show retrospective application. As a result of this new standard, we recorded $8 million of non-cash interest expense related to the amortization of the deferred interest, which we exclude in our non-GAAP results. There will be approximately $19 million of additional non-cash interest expense recorded as a result of this adoption, of which $13 million will be recorded in the current fiscal year. Please turn to slide seven. On March 10, 2009, we announced the restructuring plan intended to resize our business in order to return to more normalized operating margins as quickly as possible and align with customer requirements. During the June quarter, we recognized $65 million of restructuring charges, comprised of $33 million of cash charges, which are primarily employee severance related costs, and $32 million of non-cash charges, primarily associated with the disposal of non-essential facilities and equipment related to various exit activities. We are extremely pleased with how quickly and efficiently our organization has implemented and executed our restructuring plan. To-date we have recognized $215 million of restructuring charges. We don’t see any significant changes to our original plans and expect to recognize the remaining approximately $35 million of charges over the course of the fiscal year 2010. We remain confident that upon completion of these restructuring activities our potential savings will yield annualized savings between $230 million to $260 million. We expect to achieve savings from cost of sales through lower depreciation, reduced employee expenses, reduced operating costs and improved operational efficiencies, as well as reduced SG&A operating expenses. We believe our operating results this past quarter show that we are progressing as planned to meet these savings expectations. Please turn to slide eight. Return on invested capital improved to 14.2%, up 450 basis points sequentially. The company asset management continues to be strong and coupled with the expanding margins has resulted in an improving return on invested capital. Our top priorities center on improving operating efficiencies, controlling costs and managing our working capital. Thus we expect to derive continued improvements in this important metric. Please turn to slide nine. We're extremely pleased with our working capital management. Our cash conversion cycle improved to 19 days in the June 2009 quarter. Our results were driven by further improvements in inventory and receivables, offset by reduction in our accounts payable. Once again, inventory decreased this quarter, declining sequentially by $326 million and inventory days decreased by eight days to 47 days. Our inventory management has been exceptional, as we have aggressively reduced our inventory levels by approximately $1.8 billion or 40% in the past year. Our inventory turns are at 7.8 times, which is the highest level since December 22007. Receivables declined by $250 million, net of a $69 million reduction in A/R sales, resulting in an improvement of eight days to days sales outstanding of 35 days. During the quarter our accounts payables declined sequentially by $418 million, as days accounts payable decreased by 13 days sequentially to 63 days, as we made further investments in our supply base. Please turn to slide 10. Our cash flow from operating activities generated $107 million in the quarter and it was the fourth consecutive quarter that we generated positive operating cash flows. Our cash flow from operations reflected the absorption of approximately $90 million of restructuring related payments during the quarter, as well as the reduction in the benefit from receivables sales amounted to $69 million. Our working capital management continues to be industry leading. Our cash flow from operations for the last 12 months generated more than $1.4 billion in cash. Net capital expenditures were $39 million and total depreciation and amortization were $118 million in the June quarter. A modest capital spending during the quarter combined with strong cash generation resulted in approximately $68 million of free cash flow. We are pleased with our ability to reduce working capital, capital expenditures, and other discretionary spend, which has resulted in a generation of almost $1.1 billion in free cash flow for the last 12 months. Please turn to slide 11. Since June 2008, we have reduced the consolidated debt level of the company from $3.7 billion to a projected $2.6 billion, which includes the repayment of $195 million of the 0% converts at their maturity, which is at the end of this week. Since last fiscal year we have made deleveraging a priority of our capital structure. Opportunistically utilizing excess cash to strengthen our balance sheet and reduce the interest burden on our P&L. We believe our capital structure and liquidity is a competitive advantage that provides our existing and new customers financial security when making outsource partner decisions. During the quarter we successfully tendered for the repurchase of $100 million of both our 6.25 and 6.5 senior notes. In addition we secured the consensus modification of the associated indentures for both notes. These modifications include resetting the restricted payment basket to zero as of the beginning of the fiscal year and immediate basket of $250 million to purchase junior securities or other restricted payments, elimination of certain non-cash charges and the removal of our existing 1% convertible bonds from the restricted payment basket. We are very pleased with the results on execution of this capital market transaction. It affords us the flexibility to better utilize our excess cash in future transactions. Please turn to slide 12. At the end of the June quarter, we had approximately $1.7 billion in cash, which was lower by $145 million compared to the end of March quarter. As a result of the aggregate $200 million paydown of our senior notes total debt was $2.75 billion at quarter end compared to $2.94 billion at the end of March. Over the past year we have reduced our debt by almost $1 billion. Net debt, which is total debt less total cash, was further reduced this quarter by $50 million and was $1.07 billion. Our net debt has decreased more than $800 million from one year ago. We closed the period with no borrowings outstanding under our $2 billion revolving credit facility. The graph at the bottom of the slide shows our significant debt maturities by calendar year. Our $195 million privately placed 0% convertible junior subordinated notes are due to be paid at the end of this month. The $240 million of 1% convertible notes will mature in August 2010. No additional significant balances of debt are due until calendar 2012. Based on our existing cash balances, along with our anticipated cash flows from operations, and the additional liquidity available under our revolving credit facility, we remain very comfortable that we have sufficient liquidity to meet our projected needs. Thank you, ladies and gentlemen. As you turn to slide 13, I will now turn the call over to our CEO, Mike McNamara.

