Kevin Kessel - VP, IR Paul Read - CFO Mike McNamara - CEO

Sherri Scribner - Deutsche Bank Shawn Harrison - Longbow Research Wamsi Mohan - Merrill Lynch Matt Sheerin - Stifel Nicolaus Brian Alexander - Raymond James Amitabh Passi - UBS Osten Bernardez - Cross Research Jim Suva - Citi Craig Hettenbach - Goldman Sachs Sean Hannan - Needham & Company Amit Daryanani - RBC Capital Market

Good afternoon, and welcome to the Flextronics International first quarter fiscal year 2013 earnings conference call. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Kevin Kessel, Flextronics' Vice President of Investor Relations.

Thanks for joining Flextronics' conference call to discuss the results of our fiscal 2013 first quarter ended June 29, 2012. The slides for today's discussion are posted on the Investors Section of the Flextronics' website and can also be accessed from a direct link on our home page. Joining me on the call today is our Chief Financial Officer, Paul Read, who will be reviewing the quarterly results; followed by our Chief Executive Officer, Mike McNamara, who will discuss the business environment and conclude with September quarter guidance. Today's call is being webcast live and recorded. Our presentation includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with the SEC rules. You will find reconciliation charts on our website and in the Form 8-K submitted to the SEC. During this call, we will be making forward-looking, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, actual results could materially differ because of the factors discussed in today's earnings press release, in comments made during this conference call and in the risk factor section of our Form 10-K, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward looking statement. I will now turn the call over to our Chief Financial Officer, Paul Read. Paul?

