Michael McNamara - Chief Executive Officer and Director Paul Read - Chief Financial Officer Warren Ligan - Senior Vice President of Investor Relations

Louis Miscioscia - Collins Stewart LLC Amit Daryanani - RBC Capital Markets Corporation Alexander Blanton - Ingalls & Snyder Sherri Scribner - Deutsche Bank AG Jim Suva - Citigroup Inc Amitabh Passi - UBS Investment Bank William Stein - Crédit Suisse First Boston, Inc. Sean Hannan - Needham & Company, LLC Shawn Harrison - Longbow Research LLC Brian Alexander - Raymond James & Associates Steven Fox - Calyon Securities (USA) Wamsi Mohan - BofA Merrill Lynch

Good afternoon, and welcome to the Flextronics International Fourth Quarter Fiscal Year 2010 Earnings Conference Call. [Operator Instructions] At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Warren Ligan, Flextronics Senior Vice President, Investor Relations and Treasury. Sir, you may begin.

Thank you, operator, and good afternoon. And welcome to Flextronics conference call to discuss our results for our fiscal 2010 fourth quarter ended March 31, 2010. 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 Investors section of our website under Calls and Presentations. We will refer to each slide number as we move through the presentation. During the call today, Paul will first review our financial results, and Mike will comment on the business environment and demand trends for our company. Mike will conclude with guidance for the first quarter of fiscal 2011 ending July 2, 2010, and following that, we will take your questions. Please turn to Slide 2. This presentation contains forward-looking statements within the meaning of U.S. securities laws, including statements related to revenue and earnings guidance, our expectations about our future operating margins and return on invested capital, expected revenue growth in our market segments, expected improvements in our profitability of our Components business units, our expectations about the availability of components for our products, the expected changes 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 expectation, and we assume no obligation to update them. Information about these risks is noted in our earnings press release on Slide 13 of this presentation and in the Risk Factors and MD&A sections of our latest annual and quarterly reports filed with the SEC, as well as 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 earning press release on Slide 5 of the presentation and the GAAP versus non-GAAP reconciliation in the Investors section of our website, which contain the reconciliation to the most directly comparable GAAP measures. I will now turn the call over to Paul.