Thanks, Paul. My comments today will focus on our quarterly performance, what we're seeing with demand, and where our priorities lie going forward. We are pleased with our performance in the first quarter ended July 3, 2009. Our strong execution of the controllable aspects of our business achieved our planned objectives. The overall demand climate has remained subdued, but we have made measurable strides to adjust to the current market conditions and position ourselves for improving profitability. Our June quarter revenue was $5.8 billion, which was at the higher end of our guidance range and our adjusted diluted earnings per share were $0.08, also at the top of our guidance range. This solid performance was primarily the result of our ability to respond quickly to changes in the end market demand. Bright spots in the quarter also included the successful ramping of our notebook production for HP and smartphone production for a major smartphone manufacturer. Challenges remain however, as one of our large cell phone customer continue to face deteriorating demand and another large customer works through their bankruptcy period. We have balanced these challenges with new business wins and exceptional execution. While we have seen positive results from our actions to control our operating expenses and improve our operational efficiencies, we are by no means letting up on these efforts. We will continue to act with speed and agility to adjust our operations, keep disciplined cost controls in place, and optimally position Flextronics in the market. Our top priorities remain to control these costs, improve internal efficiencies, aggressively manage our working capital, generate strong cash flow and improve our capital structure. Our continued success in these areas include the following results this quarter; adjusted SG&A was driven lower by disciplined cuts in discretionary spending and headcount reductions, as a result of our restructuring efforts. At $170million for the quarter, SG&A costs were down $15 million sequentially and were at the lowest level in almost two years. Inventory was further reduced by $326 million sequentially. In total, over the past nine months, we have reduced inventory by nearly $1.9 billion, which is an exceptional achievement. At 14.2%, our ROIC is clearly moving in the right direction. We remain intensely focused and determined on improving this metric and increasing shareholder value. Our capital structure was further strengthened due to the success of our partial tender and consent solicitation for our senior subordinated notes. In regard to these bonds, we reduced debt by approximately $200 million and annual interest expense by greater than $10 million. In addition, we reset the restricted payment provisions within those bonds to provide more flexibility on deployment of future excess cash. In the first quarter, and for the third quarter in a row, our net capital spending was below current depreciation levels, with Q1 capital spending coming in at $39 million. Our previously announced restructuring plan is on target, with $215 million of the announced $250 million plan expensed over the last two quarters. The quarterly improvement in gross margins and operating margins are directly attributable to those efforts. We expect the approximately $260 million annual run rate of savings to be met later this year. Moving on to end markets, I will provide highlights for each marketing segment and our thoughts on where we see each category progressing in the current environment. Our Infrastructure segment is well positioned competitively and we remain focused on improving ROIC with our existing business and new opportunities. A good portion of our total inventory decrease in the June quarter compared to the March quarter occurred in Infrastructure and inventory turns in this segment improved significantly quarter-over-quarter. Overall demand for the segment was flat sequentially. New business ramps for networking and optical products combined with the benefits of our diverse customer base, helped to offset weakness in our Nortel business. We continue to partner with Nortel through the reorganization period and we have received all payments from them under the bankruptcy agreement to-date. With regard to the potential sale of major portions of Nortel's business, we believe we are well positioned to deal with any of the potential successful bidders. The work we do with Nortel tends to be more complex and sticky so we believe any change will provide us the opportunity to retain this business. Our Computing business displayed healthy growth for the first quarter primarily due to the continued ramp of our recent notebook production launches. We recently announced the launch of our notebook R&D facility in Banciao, Taiwan, which will provide dedicated design, R&D and supporting services for notebooks. We are thoughtfully expanding our capacity to service this segment and anticipate growing our notebook engineering capacity to 1,500 engineers over the next couple of years. And we are increasing manufacturing capacity. We are also focused on increasing and diversifying our customer base and product portfolio. As we continue our entry into the notebook market, in the near term we will focus on the main stream, high-end gaming, and thinner line notebooks, with expansion into other models as we gain momentum. As we indicated last quarter, we are anticipating a notebook revenue run rate of approximately $1.5 million to $2 billion by the