Thank you, Kevin. Good afternoon. Slide 3, we generated $6 billion in revenue for our fiscal 2013 first quarter ending June 29, 2012, which was within our guidance range of $5.9 billion to $6.3 billion. Revenue declined $1.5 billion or 20% year-over-year, driven almost entirely by the transformation of our business model mix to include significantly less High Velocity Solutions business. Our first quarter adjusted operating income was $177 million and our GAAP operating income was $167 million. Adjusted net income for the first quarter was $156 million and our GAAP net income for the first quarter was $137 million. We reported adjusted earnings per diluted share for the first quarter of $0.23, this was up 10% year-over-year, and was within our adjusted EPS guidance of $0.20 to $0.24. Our GAAP EPS for the first quarter was $0.20, which is up 11% year-over-year. Our GAAP EPS was a new first-quarter record for the company and speaks to our quality of earnings, resulting from the improvement in our business mix. Our diluted weighted average shares outstanding or WASO for the quarter was 688 million. This was a reduction of 9% or 72 million shares compared with the 760 million shares reported a year ago. This decline reflects the result of our share buyback programs. During the quarter we repurchased approximately 20 million shares. Please turn to Slide 4. Our Integrated Network Solutions business group totaled 46% of our sales during the quarter, up from 44% last quarter. Revenue was $2.8 billion in the quarter, reflecting a slight decline of 2% both year-over-year and sequentially. This quarterly revenue performance was slightly below our expectations of stable revenue, as continued strength from several of our new outsourcing wins was offset by some softening across most of our top customers in the last month of the quarter. On a positive note, INS had an extremely strong bookings quarter, which Mike will discuss shortly. Industrial & Emerging Industries sales grew 7% sequentially to $1 billion. The group comprised 17% of total sales, up from 15% last quarter. We are in line with our expectations of high-single digit revenue growth, which is filled by solid growth in our Capital Equipment business, coupled with several new customer program ramps. Our High Reliability Solutions group is comprised of our medical, automotive, and defense and aerospace businesses. In the first quarter the group comprised 11% of total sales, up from last quarter's 10%. Quarterly revenue totaled $671 million, growing 4% sequentially and a healthy 20% year-over-year, marking yet another quarterly revenue record. This performance is in line with our June quarter expectations of low-single digit growth, as we saw revenue expansion balanced across the customer in industries will be served. This marked the tenth consecutive quarter sequential and year-over-year revenue growth for our medical business, as it grew healthy high-single digits sequentially driven by strength in drug delivery and medical equipment business. Additionally, we continued to see great traction with both new and existing customers, and our sales pipeline is holding strong in over $1 billion across the broad areas of medical industries that we serve. Our automotive business continues to be a strong performer and it grew several new customer programs, and had solid bookings during the quarter. Our ability to continue to penetrate top-tiered OEMs across the broad portfolio of products will propel this business beyond $1 billion revenue level this fiscal year. During the quarter we completed our acquisition of Stellar, through which we have expanded our manufacturing capabilities specifically around microelectronic. We expect our High Reliability group will experience accelerated penetration in the aerospace and defense business, as we leverage these new capabilities and technologies during fiscal 2013 and beyond. High Velocity Solutions comprised 26% of total sales, down from 31% of total sales last quarter, as revenue declined sequentially to $1.5 billion from $2 billion. HVS sequential decline of 22% was within the range of our expectations of 15% to 25% sequential decline. This revenue decline was a result of continued reduction of business with our largest mobile customers, we continue to execute and focus portfolio management actions. Please turn to Slide 5. Adjusted gross margin was 6%, up 40 basis points from the prior quarter, reflecting the trend we believe will continue as we transition our portfolio to a greater concentration of low volume, high mix business, which carries high margins. Adjusted operating income increased 12% sequentially, totaling $177 million and adjusted operating margin with 3%, which was up 50 basis points from the prior quarter. During the quarter, we incurred approximately $10 million as planned in the transition cost as we reduced our exposure to a significant mobile customer. We expect a similar transition cost in the September quarter to finalize our activities with this customer, as we have previously discussed. Additionally, as we previously discussed we continue to optimize our components business, which absorbed approximately $5 million in realignment cost during the June quarter. We expect a similar level of realignment cost in the September quarter. Our adjusted operating margin was within our margin guidance range and we continue to believe that our business is structured at a target of 70-30 mix to produce operating margin returns of 3.5% on increased revenue level. Our adjusted EBITDA was $282 million in the first quarter and totaled over $1.1 billion over the last 12-monhts. Our adjusted EBITDA margin increased 20 basis points to 4.7%. Our adjusted EPS from continuing operations of $0.23 was up 10% from the $0.21 we reported last year. Please turn to Slide 6. Interest and other, net was at $9.3 million expense in the quarter, a change of $24.6 million from the prior quarter, which had income of $15.3 million. The major driver for the increase was the absence of a $19 million foreign exchange currency translation gain, which resulted from the liquidation of certain foreign entities in the prior quarter. We also realize strong foreign currency gains primarily due to certain strategic renminbi position, although to a lesser degree than prior quarter. We do not anticipate this level of foreign currency gains to continue. As such, we believe a range of $15 million to $20 million for net interest and other expense, next quarter and going forward remains appropriate and is a level forecasted in our guidance. The adjusted tax expense for the first quarter was approximately $12 million, reflecting an adjusted tax rate of 7.1%, which is slightly more favorable than the 8% to 10% tax rate we have estimated for the quarter. The favorable tax rate was primarily due to a shift in the mix of taxable income during the quarter. For our September quarter, we believe modeling 8% to 10% tax rate remains appropriate and is also what our guidance is based on. Turning to the reconciliation between GAAP and adjusted EPS. Stock-based compensation amounted $9.8 million in the quarter and intangible amortization net of tax was $8.5 million in the quarter. The two combined items represent a $0.03 EPS impact. Our previously announced Vista Point Technologies divestiture closed during the quarter. As discussed last quarter, the operating results for this business and impacts from the transaction are being recorded as discontinued operations. Our discontinued operations reflect a net loss of $9 million, which equated to $0.01 EPS impact in the quarter. Please refer to the Investor Section of our website for detailed reconciliations. Please turn to Slide 7. Inventory declined by 5% sequentially or $150 million in line with our sequential revenue reduction to approximately to $3.2 billion, and our inventory turns remain flat at $0.07. Our cash cycle expanded three days sequentially to 30 days, which was within the 25 to 30 day range we had expected to manage our business following our continued reduction in our High Velocity business that carries significant higher asset turnover. The current three-day increase was a result of a decline by one day in our DPO coupled with a DSO expansion of two days to 47 day. As seem from the networking capital chart at the top right-hand side of the slide, our networking capital as a percentage of sales increased slightly to 8.5% from 8.3%. This was just above our targeted range of 6% to 8%. Our ROIC for the quarter was 20.8% and remains well above our 8.5% weighted average cost of capital. Please turn to Slide 8. We generated $46 million in cash flow from operations, which marked our sixth consecutive quarter of positive cash generation. Our net capital expenditures amounted to $105 million in the June quarter, as a result we consumed $59 million of free cash flow. Completion of the Vista Point Technologies divestiture combined with a couple of strategic acquisition to close this quarter result in approximately $15 million of net cash used related to these investing activity. During the quarter we also spend a $134 million repurchasing our stock. Please turn to Slide 9. We ended the quarter $1.3 billion in cash, down $233 million versus the prior quarter. Total debt remained constant at $2.2 billion. Our net debt increased by $220 million to $912 million, while our debt-to-EBITDA level remained at very healthy 1.9 times. That concludes my comments. And I will now turn the call over to our CEO, Mike McNamara.