Thanks, Warren, and welcome to everybody on the call. Today, we'll summarize and highlight our financial performance for the fourth quarter, and Mike will provide additional business insights, cover important segment and business unit trends and provide guidance for our fiscal 2011 first quarter. Please turn to Slide 3. Fourth quarter revenue came in at $5.94 billion, which was within our guidance range of $5.8 billion to $6.2 billion and represented a 9% sequential decline, which is better than our normal historical March quarter seasonality of an approximate 15% sequential decline. Increased component supply constraints across various component sides broadly impacted our sales for the March quarter more than we had originally anticipated. Adjusted earnings per diluted share for the March quarter was $0.16, which is at the high end of our EPS guidance of $0.13 to $0.16. The adjusted tax expense for the third quarter was $6.8 million reflected on an adjusted tax rate of approximately 5%, which is below our stated guidance range of 10% to 15% due to year-end true-up adjustments for estimates made in the previous quarters. Going forward, we still feel 10% to 15% is a good range to use for modeling our results. Finishing up on the income statement, our adjusted net income for the fourth quarter was $130 million, increasing 6% from the third quarter. Let me now briefly highlight some year-over-year changes. We saw sales increase to 6% from a year ago. Meanwhile, adjusted gross profit rose 46% due to cost rationalization activities and better utilization. Adjusted SG&A, which includes R&D, declined 7% versus March of a year ago, and our adjusted operating profit more than tripled. Interest and other expense came down meaningfully as a result of our debt repayment activities. Lastly, adjusted net income was up sixfold year-over-year, which resulted in more than fivefold increase to our adjusted EPS. Please turn to Slide 4. Adjusted gross margin expanded for the fourth consecutive quarter, rising 30 basis points sequentially to 5.8% as our overall mix improved, with an increased percentage of our sales coming from our Infrastructure, Industrial and Medical businesses, and less from our Consumer and Mobile businesses. Our Components businesses remained below normalized profitability levels during the March quarter. We expect increased adjusted operating profit contribution from our Component businesses as revenue and product yield improved during the year, and operating margin starts to normalize towards the 5% range. Adjusted SG&A expense totaled $172 million in the quarter, roughly flat on a sequential basis and down $13 million year-over-year. It's interesting to note that we were able to achieve this year-over-year adjusted SG&A reduction despite sales being more than $350 million higher, which illustrates the impact of our successful restructuring actions and cost containment efforts. At the same time, we've continued to invest in our business as our R&D expenses have remained stable year-over-year. Our adjusted operating profit trend shows the improvements made over the last year to cost cutting and revenue expansion as the overall economic environment improved. Adjusted operating profit of $170 million decreased 10% sequentially, but increased 236% or $119 million year-over-year. Our adjusted operating margin held firm at 2.9% on a sequential basis and reflected a 200 basis points of improvement versus a year ago. As we enter fiscal 2011, we remain confident and committed to continuous improvement in our adjusted operating margin towards our targeted range of 3.5%. Please turn to Slide 5. During the March quarter, we recognized $20.3 million of restructuring charges. This brings to a close of a previously announced restructuring plan which, over a five-quarter period, totaled $258 million. As we enter fiscal 2011, we are now realizing full annual savings of approximately $240 million, which is within our original range expectation. We incurred a $10.5 million charge related to the extinguishment of $300 million of our 6.5% senior subordinated debt. We call it the 6.5% notes with the highest-yielding debt we carried on our balance sheet, and the elimination of them will save the company approximately $19 million in annual net interest expense. After-tax intangible amortization and stock-based compensation was approximately $20 million and $14 million, respectively, consistent with the prior quarter. After reflecting these items, GAAP net income was $60.1 million compared to GAAP net income of $92.9 million in the prior quarter. GAAP EPS for the March quarter was $0.07 compared to $0.11 in the prior quarter. Please turn to Slide 6. Flextronics' suite [ph] (8:57) and capital management remained at industry-leading levels, with the Cash Conversion Cycle holding stable at 11 days, which is also 1/2 of the 22 days we were at a year ago. A lot of hard work has gone into reducing our Cash Conversion Cycle, and now we plan to maintain it at these world-class levels. Maintaining our Cash Cycle in the low double-digit range is a distinct competitive advantage, allowing us to continue to grow our business efficiently and with significant positive free cash flow. We're pleased that at these Cash Cycle levels, our networking capital as a percentage of sales will remain in the 3% to 5% range. Inventory rose $94 million or 3% quarter-over-quarter, but remained below year-ago levels despite higher sales. Our inventory days rose six days sequentially to 46. This also remains well below year-ago inventory day levels of 55. Our inventory turns decreased to 7.9 turns, which still marks the best inventory turnover for Flextronics for our March quarter since March 2006. This performance was in spite of a challenging supply chain environment we continued to experience while we were chasing quite a few parts across quite a few product categories. We continue to experience an expansion in component lead times, especially around custom semiconductors and components, memory and displays, which resulted in raw material and with [ph] (10:19) inventory build. Overall, we estimate that component shortages impacted our revenue in the quarter by $150 million to $200 million, which is significantly up from a range of $60 million to $100 million in the prior quarter. DSOs rose four days to 37 days and still remain within our targeted range. DPOs increased 10 days to 72 days, but ended the quarter four days below year-ago levels of 76 days. Flextronics asset management remains very strong and consistent, and coupled with our recently improved margins, has driven substantial improvements in our return on invested capital. For the quarter, return on invested capital came in at 28.8%, nearly triple the 9.7% of a year ago and down sequentially from 30.1% last quarter. It's worth noting that the sharp improvement in the ROIC over the past five quarters puts it well in excess of our cost of capital. Please turn to Slide 7. Flextronics generated $49 million in cash flow from operations during the quarter, marking the seventh consecutive quarter the company has generated positive operating cash flow. Our cash flow for the quarter included the negative impact of $32.5 million in cash restructuring payments and a $50 million payment for a previously recorded tax obligation in connection with the tax examination of an acquired subsidiary. For the fiscal year, we generated around $800 million in cash from operations, which includes the absorption of making $190 million in cash restructuring payments during the year. Net capital expenditures for the quarter and the fiscal year were $56 million and $176 million, respectively, as we continue to be disciplined in our capital deployments. Our ability to manage our working capital, reduce our capital expenditures and drive improving operating efficiencies resulted in the generation of $622 million of free cash flow for the fiscal year. We paid $9.6 million for acquired businesses in the current quarter related to the closing of one small acquisition and certain post-closing purchase price payments on the historical acquisition. During the quarter, we also called and repaid 6.5% senior subordinated notes due 2013, which were redeemed on March 19 for around $300 million. For the fiscal year, we deployed over $700 million of cash for financing activities as we continued our deleveraging effort. Please turn to Slide 8. We ended the quarter with $1.9 billion in cash, down $314 million versus the prior quarter, principally reflecting the redemption of the $300 million 6.5% senior subordinated notes. As a result, total debt declined $294 million to $2.26 billion at quarter end. Since our deleveraging efforts began in June 2008, we have reduced the consolidated debt levels of the company by 38% or $1.4 billion. Also, during the quarter, we were very pleased that S&P followed Moody's and raised our outlook to stable from negative and also reaffirmed its rating. Net debt, which is defined as total debt less total cash, remains near the lowest levels in the company's history of $329 million for the quarter. Net debt has declined $1.56 billion, or 83%, from June 2008 levels. We continue to gain confidence from our ability to generate cash and delever our balance sheet even during difficult economic times. We closed the period with no borrowings under our $2.0 billion revolver credit facility and have ample liquidity overall. The graph at the bottom of the slide shows our significant debt maturities by calendar year. The $240 million 1% convertible notes will mature in August 2010. No additional significant balances of debt are due until calendar year 2012. In conclusion, I'm pleased with how we ended fiscal 2010, and I believe we have multiple positives to build on as we enter fiscal 2011. I'm particularly encouraged with the overall position of our balance sheet, our cash flow generation and our growth outlook for the June quarter and the rest of fiscal 2011. Thank you to everyone for listening. I will now turn the call over to our CEO, Mike McNamara.