end of this fiscal year. We also continue to ramp the latest generation Intel Nehalem Server products and additional customers. With regard to servers, revenue was somewhat flat to down quarter-over-quarter and is being driven by weaker end demand. We have been pleased with the progress of our Computing segment but pressures in the business remain. For example, average unit prices for notebooks continue to decline as end users shift to lower priced products, plus overall market weakness has resulted in fewer future designs that the OEMs plan to take to market in the near term. Although, significant economic concerns persist, our dialogue with our customers lead us to believe that there will be stronger second half due to seasonal growth. Our Medical segment has a robust pipeline and we continue to win new business with our diverse platform of offerings, which has helped offset the year-over-year decline in our base business across most product categories. Recent new wins include a manufacturing transfer award with a large medical products and services customer that will provide revenue this fiscal year ant three new drug delivery design programs with three separate customers, which will lead to manufacturing over the next two to three years. In addition, there is significant new product development activity in the diabetes market segment. While we are pleased with these wins, competitive pricing pressure has become more intense in this segment, plus OEMs are taking more time to make decisions on new product developments, which has increased the sales cycle. However, we are beginning to see medical OEMs evaluate outsourcing at a total system level more actively due to the cost pressures in medical equipment and disposables. We have a very strong competitive position in these medical markets and we are very confident we will be able to take share over the long term. Performance in our Industrial business was down slightly quarter-over-quarter, this diverse segment encompasses several sub-segments including capital equipment, meters and controls, test equipment, solar products, appliances, self service kiosk and other miscellaneous products. While visibility remains low, due to continuing uncertainty of future demand, we believe many of our Industrial customers are beginning to explore more outsourcing options. Customer interest in Flextronics and quote activity has increased recently, which is largely attributed to our financial stability and complete solution offerings, which positions us as a reliable, less risky choice for new customers. While new business volumes have been small to-date this new diverse customer wins are expected to better position us once the end markets strengthens further. Our consumer segment experienced growth quarter-over-quarter. Positives included the successful launch of LCD TV production for a large electronics customer in one of our Mexico facilities, plus strong demand for gaming consoles for one of our large customers coupled with a slightly higher demand with inkjet printers. Some pricing pressures remain across all product groups due to the general overcapacity in the industry. In the second quarter, we're experiencing normal demand increases due to back-to-school and holiday seasonality, but certainly not the same levels compared to previous years. While seasonality is driving an increase in orders, it's not evident whether the increase is based on sales recovery or inventory build-up or whether it will be sustainable in the later part of the year. The sequential increase in our Mobile segment reflected the continuous progress on product ramps for our major smartphone manufacturer, which was partly offset by continued reduced demand from one of our core Mobile customers. The global demand for mobile devices continues to be weak and faces difficult historical comparisons. While the struggle for market share amongst OEMs remains fierce, we have adjusted to this lower demand level in both our Consumer and Mobile segments by successfully rationalizing our business with aggressive inventory corrections over the past few quarters and consolidating our capacity. Similar to our Consumer segment, we are now starting to rebuild capacity in our Mobile segment for the seasonal sales volume. Our relationship with a major smartphone manufacturer continues to thrive. As this customer's grown into consumer smartphone sectors, it has expanded its market reach and we are continuing to benefit from that expansion. We are encouraged by the opportunities that continue to emerge in this space. With regard to our Automotive business, the industry is clearly continuing to struggle. Although our focus in this segment is primarily electronic content for European customers, our results have been impacted by lower overall industry demand. As we mentioned last quarter the business represents about 2% of revenue and we will continue to focus on ODM products within this space. Turning to our Component business, our printed circuit board business offering remains challenged, as we continue to struggle with under-absorption issues. While new product introductions have slowed, our ramp on new programs has been strong and we have successfully diversified customer base and market segmentations to gain momentum for growth. We continue to identify new opportunities for Multek. For example, we recently announced a partnership with Sensitive Object to significantly enhance Multek's touch-panel solution for its partners and OEM customers. Sensitive