Thank you, Paul. Today we'll discuss the underlying global macroeconomic conditions facing our business and how we are responding to these conditions, and the progress we have made with our ongoing business transformation outlined at our May 31, Investor and Analyst Day. I will conclude with guidance for our September quarter. Direct macroeconomic environment has deteriorated over the past few months, which should surprise anyone listening to the call. Well, we're aware of the challenges facing Europe, China and the U.S. from a macroeconomic standpoint. Regardless of the environment, we are maintaining a disciplined cost structure, while aggressively expanding our efforts to create supply chain solutions for our customers and grow our revenue and improve our overall operating profile. We've been adding new customers and new business into a portfolio that will help us grow and diversify. Three of our four business groups are expected to be stable to up slightly, and our HVS business is expected to benefit from consumer seasonality and grow sequentially. Our pipeline of outsourcing opportunities is expanding and we are converting these opportunities into strong bookings. The June quarter turned out to be one of our best bookings quarters reaching $2 billion on annual basis. Breaking down our bookings, in INS we saw over $1 billion, which were distributed across 13 different programs for data networking, servers, storage and telecom. IEI was over $300 million and spread across more than 50 programs in many sub industries such as point-of-sale, appliance, security lifestyle products, energy, navigations, smart meters and capital equipment. HRS was over $171 million with approximately 50% in automotive programs, primarily in the connectivity and the body electronics markets. And the majority of the remaining HRS bookings, supporting our medical equipment and drug delivery businesses. HVS totaled $600 million with over $450 million in Mobile Consumer and the remainder in High Volume Computing. Perhaps, even more noteworthy is that over 80% of our new HVS bookings are in higher value-added services, mechanicals and non-assembly technologies. Our bookings this quarter are vital to reigniting our growth engine and we expect to benefit in fiscal 2014, with some programs ramping later this fiscal year. Although, remain main challenging to predict where the global economy goes from here. We remain confident in our ability to improve our operating margins towards the 3.5% we've outlined. And we will generate strong free cash flow in fiscal 2013. We have accomplished a transmission of our business to our desired portfolio model. Our current portfolio model is structurally established to reduce volatility at a price for more diversification across markets and customers. Evidence by diversification was seen through our continued reduction and the concentration of our top 10 customers. Our top-10 customer concentration came down to the lowest level in nearly three years at 48%. This is down meaningfully from 51% last quarter and 55% in fiscal 2012. The quarter also marked the first back-to-back quarters without any 10% customers in over three years. Our mix shifted 74% low-volume high mix, and 26% high volume low mix, and we expect that we will maintain a roughly 70-30 mix for fiscal 2013. We expect this to occur even as our HVS business grows again from the bottom and establishing Q1. But now our HVS growth will be driven by higher quality businesses using more of the non-assembly manufacturing technology businesses. Extending our lead and low volume, high mix manufacturing and achieving increased customer diversification, utilizes more of our manufacturing technologies will lead to increased predictability. Our low volume, high mix business grew sequentially in a difficult environment, and we exited the quarter with a low volume, high mix annualized revenue run rate of approximately $18 billion. Our successful transformation is also very important to supporting and enhancing our quality of earnings, which remained strong in June. Margin expansion is a key pillar of our transformation. Operating margin for the quarter settled at 3%, in line with our guidance range despite slightly lower than expected revenue. We are forecasting operating margin expansion for the September quarter, despite the macroeconomic uncertainty. The bridge that Paul unveiled at our recent Investor and Analyst Day detailing our targeted expansion to a 3.5% operating margin remains on track for our fiscal 2013. Other transformation evolved in free cash flow will increase, which will create numerous investment options. Despite a slower start to the fiscal year, our free cash flow performance was inline with our internal forecast. Our business is structured to generate free cash flow in the range of $500 million this fiscal year. Our Capital structure is in excellent shape and we remain disciplined around our CapEx investments. We have continued to aggressively deploy free cash flow to our share repurchases. And we completed our most recent share repurchase program during the June quarter, bringing our total share buyback for the year to 73.1 million shares or 10% of our shares outstanding. Now, turning to guidance on Slide 11. Our second quarter revenue is expected to be in the range of $5.9 billion to $6.3 billion. Our September quarter revenue guidance reflects a range of down 1% to up 5% or a 2% increase at the midpoint. At the midpoint of our guidance range, we are forecasting all of our business groups to be stable to up slightly sequentially, with the exception of our HVS business that will benefit from consumer seasonality and bounce off the bottom it established in the June quarter. Our adjusted EPS range is $0.21 to $0.25 a share and is based on an estimated weighted average shares outstanding of 680 million and assumes an operating margin range of 3% to 3.3%. Quarterly GAAP earnings per diluted share are expected to be lower than the adjusted earnings per share guidance, I just provided, by $0.03 a share for intangible amortization expense and stock-based compensation expense. With that, I would like to open up the call for Q&A. We ask that you please limit yourself to one question and one follow-up. Operator, please open the line for questions.