Thanks, Paul. On the call today, I plan to give you an update on the business environment, as well as cover important market and business unit trends. I will conclude with some takeaways and our financial guidance for the first quarter ended June fiscal year 2011. Let's start with our view on the business environment before turning to the results and outlook for each of our market segments and business units. We see the business environment as healthy and fairly strong. The momentum we have experienced over the last couple of quarters appears to be continuing into June and fiscal 2011. The breadth of the economic strength will result in each of our market segments and business units experiencing sequential growth in the upcoming quarter. Please turn to Slide 9. Our largest single segment, Infrastructure, grew 1% sequentially off of strong December quarter, but would have posted stronger growth had it not been for component shortages that constrained revenue in this segment by about $75 million. Infrastructure sales were $1.76 billion for the quarter and represented 30% of total sales. Our June quarter outlook for Infrastructure remains encouraging as well as we see mid single-digit sequential revenue growth. Our growth is being supported by solid demand trends across multiple customer accounts as a result of multiple new wins and strength with existing customers focused on the emerging markets' growth opportunities. Bookings include new wireless infrastructure products, China and India 3G rollouts and new CDMA wins, most of which will begin to ramp in the mid to late fiscal 2011. While we expect to all demand from our March quarter impacted by component shortages, we still expect component shortages to exist in the June quarter within a similar range. Let me pause for a minute to address the issue of component shortages because it will come up again as I cover our other segments. As we expected, Q4 marked another quarter where supply chain shortages existed and impacted our business. Demand continues to outpace supply and, in general, semiconductor capacity is too low for today's demand environment. We would estimate that component shortages negatively impacted our revenue to the tune of $150 million to $200 million, up from the $50 million to $100 million range the prior quarter. The components we found most challenging continue to include various custom semiconductor components, custom commodity components such as connectors, capacitors, power components, LCD panels and memory, both DRAM and flash. In Computing, we posted $1.2 billion in sales, which accounted for 20% of our total sales. This segment was down 11% sequentially. For the June quarter, we are forecasting high single-digit sequential growth. The growth in this segment will accelerate in the September and December quarters when new designs get launched to the market in time for back-to-school selling season and the holidays. Our high-mix low-volume segments grew stronger during the quarter. In total, Industrial, Automotive, Medical & Other comprised 21% of total sales, up from 18% of sales last quarter. This group [ph] (17:32) remained a solid contributor to the company's profitability. Our Industrial segment displayed strong sequential growth, which was ahead of our earlier forecast. We had another very successful quarter of new program wins, with new wins totaling $250 million to $300 million across a diversified base of customers. To reinforce how diverse our Industrial customer base is, recall that over 90% of our Industrial customers account for $75 million or less in the annual sales for Flextronics. During the month of March, we announced the establishment of our Clean Tech Super Site in Port of Tanjung Pelepas, Malaysia. The site has 1 million square feet of capacity that will be dedicated to Clean Tech industry in areas such as solar, smart grid, smart appliances, lighting, power, capital equipment, wind and energy. The site has a capacity to produce one Gigawatt of solar modules. In March, new programs with Q-Cells, Enphase and SolarEdge were also announced, followed by the most recent announcement of a new program with SunPower just last week. We feel very confident about our competitive positioning within the Clean Tech supply chain and believe we'll bring the right capabilities to a marketplace; thus, becoming increasingly receptive to manufacturing optimization and value-added supply-chain solutions. Areas of strength within Industrial continues to be resurging capital equipment market, the Clean Tech products, office equipment, as well as kiosks and navigation products. Next quarter, we expect the same sequential growth from our Industrial segment to continue. Our Medical segment expanded modestly on a sequential basis in Q4 as improvements in diabetes-related products and new product ramps continued as we expected. We continue to see more large healthcare OEMs looking to outsource more, and to that point, we booked roughly $450 million in new medical programs over the past year, including one program that we believe to be the largest ever in the medical instrumentation field. Keep in mind that many medical programs have long gestation periods, and ramps can range from six to 36 months in duration. However, success like this gives us confidence in the 10% to 20% year-on-year medical growth rate for fiscal 2011 that we presented back in November. Next quarter, we expect sequential growth from our Medical segment in line with the sequential growth it had posted this quarter. Our Automotive business saw continued momentum during the March quarter and grew sequentially. The overall order and demand environment has continued to improve. In addition, we booked new wins for interior lighting and roof modules, as well as in-car connectivity solutions as ODM investments in these areas are paying off. More than half of our Automotive revenue today is considered ODM and by the end of fiscal year '12, it's forecast to be almost 2/3. Our Automotive business remains heavily focused on European premium automotive OEMs, and we do expect sequential growth over that segment in the June quarter. Mobile sales declined 18% sequentially to $1.16 billion or 19% of sales. Seasonality drove the majority of the movement within this segment, which was coming off at 29% sequential growth quarter in December. We continue to see customer diversification efforts strengthening in this segment, and we remain focused on expanding our relationship with our largest strategic customers. To that point, during the quarter, our largest Mobile customer, RIM, announced that it will be utilizing Flextronics' Sorocaba, Brazil industrial park to expand its product line further into Latin America. where it will begin production of the Blackberry Curve 8520 and expect to broaden our Brazilian product portfolio over time. For the next quarter, we see our Mobile segment rebounding with low double-digit growth forecast. Consumer Digital declined 30% sequentially in the March quarter, which is typical seasonality, and was modestly exacerbated by some component shortages, principally in the LCD panel area. The segment ended at $624 million or 10% of total sales. For the June quarter, we are currently forecasting mid double-digit revenue growth. I would now like to spend a few minutes discussing our business units. Our Component business are comprised primarily of Multek, VistaPoint and FlexPower and have been underperforming in profitability As we mentioned last quarter, these businesses were running at roughly a $2 billion annualized run rate, with breakeven profitability. We continued to add new customers and win business with existing customers, and our pipeline of new business opportunities has gained further momentum. However, these businesses that declined in aggregate during the March quarter, primarily due to seasonality, were below break even as a whole. Nevertheless, we see these three businesses on track for a 30%-plus growth in FY '11, and we believe they have the potential to achieve a normalized operating profit margin of over 5% in the medium term. In the near term, they are forecasted to turn profitable as a group beginning in our Q2 FY '11, possibly Q1, and we see improving margins over the next several quarters. Our Global Services business focus on logistics repair services and service part of logistics. Global Services had a strong finish in Q4, exceeding its revenue and operating profit forecast across all the major service offerings and geographic locations. A Retail segment of the service business provides competitive and flexible field services for customers. We are aggressively expanding our capabilities across all our services business, and we'll give more information about these strategies at our upcoming May 25 Analyst and Investor Day. Please turn to Slide 10. The slide depicts our improved customer profile and success of diversification efforts. Our top 10 customers accounted from 49% of sales, flat with the prior quarter and just about 46% from a year ago. Typically, we don't have a consistent 10%-plus customer. Last quarter, HP rose above 10% due to seasonality. This quarter, RIM was just about 10% of sales. Sales to our top three customers, RIM, HP and Cisco, were 29%. It is also worth noting that the leading Chinese OEMs, such as Huawei and Lenovo, has solidly positioned themselves amongst our top 10 customers. We expect this trend to remain as we enter into fiscal 2011. Please turn to Slide 11. In summary, our fourth quarter represents a strong end to our fiscal 2010, and we have established a solid foundation from which we will profitably grow our business. Even though we continue to experience challenging supply constraints, we are able to still improve our financial conditions and deliver improving returns. Our key takeaways for the quarter are as follows. First, we saw better than seasonal revenue decline in the March quarter of only 9% versus our historical average decline of 15%. Our Infrastructure, Industrial, Medical and Automotive segments all grew on a sequential basis. Second, our Cash Conversion Cycle remained at industry-leading levels of 11 days despite the seasonality we needed to manage this quarter. Also, our inventory turns of 7.9x marked the best inventory velocity for our March quarter for Flextronics since March 2006. Third, we are executing well on free cash flow and net debt reduction. Free cash generation over the past four quarters have exceeded $600 million, and we ended our March quarter with a very healthy cash balance of $1.9 billion despite paying down $300 million in debt during the quarter. We have reduced our net debt by $800 million in the past year to $329 million. This remains one of the lowest levels in our company's history. And lastly, ROIC in the quarter at 28.8%, well above our cost of capital and certainly one of the highest levels we've achieved in recent history. Now turning to our guidance on Slide 12. Fiscal 2010 was a strong year for new business wins across all our major business segments, many of which we expect to ramp up during fiscal 2011, contributing to a solid revenue growth. For our June quarter, we expect all our major segments and business units to show sequential revenue growth. We are expecting our revenue to be between $6.1 billion and $6.6 billion, which indicates a sequential growth of 3% to 11% and is up 7% at the midpoint. We expect our adjusted earnings per share to be in the range of $0.16 to $0.19 a share, also up sequentially at the midpoint. Quarterly GAAP earnings per diluted share are expected to be lower than the guidance provided here and by approximately $0.04 for intangible amortization expense, stock-based compensation expense and non-cash interest expense. Once again, I want to take this opportunity to thank our employees all over the world for their hard work and dedication during the March quarter. You've all had a hand in helping Flextronics finish fiscal 2010 on a strong note and position the company well for fiscal 2011. Lastly, as a reminder, on May 25, we will be hosting our annual Investor Day in New York at The Westin in Times Square. We look forward to seeing many of you there, and online registration instructions have already been sent out via e-mail. If you need more information on registering, please contact Investor Relations. We're ready to open the call for questions, so operator?