Object will provide engineering and customized services, to Multek, along with production and development support for OEM customers in mobile, computer, computing, industrial and consumer segment. We still anticipate that several more quarters of recovery will be necessary in Multek, but we are encouraged by our competitive position in the market and the new customer activities. Our FlexPower business unit continues to successfully gain traction in the market. We have captured major share with major OEMs for adapters and chargers for phones, smartphones and digital cameras. Additionally, we have further penetrated the desktop and service space with multiple design wins, and added to our growing portfolio of high efficiency products. The competitive landscape for Power is intense as customers constantly push for lower cost solutions and pricing demands are aggressive, but our efficient operations, streamlined procurement, and most importantly, our innovative designs are key strengths in our ability to succeed in this marketplace. In our global services business, which focuses on logistics and repair services, we have had solid quote activity across all regions, as customers think to reduce cost they are outsourcing their after-market logistics services. We continue to quote customer opportunities, especially in our services and service parts logistics businesses. This business has been very stable in both revenue and profitable throughout the entire economic downturn. Our retail technical service businesses provide competitive and flexible field services for customer operations. In the first quarter, we expanded our business, become the sole source supplier of retail support services for a major wireless provider as the customer transitioned to a one supplier model. While the retail environment continues to be challenged, we are focused on rolling out Flextronics' capabilities in a variety of end market solutions. While there have been uneven performance amongst our segments in the first quarter, we are encouraged that most of the turbulence of the past two quarters is behind us. We observed signs of stabilization in most end-markets during the last three months. The timing and strength of a market recovery for Flextronics will depend a great deal on mix, but we believe that during the past two quarters we have developed a more optimal customer base and product portfolio. Our caution about the market has been appropriate as the global economy's recovery remains uncertain. We will continue to operate our business assuming a very metered recovery in the foreseeable future. Slide 14, turning to guidance. We expect our September quarter revenue to be between $5.2 billion and $6 billion, which is essentially flat and adjusted EPS to be in the range of $0.07 to $0.11 per share. While stabilization of demand has improved, it's still too early to forecast demand recovery and related financial impacts across the markets we serve with any high degree of certainty. Our guidance reflects operational efficiencies and benefits of our recent restructuring actions, cost control efforts. Quarterly GAAP earnings per diluted share are expected to be lower than the guidance provided herein, by approximately $0.07 for intangible amortization expense, stock-based compensation expense, non-cash interest expense and estimated restructuring charge. Please turn to slide 15. Over the last few quarters we have been demonstrating the skills of speed and agility that our Management team has honed during the past downturns. This agility will remain important to our success as we continue to strategically position the company for improved profitability. We believe that over the long term, momentum will be created by the successful implementation of our product geographic and vertical diversification strategy, enhanced by market focused expertise and capabilities. The key competitive strengths that differentiate Flextronics include our low cost industrial parks, vertically integrated end-to-end solutions, significant scale, customer and end market diversification and long standing customer relationships. We will continue to focus on what we can control and influence and believe our vision, strategy and execution are producing results. In addition, we remain focused on optimizing our balance sheet and capital structure, while generating solid cash flows. We continue to believe that our current cash balances, together with anticipated cash flows from operations, and availability under our revolving credit facility are more than sufficient to fund our operations and support our business opportunities. With regard to uses of cash, we maintain our philosophy of prudently deploying cash in the most strategic manner possible to enhance shareholder value. We would like to thank our employees for their outstanding execution and attention to detail in a very difficult economic environment. They have repeatedly been asked to do more with less and we appreciate their commitment to the company's objectives. Given our employees continued dedication, we are pleased that our proposed option exchange program was recently approved by shareholders. We believe the value neutral option exchange program will provide additional motivation and retention benefits for our employees, while reducing stock overhang and stock option expense for shareholders. I will now turn this conference call over to the operator for questions. We ask that you please limit yourself to one question and one follow-up.