(Operator instruction) And our first question comes from the Sherri Scribner with Deutsche Bank.

On behalf of Sherri Scribner. I was wondering if you could just address your components profitability this quarter and the trends you're seeing in the components business?

On the profitability side, for the June quarter, absent of the charges we are roughly breakeven, but we said there and we took about a $5 million charge. So as we continue to align that business and take the same amount of charge in the September quarter. And for the September quarter we'd expect it to be slightly profitability even with that charge.

You mentioned that you had about $2 billion of annualized dealings this quarter, but you're not really looking to major benefit from those until fiscal '14. And just given that we're dealing with very uncertain macro and demand picture, where do you expect to drive growth in fiscal '13?

Well, I think you'll see a recovery over the next couple of quarters. You'll see a slight increase in revenue. A lot of the new wins that we're wining aren't a lot of consumer wins that occur in the near-term. So as a result they don't ramp as rapidly in near term. Some of those wins will come in, in the fourth quarter. Maybe some even will touch into the third quarter. But predominantly they'll reach their full run rate in FY '14. So we'll continue to book business. Some of them will fall into the existing quarter, but as we book more complex business, longer product life cycle business, it tends to have a little bit slower ramp rate. And in the meantime we'll continue to live off some of the wins that we've made over the last six or nine months. And you should see some expansion in revenue as a result over the next couple quarters.

Our next question comes from Shawn Harrison with Longbow Research. Shawn Harrison - Longbow Research: Just wanted to I guess first touch on the revenue declining business there. How much of a drag will it be into the September quarter in terms of revenues, and I guess, what is also kind of the margin drag with that business right now?