[Operator Instructions] Our first question comes from Jim Suva with Citigroup. Jim Suva - Citigroup Inc: I have an easy question for Warren. Maybe if you can just let us know what tax rate we should be expecting. It looks like it was kind of been trending around 5%. And I think previously, we've kind of been modeling, thinking about 10% for next quarter. And then maybe as Warren looks that up, a more difficult question for Mike. Mike, in December quarter, you had $50 million to $100 million of lost revenues and then March quarter due to component shortages, then in March $150 million to $200 million. It appears that this situation has either gotten worse or you guys are having a problem with managing your supply chain. Can you help us out about understanding what's going on there and were you able to recoup all $50 million to $100 million in that March? And why not simply use, like Aero [ph] (28:01) or Avnet [ph] (28:02), or distributor a little bit more because I know of very few connectors that take more than three months to build. And so kind of what's going on there that the gap of opportunity lost has actually widened when you guys are supply-chain experts?

I'll take the first question as it's the hardest one, so I guess you were trying to pick on me right now. Yes, we actually did see it, the difficulty of getting parts increased. And we have a real good perspective on that, Jim, as you can imagine, just because we know the situation that many of our end customers are in, and the amount of parts that we ended up chasing were significant. So I think it's part of the industry. I don't believe it to be part of the supply-chain management technique. We've been in the business a long time. And as you know, lot of the supply chain, if we have trouble getting components, our customers help us get those components. And in fact, many of those components are actually controlled by the customer as their critical components. So there is just, in general, a shortage in a lot of capacity, particularly in semiconductors. I think your comment on connectors is a fair one. And one of the benefits about being one of the largest, if not the largest, supplier of products to applied materials, we have a real good view of the scramble that's taking place right now to bring that capacity online with many of the semiconductor companies. So I think it did get worse and that's unusual for the March quarter, but it's nonetheless the reality. We think it's going to continue into the June quarter, so we don't think that's a lack of management going into the June quarter. We think we're going to end up with many of the same problems. It might get better. But in the meantime, I think there is quite a scramble to bring capacity online at the semiconductor manufacturing plants. And with the backlog in the semiconductor equipment industry is, still remains pretty significant. And I'll let Warren answer the tax question.

I'll take it, Mike. Jim, it's Paul. Some of the tax issue, it's our fiscal year-end so there's always heavy analysis and true-up of jurisdictionally of the tax rate, and we ended up with 5%. It was a positive surprise for us. In terms of guidance, you have the 10% to 15%, it's still a good range for fiscal '11. Probably in the Q1, I would stick to the low end of that range. But we feel good about that range for next year.

Our next question comes from Brian Alexander with Raymond James. Brian Alexander - Raymond James & Associates: If I use the midpoint of your revenue and EPS guidance, it seems like you're expecting operating margins of about 3%, contribution margins on a sequential basis of about 5%, which I think is at the low end of your expected contribution margin range. So given your view that components will turn profitable over the next couple of quarters and move towards 5% in the medium term, do you expect that the overall contribution margins are going to accelerate in the second half of the calendar year from 5% perhaps closer to the 10% to 15%? And if not, why not?

Brian, it's Paul. People ask this question all the time, and I find that you have three different people asking the question about incremental contribution margins, it's three different interpretations. So it really is a detailed answer. We have contribution margins for our businesses that range anywhere from 7% to 37%. So therefore, the mix is really the key to each and every quarter. You're right about from March to June, you'll see about a 5% flow-through to the bottom line from the revenue. And as things do improve, particularly with components and mix and revenue increases and absorption through those revenue increases, you'll see higher returns then throughout the back-end of the year. That's right. Brian Alexander - Raymond James & Associates: So when should we see the inflection point in the Components business? It seems like that's a large driver. You talked about 5% in the medium term. Maybe if you could be a little bit more specific on whether that's this year or perhaps next fiscal year. And is it fair to assume that, that's going to largely be driven by Multek? And if so, could you give us a little bit more color on the new wins that you're seeing in the Multek business so that we could have confidence in the 30% growth that you're talking about?

Firstly, on the margins side, they're definitely making steady improvement, all three groups that Mike mentioned. And we'll see them steadily improve each quarter if you were out now through the back end of the year towards that target rate. And I'll let Mike talk to maybe some of the wins in Multek, but we're certainly seeing a broad base recovery there.

Yes, Multek has had probably at least four straight quarters of increasing revenues. We expect that to continue over the next several quarters. But Multek has become more and more broad-based, if you will. It now includes LCD displays. It has a number of different flex circuits and even some touch panel capability within the business. So each and every one of those segments is growing very nicely. So I think what we're going to see is, while it went -- Multek in particular went negative during the downturn, it is now crossing break even this quarter, and that we'll see steady improvement over the next three or four quarters. So we kind of view this transition and the Component profitability not to be a step function, and that includes the camera modules as well as the power, but more like a continuous improvement as we see these wins coming on. And one thing I will mention is, that we're quite comfortable that the amount of growth that we're going to have in each of these three business units is about 30% this year. So part of us going through this transition is to actually gear up to be able to handle the increase to volumes that we're seeing in the new business wins. So we're quite comfortable we're going to make the transition. It's not going to be a step function, so it's not going to be all of a sudden one quarter, it's going to hit. But I think you ought to think about it more as just a continuous improvement over the next four quarters.