(Operator Instructions) Our first question comes from Mr. Matt Sheerin, Thomas Weisel Partners. Matt Sheerin - Thomas Weisel Partners: Just a question on the gross margin and operating margin target that you've talked about, I know that you've talked about a 3% target in the foreseeable future. Could you update us on, it looks like the revenue ramp is stalled and less than seasonal, but on the other hand you've got continued aggressive cost cutting. At what revenue level would we expect to see that 3%?

We would need some modest seasonal increases in revenue to see that for sure, but it's also determined on the mix, the profile and our continued delivering of the restructuring activities and the benefits associated with that. We're driving improvements in the verticals that we have and the discretionary spend, et cetera. So there are multiple elements to it that we're driving. Matt Sheerin - Thomas Weisel Partners: Would that, though, be over $6 billion?

It depends on the mix. It's certainly our target to get back to normalized margins by the end of the year, but it's more mix dependent, but it certainly would need revenue levels higher than they are today. Matt Sheerin - Thomas Weisel Partners: And my follow-up, could you let us know what the capacity utilization rate is right now? We've seen at least one of your competitors decide that the utilization is too low and got another round of cost cutting. It looks like you're keeping to your schedule and not increasing that cost restructuring, but could you tell us what it is and are you comfortable with that and growing into that number?

Matt, the activities that we've taken to-date and kind of the expected seasonal upside that we would anticipate even in a muted economic environment get us close to our near term target levels. As far as taking any more actions, we don't think we need to do that. So when it comes to utilization levels, it's just complicated. I think I saw the other competitor, in terms of what they say. Perhaps we look at utilization a little bit differently and may be I'll go through it. I've done it in the past. We just look at it in three different ways. There's people, which is the highest cost, and we believe that's rationalized exactly to what we need today. There's equipment, which we have access to. We probably have about 25% too much, which is the second largest element. Then the third largest element is facilities themselves, which is almost modest level, to be honest with you. So we just look at capacity along each of those three different dimensions and we've taken the activities that we need to from the people standpoint. We've rationalized as much of the useless equipment as we can, but we're not going to write off perfectly good equipment that has the ability to generate revenue in the future. We would rather go book some more business and take more market share. So, we just don't look at utilization quite the same way and don't have the same benchmark I think for you, because it's just a little bit different how we do it.

Our next question comes from Mr. William Stein from Credit Suisse. William Stein - Credit Suisse: First, I would just like you to walk us through on the restructuring plan a little bit and the benefit of that. I think you said the cost will flow through for the next couple of quarters or may be through rest of the year. If you could be specific on when we think we're going to see the cost savings come in and how it will progress over the next few quarters?

As we said roughly $35 million of restructuring charge is yet to take. 85% of it is booked. The $35 million will be taken over the rest of the fiscal year. In terms of the savings, we're making great progress. We told you that in Q4 we had already netted savings of approximately $15 million. In Q1, our June quarter here, that's gone up to approximately $30 million, and then for the rest of the year, we would expect to net a total of $200 million for the year. So it accretes up every quarter getting to a full run rate in about the December quarter. William Stein - Credit Suisse: The full run rate will be $200 million per year.

The full run rate being the $230 million to $250 million number that we quoted, so the run rate of that, which is roughly $50 million, $60 million per quarter. William Stein - Credit Suisse: Then just on the end markets, kind of a combined question. First, when I look at the presentation, it looks like you re-categorized last quarter's numbers, in particular between Mobile and Infrastructure. Do I have that right and can you comment on that? Also with notebooks, you're reiterating the $1.5 billion to $2 billion goal by the end of the year. How far are we along that way now in other words how much do we think is incremental from what we just finished in this quarter to the end of the year for notebooks?

On your first point, I don't believe we made any move from Mobile. The move that we made was very minor move, but it was from Consumer to Industrial. It was roughly 1.5% to 2%. We restated the history in that graph to reflect that and that was where we took a look at some of the products we were building, which we have previously recorded in Consumer and we moved them to Industrial, because they were more industrial related products. It was roughly 1.5% move from Consumer to Industrial, and it's reflected in the historicals as well. I will let Mike answer the second part on the notebooks.

On notebooks, one thing I want to say on the notebooks is, we think we have the orders in hand to hit those target levels. Those target revenue levels of $1.5 billion to $2 billion. How close are we? We're in the process of ramping. I don't know exactly the numbers, but certainly relative to the June quarter, the volume will be triple of what June quarter was as we go into the December quarter. So it's in a very steady state kind of ramp. We do have a couple of additional ramps that start hitting in September which kind of kick it a little bit, but I think you could probably safely assume we're one-third our way towards the levels that we're talking about that we're hoping to hit in the December quarter. William Stein - Credit Suisse: The run rate should be around $500 million per year right now or in the June quarter?

Yes. If you use that as a good benchmark, it's going to be at 1.5%, say to 2%, then that means we're running around $500 million run rate today. That's correct.

Our next question comes from Mr. Jim Suva, sir, you line is open. Jim Suva - Citigroup: Mike and Paul, you both kind of talked a little bit about stability in demand and nobody really is expecting I think a V-shaped recovery and you seem quite upbeat and talk about your ability to react and get a lot of new wins. But when we compare your September outlook and also fold in some smartphone business as well as notebook business, it appears that you're guiding sequentially off of a low time right now in the recession that we're dealing with right now. Really the lowest sequential quarter-over-quarter increase, the lowest in like 16 years. When you consider that compared to the rest of the industry, where Celestica, Benchmark and some of the other companies in Huanhai have given guidance and recent results, it's hard not to say that you're gaining share, it's hard not to say that you're losing share, so may be can you address the thing of really what's problematic, because I think everybody knows Motorola and Sony-Ericsson for Q2 had challenges, but going forward it seems like that Flextronics is really struggling with bringing something to the topline sales?