We'll have some revenue decline going into Q2 from Q1, it's probably not very significant, but it will be slight downward trend. The margin trend it really depends on how we end up in terms of the overall alignment charges that we've talked about. We talked about a $10 million charge in the second quarter that's the amount, to think about that comes out over time. We've actually hoped to be substantially out of that in Q3. So we're actually hoping those, the ending realignments are actually currency too. So we see some slight reduction in revenue, not that meaningfully. And we still see about a $10 million realignment and the after that we'll be pretty much steady to say. Shawn Harrison - Longbow Research: So on a net-net basis you'll have a total of $5 million in restructuring charges with the components businesses $10 million, with the realignment within mobility. So you should see a $15 million benefit to EBIT moving into December quarter, is that the correct way to think about it?

Yes. That's roughly correct.

Your next question comes from Wamsi Mohan of Merrill Lynch. Wamsi Mohan - Merrill Lynch: Mike, can you talk a little bit about what is driving the higher non-assembly business in HVS? And what percentage of revenues in HVS is non-assembly and where that could go over the next year?

What's driving the non-assembly business is a lot of the pure assembly business and consumer kind of products, tend to be a very low profitability programs that have high competition with some of our Taiwanese competitors. We found that to be difficult to really drive any kind of meaningful value for our shareholders. If you look at even the results this quarter you'll see that revenues are down substantially, but actually net income is higher and earning per share up 10%. So what we're trying to do with our High Velocity business, it's really important to us, it's something that we'll continue to penetrate it. Now, we continue to have billions of dollars in. And we'll try to spend more time booking businesses that are in, what I called, just pure volume business, but also things like services and mechanicals and power and Multek boards. And maybe its other region such as Brazil, maybe it's a locally build products. I mean there is still a lot of different ways to go penetrate those consumer products. And we're actually focused on booking all those kind of things, which we think are better businesses. How does that trend, evolve over time, well it is evolving kind of as we speak. So I would say, I don't know the numbers exactly. But what you'll find as we move from computing ODM, and we move out of some of the pure assembly business from our big cell phone customer. You're actually seeing that transition occur very, very rapidly. So I wouldn't want to quote a number, except to say it's moving very, very rapidly over the course of the last six months, and will continue to over the next six months. Wamsi Mohan - Merrill Lynch: And as a follow-up, Paul, you mentioned the $5 million in charge this quarter and next quarter for components. Can you remind us what those charges are specifically geared toward? And is this primarily still transitioning in consolidation in China of the factories or is there anything else?

It's primarily the power. We have one last facility to transition there. And it would be done by the end of September. And so it's primarily related to that.

Our next question comes from Matt Sheerin with Stifel Nicolaus. Matt Sheerin - Stifel Nicolaus: So at your Analyst Day, you threw at a target of dollar to $1 to $1.10 in earnings for fiscal '13, given that you've got a lower revenue run rate here and that EPS is little bit lower than some expected for the September quarter. Are you still comfortable with that target and given that you've got some cost rolling out in the back half or should we bring that in a little bit?

Our objective is to talk about our targets, once a year at the Analyst Day, and then give you guidance on a quarterly basis. I think the new data you have is that the macro tends to be a little bit tougher and continue to become tougher. Over the last few months, a little bit more than we would anticipate. So I think that's a new data. But that continue to kind of slightly deteriorate. I don't actually consider it to be a significant down, but it just seems to be leaking a little bit. But we're not prepared to readdress the targets. I mean, we've set our targets and we're going after those. But certainly, the macro environment is not helping us, so we could go and achieve those targets. Matt Sheerin - Stifel Nicolaus: And then just clarifying the relationship with RIM. I know you're basically closing down some operations where you supported RIM in a couple of plants. What's going to be left in terms of that relationship, when all this restructuring and alignment is done?

Well, we'll have to see, but we'll continue to work on a number of different projects such as flex circuits, printed circuits boards, may be there will be services involved, maybe there will be power products involves. So we'll continue to try to work the relationship much as I described earlier about trying to time do the production technologies around the edges as opposed to being involved in significant variability that testify with that. Matt Sheerin - Stifel Nicolaus: So all the volume business is going away, basically?

The volume assembly business.