Our next question comes from Amit Daryani (sic) [Amit Daryanani] with RBC Capital Markets. Amit Daryanani - RBC Capital Markets Corporation: Just have a question to go back on the component issues that Jim brought up. I'm just wondering, to the extent that demand continues to get better and suddenly a lot of these semi companies aren't adding capacity nearly fast enough to the extent demand's improving, could you maybe talk about why you don't think the situation [ph] (36:08) could get worse from the $150 million to $200 million headwind that you had this quarter?

Could you repeat what you said at the end, what about the $150 million? Amit Daryanani - RBC Capital Markets Corporation: Well, I guess my question really is, to the extent demand keeps getting better and capacity isn't getting out of fashion at least in the component side so far, why couldn't that $150 million to $200 million revenue headwind you had to component shortages actually become a bigger hole in June and September?

Well, I guess it's possible. I mean, we don't know what it's going to be like in June, so we don't know what we're going to leave on the table. We don't know what surprise increases we're going to get out of customers. So it's still April. But if we look at it, it looks and feels similarly to this quarter that we just finished where we just have a very broad-based set of capacity constraints that are hitting multiple industries. And we continue to see a broad-based industry expansion. It's one of the reasons that we mentioned that we think each one of our different business units and market segments are going to grow sequentially. So the demand environment is broad based. We see it hitting a lot of different industries, and it just kind of looks and feels like it did last quarter. And in talking to many of the semiconductor guys and in talking to the equipment guys, they see this hopefully getting maybe better by the end of -- maybe getting better in June quarter, but still September is an unknown. So I think it's just a -- we don't think it's going to get worse, but I suppose it could. People are adding and scrambling to add capacity in a pretty significant way. And people believe that there's a pretty broad-based recovery going on. And I can tell you, in December and in September of last year, many of the IC companies do not necessarily believe that there was a broad-based recovery on it, and there was still a risk of a double dip that people had in the back of their minds. So there was some reluctance to add the capacity needed to bring it online. And now I don't think, on average, that, that is viewed to be a worry. And I think as a result, the semiconductor equipment guys are adding capacity as roughly as they can. So I think there's some changes where we can see that, we think the problem gets alleviated. We just don't necessarily think it's going to happen in the June quarter. It could, but we don't know what things are going to be like in a week. So we'll just have to wait and see. Amit Daryanani - RBC Capital Markets Corporation: And then just maybe to follow up, you talked about this 3.5% margin target in the future. I'm curious, what sort of mix do you envision to get there between, call it, core EMS PC and components?

Yes, we would like the mix to be fairly similar to where we are right now. We don't want to get out of balance in any way on the low end for sure. So mix has to remain fairly constant, and we actively managed that this year. Revenue, of course, increases in components improvement. Those are the three areas that we're focused on to get up to that.

Our next question comes from Sherri Scribner with Deutsche Bank. Sherri Scribner - Deutsche Bank AG: First, Paul, I just wanted to clarify, you said there will not be any restructuring charges going forward, that you're done with the restructuring. Is that correct?

We just finished our restructuring program for fiscal '10. For sure, yes, $258 million and the savings we're enjoying. Sherri Scribner - Deutsche Bank AG: So you wouldn't expect to see restructuring charges next quarter?

Not that we're planning for, for sure. Sherri Scribner - Deutsche Bank AG: And then in terms of the CapEx for next year, it looks like you spent a little less than maybe you had planned for fiscal '10. And I'm curious, I mean, I have a number in here, I don't know how old it is, about $300 million for fiscal '11. Is that roughly what you're thinking about for CapEx for fiscal '11 or is that number too high?

Yes, that's pretty close. Our depreciation runs about $400 million a year. And we would expect to probably spend anywhere from $300 million, $325 million next year. And it's more front-end loaded, with the ramps that we've got, the programs we've won. June and September will be heavier than the back end. Sherri Scribner - Deutsche Bank AG: And then in terms of the Server Compute business, clearly, that was a little bit lighter than I expected. I was just curious if you could give a bit more color. Based on the breakout of the customers that you gave us, it doesn't seem like your customer mix has shifted very much in terms of the top 10? You still got Lenovo, Dell in there, and Sun, all still strong customers. So I'm wondering, is it related to those customers, other customers, maybe what was going on in that segment?

Yes. I think, it was -- I would agree, I would have thought that it was a little bit light as well relative to what our original expectations is. And it's not really a customer mix shift. I think, just in general, the customers we had ended up shipping a little bit less than we would have anticipated. So I actually think it's more of the programs we were in, we're just a little bit lighter, as opposed to the real reflection on the industry itself. Sherri Scribner - Deutsche Bank AG: And that's kind of cross-sell customers?

Yes. Because if I think about -- if I think through the computing customers, as well as I think through the server customers that we had, I think it's a very similar answer. I think some just didn't demand delivers as much as we would have anticipated.

Our next question comes from Shawn Harrison with Longbow Research. Shawn Harrison - Longbow Research LLC: Operating expenses for fiscal '11, is it still safe to expect $170 million to $180 million range per quarter?

That's right, Shawn. That's what we're modeling. R&D is built in that and that's increasing a little, but I think that range is good for the year. Shawn Harrison - Longbow Research LLC: And the second question is a multipart. Looking at the ODM computing business. If you could maybe comment just in terms of the wins you're seeing, how that will progress in the back half of the year, as well as some of the news releases that have been out there in terms of how you're pricing the business? And then finally, if you expect to make a profit in that business later in the year, as well as for the full fiscal year?