I think there's no doubt we're continuing to have downward pressure on some of our businesses that you just mentioned. We're certainly having some downward pressure on some of the Nortel business. We're having downward pressure on some of the Sony-Ericsson business continuing on into September and those being kind of the biggest pieces. So when we go flat, we actually have to overcome some continuing deterioration in those accounts. They were both top three accounts, as of just two quarters ago. I would still call it to be somewhat of significant erosion that's really offsetting any new business that we're getting in. I wouldn't call it really significant new business. We're seeing a lot of opportunities. We're participating in them, but it's a robust market where we're seeing all this new stuff coming in, we are winning and booking all this business, we are booking some nice pieces, but it's difficult in this economic environment to offset some of the downsides. I think the other thing to think about is, June quarter came in a little better than we anticipated. We were anticipating more around a 5.5 number it ended up coming in around at 5.8. We got quite a bit of some strong uptick in the June quarter, which we didn't anticipate, which kind of pops that comparison a little bit higher. So maybe that will come in, in the September quarter. We don't know. But we are still having erosion in those two big accounts and I can't emphasize enough that the pain of taking two of your top three customers are having a pretty significant erosion. Jim Suva - Citigroup: Okay. That's fair. Then maybe as a follow-up and switching gears to your notebook side, can you talk a little bit about, it seems like a lot of growth there is in the netbook side. Do you have any wins there or is that, prove yourself first with the notebook before you go into netbooks? For the September quarter, the PC industry for notebooks typically has been up about 14% quarter-over-quarter. Are you seeing that type of growth in your notebook segment for the September quarter and what about netbooks?

Well, let me take your second question first on the September quarter and the notebooks. I don't think we have a diversified and enough product wins to be representative of the industry. So I think our success in notebook is going to rely on the number of products we book and the individual success in the marketplace. So for us in December, as I mentioned a moment ago, when Bill was talking about it, is we'll be up 3X. So it won't be seasonal upside, so I don't think we're representative today of what that industry is going to do, but we're going to have some pops, because we've got a number of wins coming in, in the September timeframe. On netbooks, we are not participating in netbooks today. We have a few designs that we're working on to begin the process, but we specifically stayed away from this product category. We specifically tried to focus on those product categories we had more experience and we have a limited design team. We've been adding to that design team and expanding it and overtime it's highly likely that we'll end up with a very, very complete portfolio of high-end gaming notebooks, all the way down to netbooks. So I think that's likely, but we are pacing ourselves and we're utilizing our design resources in an optimum way to kind of penetrate the marketplace that we think we have the most experience in, we have the most likely of booking business and we have limited design resources and as we expand those design resources we'll expand that product portfolio.

Our next question comes from Alex Blanton. Alex Blanton - Ingalls & Snyder: It's Ingalls and Snyder. Just a comment before we start. It would be really helpful if you could go back in your earnings release, go back to putting in your non-GAAP results on the P&L, just as you do on the website in the summary operating statement. You should duplicate that presentation in the press release so that you have three columns, non-GAAP operating statement, adjustments between and then the GAAP operating statement, because as it is, you can't look at the press release and see a non-GAAP operating statement. But those are the numbers that everybody looks at and wants to see. So we have to go to your website, which needs to be updated and sometimes it doesn't get done on time. It would be simpler to put it in the press release and you were doing that up until fiscal 2007, so I don't know why that changed. So that's a suggestion for next time.

Thanks for the feedback, Alex. Alex Blanton - Ingalls & Snyder: I've got a question on notebooks like everybody else. Just after you announced your expansion of the R&D center, Reuters did several stories and the numbers they presented on your capacity plans were in conflict. The President of Flextronics Computing segment was quoted as saying that by March 2011, you plan to have capacity to do 12 million notebooks a year, 1 million a month, up from 300,000 a month now or at the beginning of 2009, actually. Then later, another person at Flextronics, said to be a General Manager, was quoted as saying no, you plan to hit a capacity of 20 million units a year by the end of 2010. I assume he must have been talking calendar 2010, so those two were in conflict. Then in a separate story, another story, it talked about the sales target for notebooks to be $3.5 billion annually by the end of fiscal 2011. So that would be a sales target, whereas the target of capacity of 12 million would be about $6 billion a year of capacity but $3.5 billion of sales, actually by that time. Now, these were stories on Reuters from the Far East, so it may not be reliable, but could you comment on those numbers?