Yes, the comments are really very similar to what we've stated in the past that we did about $1 billion last year. We expect to do about $2 billion this year. We've had some nice wins across multiple new customers, and we've had some nice wins across and expanded the product portfolio to include netbooks and all-in-ones, which we did not have a year ago. So we're making good progress. We think it's going to be a much more diversified product set, with a more diversified customer portfolio, so we would have less unpredictability like I just mentioned to Sherri, that she observed in this first quarter. So I think that's going to improve. So that's on track. We expect the profitability continue to increase. It runs roughly breakeven now, and we actually think we expect to be around $4 billion to $5 billion before we hit industry averages, because we think we need that kind of volume to amortize our R&D expenses. So we'll take -- this year, we'll maybe do $2 billion. Hopefully, next year, we'll do $4 billion. So it also will work its way up in terms of profitability over the next two years. So we think that's on track. As far as programs that you mentioned, some rumors in the marketplace in terms taking programs too low, that's certainly not our objective. And so we expect to take programs in a market competitive rate and nothing different than that. So I don't know if there's some market rumors or bids that we've put in that weren't correct. But it is our objective to be building on a competitive basis and nothing less. And I'll remind everybody, Computing business is $1 billion this year of our $25 billion, and we don't need to underbid the program on this in order to have a very robust business growth. We're going to manage it in a way that it's competitively bid. And hopefully, we'll not make mistakes away from that intention.

Our next question comes from Sean Hannan with Needham & Company. Sean Hannan - Needham & Company, LLC: Just to follow up, I wanted to see if I can get a little bit more color in terms of the notebook platforms. Are you in a position where you can provide some more detail around the number of platforms that you're on, and across how many customers? And particularly, what of that is we expect to start ramping really in that September time frame?

Yes, that was part of the last question from Shawn, but I didn't answer very well. So we would expect the ramps to occur beginning in the September quarter and into the December quarter. So you should see a sharp increase in our computing numbers at that time. So that's mostly where they're going to happen. They're just going to be very little in terms of a ramp in this quarter, and not that much July, maybe a little bit in August, it'll start. And then, we will see some substantial ramps in the September through December time frame. And that will basically take us through a double the run rate. And as far as the type of programs and the customers, we actually laid out a kind of a nice chart in the November Analyst Day, and we want to do is have our guys get back to you and send you that chart. Sean Hannan - Needham & Company, LLC: I have that. I just wanted to see if there was some further color around that.

Not too much. We have one major program that was not in that chart, which I actually can't disclose. Sorry about that. But it's a large enterprise ramp with a pretty significant customer. So that wasn't in that original chart and it's added since then. So we've had one real nice win, which over time, should generate hundreds of millions of dollars of business. So we do have one more ramp, but we haven't disclose or announced that yet. Sean Hannan - Needham & Company, LLC: If I can switch segments just for a moment. You had mentioned a program on the medical side, one of the largest in terms of medical instrumentation. What type of program is that? And then separately, or related to that really is, do you have a little bit of a strategy shift in terms of the types of products that you're pursuing within that space?

No, no strategy shifts. And just to remind everybody, we kind of have a three-tiered approach to that space. We are actively after the disposable market, which may or may not be electronic products. But they could easily be mechanical products or plastics-based, or even just assembly-based. So there's disposable. A second platform is low volume high mix kind of products, such as the instrumentation. And the third is the volume consumer kind of products. And a large category within that is diabetes. So there's no real strategy shift. Those are our three main platforms, and we're continuing to develop those platforms. So this falls very nicely into the low volume, high mix kind of more complicated type of program, which is very much in our sweet spot. So I kind of view it right mainstream, and not really a shift to where we've been trying to target our medical business now for about two or three years. Sean Hannan - Needham & Company, LLC: On the instrumentation side, if there was a certain theme of application that, that got at?

No.

Our next question comes from William Stein with Credit Suisse. William Stein - Crédit Suisse First Boston, Inc.: First, I'd like to talk about cash use for a sec. You guys have done a great job of generating cash in the downturn, and it looks like that may continue. You also mentioned that you did a small acquisition in the quarter. Can you give us any color on that acquisition first? And then, any comments on priority of use of cash going forward?

Yes, Will, it's Paul. So obviously, cash has been a huge focus for us and we'll continue forward with the model we have, with 11 cash cycle days, 3% to 5% working capital is just a great business model to help grow this company and continue to generate free cash flow. So fiscal '11, for sure, will be generating hundreds of millions of cash flow. And like I mentioned earlier, in the first couple of quarters, we've got some heavy investment in capital, in CapEx. We're going to spend $325 million next year, and we'll spend most of that in Q1 and Q2, as a lot of these programs that Mike talked about are ramping, and we're supporting that with its Clean Tech or others. So that's kind of cash use, we have a lot of -- in terms of what we do that we have a lot of M&A opportunities and investing back in the business et cetera. So that's where our focus is. In terms of the acquisition, the real small local acquisition here, which we haven't disclosed in any way, but it was in the mechanical space.

Yes, it's in -- maybe if I can answer that Will, it's in the machining space. We have rapidly growing machining operation, and we picked up a guy that does a form of different types of plating that's related to the machining space. William Stein - Crédit Suisse First Boston, Inc.: The shortages that you're facing now, that one departing [ph] you a little bit more than you expected in the quarter. Are you seeing the shortages jump around from commodity to a commodity and part number to part number? Or is it more like chasing the same category and maybe subcategory of component that's just in perpetual shortage? Any characterization of that nature would be helpful.

Yes, I mean, I kind of described it the same way I did earlier, which is, I think in general, it's a lack of general capacity in the semiconductor industry. So as a result, I think it moves from one spot to another, from one commodity to another, because I think it's a little bit part of being able to manage this thing. It's how large you can yield to get your parts and get priority. So I think it's more of a general capacity constraint, a little bit demands, and the supply is imbalanced. So I think it can move around a little bit.

Our next question comes from Amitabh Passi with UBS. Amitabh Passi - UBS Investment Bank: My first question was, I just wanted to clarify, I thought you said that your hope is that by the end or exiting fiscal '11, your $2 billion component business should be close to sort of the mid-single-digit operating margin level, around 5%. Is that correct?

Yes, that's our target. Dual [ph] service, in general, increased throughout each quarter, and that's what we're heading towards. So it's obviously a year ahead of us, so 12 months of execution to get that. Amitabh Passi - UBS Investment Bank: So all things being equal, exiting fiscal '11, you should potentially see an extra $25 million on the operating income line just from improvements in your components business, correct?

Yes, that's about right. Amitabh Passi - UBS Investment Bank: So if I just look at 5.94 that you did this quarter, an extra $25 million on the OI line, would get you sort of close to 3.2%, 3.3% on the operating margin line, just assuming everything else remains constant?

That's the effect that would have, yes. Amitabh Passi - UBS Investment Bank: The second question I had was, and I'm still a little confused about this, in terms of normal seasonality still being defined as down 15%. I mean, I thought that was the situation pre-Solectron, and I would have suspected that would have changed and been less severe, given the fact that your consumer's business is now close to 29%, 30% versus 50%. So I'm just a little confused why sequential decline should be as high as 15%? It seems like it should be closer to 7%, 8% adjusting for Solectron?

Yes. So I think on a go-forward basis, you should assume it's no longer going to be going down 15%, and it's probably more like what it did this time, like an 8% to 9% level, at the way you just talked about that [ph]. Amitabh Passi - UBS Investment Bank: Mike, perhaps, for you, can you remind us again where was the notebook business on a run rate exiting March? I mean, are you kind of in that $1.5 billion to $2 billion sort of annualized run rate?

Yes, so I'm going to get off the run rate comments, because your first time in the business, we went from like $50 million to like $200 million. So the run rate might have been valuable and important to demonstrate a ramp. I think the better way, and I ended up confusing people a little bit, I think, so I kind of more like just -- we've been in the business for two years now. I've kind of like to more say, we did $1 billion last year, we'll do $2 billion this year. We'll do $4 billion next year hopefully, and try to get away from the spikiness of the run rate. Amitabh Passi - UBS Investment Bank: I guess that's what I'm trying to just figure out, because I thought you were doing sort of close to $400 million to $500 million a quarter exiting the March quarter. And it just sounded like basically, what you were saying, to get to $2 billion, you'd essentially be kind of at that level for the rest of the year?

Well, we're cycling through. We ended up having very little last year until we get to September and the December quarter. I think it underperformed a little bit in March. But again, very similar to the November Analyst Day, we are not a diversified business in that product category. We are subject to the flow through of just a couple of products, and those couple of products were off in terms of the customers' expectation. Our next set of new products will be coming out, in which is a more broadly-based set of products, which includes netbooks, all-in-one and enterprise notebooks and consumer notebooks, will end up coming out mostly in the September quarter. So these are all in design and development now. So there's not going to be a whole lot of a spike or an increase in the June quarter either. So then, we're going to see the next level increase. If you look at it holistically across the entire year, we're going from about $1 billion in FY '10 to like $2 billion FY '11, and that's kind of the better way to look at it. We can take some of the spikiness out of the comments, because it tends to be very, very confusing to everybody. Amitabh Passi - UBS Investment Bank: You've had a string of recent announcements in the solar arena. I don't know if you're able to share it collectively, how we should expect this business to ramp and just what the potential opportunities for you over the next 12 to 24 months with these customers?

That's a very good question. The Solar business, as you know, is a little bit difficult to forecast, only because it's largely driven by subsidies, and the subsidies move around a lot. So Italy was the largest supplier of -- or Spain was the largest supplier of megawatts back in FY '08. This last year, it's Germany, which is probably consuming 40% of the world's demand. It really depends a lot on the subsidies and around the government's support in many of these different regions, which can move around and change quite frequently. We're seeing a lot of demand from the customers this year, so we're pretty pleased with that. We think it's certainly going to go up substantially over the following years. So certainly, over the next three or four -- so if we had our guess, we could probably see that segment going up to $1 billion over three or four years. So we have high expectations for it. And we think we've got a strategy and a position for it that's very, very strong. So we think it could be significant.

Our next question comes from Steven Fox with CLSA. Steven Fox - Calyon Securities (USA): One, when you look at the Components business, I just want to be clear. Are you expecting to see reasonable profits out of power supplies and camera modules? And secondly, if you just look at the core businesses in the components area being PCBs and enclosures, are those disappointing in and of themselves? And will they have the biggest improvement in margins over the next couple of quarters?

We're seeing a pretty solid March, for which -- for all three, camera modules, Multek and power. So we would expect all of them to have consistently increasing revenues and profits. So they're all moving at a fairly balanced way. Steven Fox - Calyon Securities (USA): So it's going to take all of them to move up margin?

Yes. And we will take all of them, and we expect all three to move up along. So we've got a good book of business. We tend to -- some of those programs get designed in. And so as a result, we get some pretty good visibility into what they may had looked like going forward. But yes, we would expect to see all of them proceed in a very linear way.

Our next question comes from Alex Blanton with Ingalls & Snyder. Alexander Blanton - Ingalls & Snyder: I'm going to talk about components too. Mike, you've been in the Component business many, many years. And in past years, earned a lot more than you're earning now. And I understand that volumes are down. But what is it that has to happen to get you to 5% profitability, which is actually not very high compared with what you have been in the past in at least in the Multek business? Can you help us understand why you were not making that now? And what has to happen to get you from here to there? I mean, is it volume? Is it efficiencies? What exactly is it?

Yes, it's probably -- right now, it's probably just volume that we need to run through. Multek's problems were very simple. It went into the downturn. It has a substantially higher fixed costs as a percent of sales and it struggled during the downturn. And it has a lot more competition than it's ever had in the past for the product categories that it runs. So it simply needs volumes. It's had four straight quarters of volume increases. It's dug its way completely out of the hole. It's crossing through break even this quarter, and it shows very nice profitability going forward. We've had very, very strong book-to-bills in practically every factory, if not every factory in the Multek system. So that's just a question of utilizing the existing equipment that tends to be a little bit more fixed cost in a down environment. We have the same problem in 2001, and we think it's going to come back and perform very, very well. Camera modules is just a different story. Camera modules has been profitable in the past. It's a business we've been in only for about three years, but technology shifts quite a bit. But its problem is, the number one and number two customers last year was Sony Ericsson, Motorola, and not only with the downturn, but having the lost market share of both Motorola and Sony Ericsson and cellphones was somewhat crippling to it. So its turnaround is simply to book some additional business and come back around. And to be fair, camera modules, we expect in FY '11 to have the highest revenue that it's ever had in its history. So it's in process of a very significant turnaround, but was hit twice, once by the recession and once by the fact that its two top customers had that very significant market share shifts that were lost over the last couple of years. At power system, new division for us, it's a continued investment for us. And three years ago, with $60 million, we could hit $800 million this year, and as a result, we have chosen to continue to invest in power, knowing the growth rates that we're able to achieve and the high possibility that it has, rather than slow it down and just try to reap profits at a lower level. So this has been an area where it's been under continued growth and investment, and we think that was the right strategy for power. We're now the fourth largest power supply company, and we think that's good enough, and we think we can now spend our time really reaping the rewards of those investments. So each one is a completely different story. So we'll just manage them all individually. The good thing is we have all three of them that we think are in the midst of a turnaround based on what we can see from the bookings. So as a result, we're pretty bullish. Alexander Blanton - Ingalls & Snyder: Just one thing on what you said about Multek. A lot more competition. What does that mean? What is the average layer count right now? Are you still in the high layer counts and did more people come into that business than have been in the past? That was a fairly small number of competitors in the past.