There was a lot of inconsistency with the reports coming out of the news agencies in Taiwan and we tried to tie off and tried to piece them together as best we could. Now, keep in mind, in our presentation and our grand opening we didn't invite the press to those meetings so I think they were picking up a lot of data, where $3.5 billion sales number for example may have included other pieces that didn't include notebooks. It could have been servers. It could have been other things. So there was a lot of inconsistency that came out of there and rather than address each individual one, I think it's fair to say that the way to think about this is, is kind of getting the data from myself, which is, we're going to hit about $1.5 billion to $2 billion. We are investing additional design engineering. We'll double the size of the design team. We expect to double the size of the design team over the next, say, two years. We will add incremental capacity for our operations and anticipating continuing to grow the business. We don't exactly know what we're going to produce over the next few years. We will certainly put up a building, capable of doing substantially more notebooks than what we're doing today, but that doesn't mean we're going to fully outfit the building with equipment and with people. So we're just going to take this year by year. We're going to make sure our customers have enough room for expansion and we're going to make sure we have enough room for our sales guys to book additional business and we're going to make sure we have room to diversify our business as well and be able to have room for new customers. But there are no official numbers going forward into 2010, and I even heard numbers into 2011. So there's no official numbers that you can count on, except it will be our objective to continue to grow the business overtime. Alex Blanton - Ingalls & Snyder: You've got your SG&A down to $170 million now for the quarter, which is 2.9% of the current sales level, which sales level's down 40% year-over-year. Can you hold or how successful can you be in holding SG&A near the current level as the sales go back up? Because if you do, your margin's margins will really improve a lot.

We're really pleased Alex with the progress we've made in such a short period of time, we are in all time low for two years and are very proud of that. We think we can hold the dollars flat, certainly through this fiscal year and who knows beyond that, but included in that line item is some R&D that's a little bit variable, but for the most part it's fixed expense and we are right-sized for the level of business. Alex Blanton - Ingalls & Snyder: Well, if you can do that, you're going to really accomplish something. Okay. Thank you.

Our next question comes from Shawn Harrison, Longbow Research. Joe Wittine - Longbow Research.: Hi, this is Joe calling in for Shawn. Can you hear me okay?

Yes, Joe, go ahead.. Joe Wittine - Longbow Research.: I just want to talk about the revenue guidance just a little bit more I guess. When I look at it, this may be splitting hairs, the midpoint of the guidance is down slightly sequentially. Just by end-market or by your business units, it sounds like the sequential declines may be more focused in handsets. That was one thing I was able to derive from Mike's comments. Is that a good assumption, I guess?

Well, again, we've kind of got the same range we had last period. I think I mentioned we had some good June pickup that we didn't anticipate, so when you look at it sequentially, may be the midpoint looks like it's down, may be we'll get a pickup in September just like we got in June, I don't know, but I think the messaging that we're trying to give is we're kind of going to be flat. We've taken the range from 5 to 6 to 5.2 to 6, because we're getting more and more comfortable with the stability of the market and more predictability, so as that predictability increases we pulled in the range of revenue. We still look at the entire market as being pretty flat. It's getting more and more complicated to try to predict the market, because we're seeing so many changes in industry. We're seeing Chinese suppliers, what looks like gaining share relative to some of the US and European guys. We're seeing some companies being more successful than others, so it almost looks like there is more of the market is going through its natural process of picking the winners and losers going forward. It's getting more complicated to try to even industry-by-industry draw generalized conclusions. So I think what we've tried to do is just to signal that. We think we're flat in revenue. We think the marketplace is pretty flat in revenue. We'll see some continuing upsides probably in revenue later in the year as those notebook businesses ramp. We'll also get less deterioration out of some of our former big customers and that despite the flatness in the revenue, we expect to improve margins. So we're in a program to continuously try to improve margins. Following up on Alex's comments, we're on a program to keep our SG&A total dollars flat, and at which point if we see some revenue upsides, we'll benefit nicely from that. So I think that's kind of the messaging and it's still difficult to project where the market's going. So I think the message we would like you to take away is, we kind of see the cumulative total of the market is kind of flat and even if it's flat we're going to keep driving our margins up over the next few quarters. Joe Wittine - Longbow Research.: Okay. Thanks a lot for that color. Just as a quick follow-up. Paul do you have a number of what we can expect for interest expense for the quarter here given the payment that is going to happen at the end of this week?

I think you should on a go forward look at a $35 million to $40 million interest and other line item for the rest of the fiscal year, per quarter.