Yes. I don't know our average layer count. It depends on which product it is. But yes, we still predominantly stay in the cellphone area, and also the high-end computing boards. And yes, there's more competition, because if you look at the top 10 PCB suppliers in the year 2000, and you will find eight European and American OEMs or companies. And if you look in the top 10 PCB manufacturers today, you'll find one. Well, actually, you'll find two now, because you'll see TPM. And as a result of acquisition, TPM and Needbell [ph], and you'll see Multek. So what's happened is, is that there's just been, over the last 10 years, a shift towards more and more competitiveness in terms of using Asian manufacturers. So that's put a little bit of a constraint on the profitability and it just created more competition, but we're still continuing to focus on the high end. So I think some of the real strong, very high double-digit margins that Multek has enjoyed in the past, it's going to be harder to come by now.

Our next question comes from Lou Miscioscia with Collins Stewart. Louis Miscioscia - Collins Stewart LLC: A couple of question on margins, the 3.5% operating margin goal, did you ever put a time frame on that? Do you expect it this calendar year or next calendar year?

Yes, we haven't Lou. We've just said that's our next target, and talked a lot about this revenue mix and components recoveries. So we've got a great revenue growth this year. We'll certainly, hopefully, be in the double digits. And we've got to keep the mix in balance, which is something we work on actively, and really got a good plan to components. So we haven't put a timescale on it. We're just building all the activities behind it to make sure we hit it. Louis Miscioscia - Collins Stewart LLC: And given the things that you're currently doing now, obviously, with the ODM PC business, and obviously, with Component business starting to come back, would say that's a midterm type of target? And if that is so, what would you say would be your long term? And the long term could be, two-, three-, four-year kind of operating margin target?

Yes, for sure you can categorize it as a midterm target, and our long-term targets remain at 3.5% to 4%, like we've always had. And so yes. Louis Miscioscia - Collins Stewart LLC: Mike, you had mentioned that when you get to $4 billion of revs, you'd be in the same operating margin range as the other ODMs. Could you just give us what you think that operating margin range is, because it does vary somewhat out there?

Yes, and it changes, as you know, but we view it as being around the 2.5% level. Louis Miscioscia - Collins Stewart LLC: With the cash position, obviously, which is pretty healthy and you still have a lot of untapped revolver and debt. Any thoughts, and I know you did [ph] a while ago, the share buyback, but any thought about using some of that cash, maybe $500,000,000, just something for a buyback, given that it looks like things will all head in the right direction, and this year still do look rather inexpensive at these levels?

It's certainly something we think about, Lou. That or debt repurchase. But we have so much opportunity this year in this business growth. So supporting it with a working capital, the CapEx and M&A, we're really excited about that area. So we've not given a great deal of thought to it, albeit we remain opportunistic in those areas as always.

Our last question comes from Wamsi Mohan with Bank of America Merrill Lynch. Wamsi Mohan - BofA Merrill Lynch: Can you talk a little bit about maybe what you're doing to alleviate some of these supply concerns for the components that you are responsible for procuring? So in particular, are your raw material inventories sort of significantly different from the end of the quarter? And maybe you can quantify how many weeks the lead time elongation really was? Mike, I think you mentioned in your prepared remarks that there was an elongation. How much of that really changed quarter-to-quarter?

Yes. So as far as alleviating some of the supply concerns, one of the things that we're doing is working with the customer to get longer orders and longer visibility. One of the things that we're seeing is that when OEMs are controlling the supply chain, they're locking up capacity in some cases for the whole year. And we need to have the flexibility to do that which is not typical. We usually respond to the orders that we have in hand and the lead times that are in place at the moment. So that's one thing. We are putting in more inventory in some locations. So we're working with our customers to identify, and our suppliers to identify where we think some of the difficulty and challenges are going to lie. And we are putting in capacity in some cases. It gets to the last question earlier about using arrow and others [ph], and I neglect to answer that because it's kind of a multi-point question. But we are actually using distributors as needed and as it makes sense for sure. We would not leave revenue on the table and knowing that there's parts available in the distribution channel. And as far as how long the parts have gone out, sometimes, we just get a call and they go from 12 to 24 weeks. It's very unpredictable and difficult to say, and it seems a little bit almost random. And a lot of it, you just have to manage back into place. But the most important thing that we're doing that we can too is to put a little inventory on the shelf. We don't think it's going to affect our numbers very significantly. We still think we'll maintain very strong turns and maintain our 3% to 5% working capital as a percent of revenue, and still be able to do that. And at the same time, we're working with our customers to try to get a longer visibility and a longer commitment into the supply base. Wamsi Mohan - BofA Merrill Lynch: And on the computing side, you mentioned there was a sort of sharp fall coming from a demand perspective. But could you maybe quantify how much of that sharp fall was also because of component availability, if there was some?

On the computing, it's not very significant. I actually don't know what the computing numbers are. Maybe like 10 million or so. So most of our problems in the Computing business, I mean, it's not really problems. It's just a few customers had lower demand that we would have anticipated. So the components did not affect that business much at all.

So with that, we'll end the call, and thanks to everybody for their participation, and we look forward to seeing you at Analyst Day. So we have, just to end, we have Analyst Day coming up on the 25th of May, so a lot of those invites are in the mail now. So thanks for your attention here.

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