Steven Fox with CLSA, your line is open. Steven Fox - CLSA: Couple of questions since you brought up mix. Could you dig into some of the higher mix areas, especially enterprise and then the components business? I am just trying to get a feel for on the Component side first of all, whether it was more of a drag on the quarter and how it would be on margins the next quarter? I think you mentioned some positive and some negatives there. Then from an enterprise standpoint, just generally what you're seeing in demand for the rest of the year?

Well, let me take the Components question first. We have had a drag with our Component business and I think that's mostly because it's just one step further away from the marketplace than most of our EMS business. Our EMS business a lot of it is really direct sales through. It really sells through directly, things like configuring at Cisco, optical switch that goes directly into the marketplace when it's sold. We're kind of running one with the market, whereas a Component tends to fluctuate with inventory levels and big adjustments. So I think our component business as a result has a bigger standard deviation of swing. So without doubt, that's pulling us down. So those businesses are running below the big EMS average. Now, we are seeing those markets also stabilizing and coming back quite nicely and we actually expect from Q1 to Q2 to Q3 to Q4 to have continuous increases in margins. This is one of the drivers, not just the SG&A holding flat at $170 million, but this is going to be one of the drivers of us being able to continually improve the margins over the next few quarters, even with only a modest, or even flat revenue. So we're unhappy that they kind of adjusted more than the rest of the business, but alternatively they should come back more rapidly as the business stabilized. So we have that to look forward to as one of our margin drivers. On the enterprise business, boy, that's a tough one. A lot of it is location dependent. A lot of it is, which vendors are winning in those locations. Are you talking about telecom, Steve? Steven Fox - CLSA: I was thinking more servers than telecom equipment.

On server base, that's also a (inaudible), I mean for sure it's stabilized. We just don't see it going down. It looks to us like there's some market share shifts going on, which we don't know for sure, but it sure feels like that. I would view it as being stable and flat with maybe some market shifts going on which makes it feel like maybe there's some upsides and some down sides. If I look at the overall bundle, I'm not sure it's going up very much. I think it's reasonably stable.

Louis Miscioscia with Brigantine Advisors, your line is open. Louis Miscioscia - Brigantine Advisors: Looks like you guys have obviously done a great job on inventory and working capital. What should we expect for the rest of the year tying that back into cash flow from operations and free cash flow, in the sense that you've already brought them done to such decent levels. Just wondering if there's a lot more room there.

From an absolute dollar level on inventory it's kind of going to flatten out. We've really done a fantastic job, $1.9 billion, as Mike said, ever the last 12 months. Hopefully with some increase in business, what we'll do is improve the inventory turns. That's our focus. Working capital at 19 days cash cycle, we're very proud of that. We actually model that around 20 days, so I think that's appropriate. Free cash flow been positive for the last four quarters and it's going to, hopefully, be positive the rest of the fiscal year and that's a big focus for us. We are absorbing restructuring charges in the year, which is roughly I think about $200 million of cash this year. So that's been absorbed. We reduced the securitization balances by $70 million this quarter. That's kind of a one-time adjustment. In taking all of that into consideration, we still have free cash flow of $69 million, $70 million this quarter and expect positive free cash flow the rest of the year. Louis Miscioscia - Brigantine Advisors: You mentioned that you actually had a couple of things that are let's say outside of the norm that maybe we're just not that familiar with. Could you maybe highlight if there's anything that we should expect that also would be helpful from a cash standpoint?

Well, restructuring, A/R sales, securitization, those are the free cash flow affected items that I can think of as being one-time in nature.

Last question comes from Mr. Ryan Jones, RBC. Ryan Jones - RBC: Just one quick question actually. I was curious, you've done such a great job I think on deleveraging the balance sheet. At what aggregate debt level do you think you'll be happy running the business going forward? I know you've got this option now to take out I think it's the balance of the 1% converts. Do you expect to exercise that ahead of schedule? I think they're due in 2010.

Well, we continue to look at it. We'll continue to be opportunistic in this market. We're very pleased with the cash flow generation. It's just we deploy it prudently really in the most strategic manner and we're very comfortable where we're at in terms of our capital structure. As you know, actually end of this week, we have another $195 million to pay out and we're all set and ready to do that. But considering that we would have then done roughly $1.1 billion in deleveraging over the last 12 months, I think that's very significant. I think it puts us in a spot where we're very comfortable with the capital structure now, and no pressure on covenants, ample liquidity to run the business, a lot of flexibility now. We fixed the restricted payment basket last quarter and more than enough to support the future business requirements, so I think we're in a really good spot.

Thank you, everybody.

Thank you for participating. Today's conference is concluded. Please disconnect.