Your next question comes from Brian Alexander with Raymond James Brian Alexander - Raymond James: Just to confirm on the 3.5% operating margin target that's still intact. Is that still intact for the December quarter? I think it was dependent on about $6.6 billion in revenue which would require about 8% sequential growth in December versus September using the mid-point of your guidance. So you weren't specific in your comments about when you get the 3.5% on what revenue levels. So just looking to see if anything has change there and then I have a quick follow-up.

We've said in our Analyst Day, that we need a revenue level. We earned about $6.6 billion per quarter to help us get to that 3.5%. We're on loss, like Mike said as the environment is challenged. We still see growth through the September, December quarters. That will be a challenging number for us. However, there is always compensating aspects that could help us still get to that and as we roll off some of these charges, the second half of the year, I think that would help and components that would certainly help. But we certainly think that the 3.5% is still achievable for this year, at the backend of this year. Brian Alexander - Raymond James: And then on bookings the $2 billion, remind me how does that compares to total bookings in recent quarters. It seems like a pretty big number, if I annualize it more than 30% of your revenue run rate. And then how should we think about the gross margin profile of those wins in aggregate relative to your current gross margin of 6%? It sounds like its higher, but I just wanted to confirm that?

I think you have to think about it. I'm not sure about gross margin on those businesses but I think you should assume that the operating profit is roughly consistent with our target operating profit of 3.5%, as a bundle. And I would say, yes. I mean, I think the $2 billion, we view this last quarter as one of the best bookings quarters that we have seen in the last several years. So we view it as being very, very strong across a variety of different segments and it just makes us somewhat happier about the potential for FY '14 and kind of resuming the revenue growth, as we get off a lot of this HVS business. So we're pretty excited about that, it's probably not an accident. We certainly restructured the company to move to this new portfolio. We try to create a structure and create an organizational profile that's much heavy awaited to as revenue driving revenue growth. And good revenue growth that meets our target margin profile and meets our portfolio. And we believe we are being successful in terms of that transition and some of those changes we made and really be able to drive some split end solutions that create value for our customers, so that we win additional revenue. So it seems to be going really well for us and we're pleased with that but it is unquestionably one of the best bookings quarter we've had. Brian Alexander - Raymond James: Do you know roughly what percentages of those are from new versus existing customers?

Well, the largest percentage of them would be from existing customers. The problem is have most of the customers in the world, so we have a lot. So it's kind of hard to book to 2 billion of brand new guys that we're not involved with. But I would say you have to assume you're roughly looking at least 80% of that is coming from existing customers.

Your next question comes from Amitabh Passi with UBS Amitabh Passi - UBS: I had a question for Mike and then a follow-up. Mike, just hoping you can drill on a little further into the INS segment. We've heard a lot of conflicting data points in terms of trends in certain key sub-segments of that segment. So I was just wondering if you just maybe talk to trends across to major sub-segments, networking, wireless, infrastructure, storage?

I actually believe it's we're getting some confusing data points. There are lot of companies out there that are small, nimble agile companies that are actually doing quite well and producing pretty strong result. And there is other companies and even within some of the larger companies that are having niches with their portfolio that are doing well. On average we see, datacom and telecom being reasonably weak but they are bits and pieces of telecom and datacom that are actually doing quite well. So I think that's the reason for some of the difficulties. As a bundle, we think they are lower but there is different places to play within those companies that could have very, very nice growth rates and they're tend to be a number of different smaller companies that are doing actually quite well. So I'd say it's weak, but again pretty spotty. Without doubt, we're hearing from our customers that Europe is slower. We hearing China is slower. We heard U.S. is actually pretty good. So from a geographic standpoint it's little bit mixed and I think you will also get some mix result and that most of the other emerging markets tend to be a little bit slower right now. In storage and servers, there is also mix data points, it seems if once you get into government and enterprise, it tend to be pretty slow, but once you get into the cloud and if you're penetrating into the cloud infrastructure of server storage, it's very, very strong. So once again, I think it depends a little bit on where you're playing. So consumer on average, we view as weak. Well, I won't go into the rest of the markets, but could you asked about the INS. But it's a lot of mix data out there. Amitabh Passi - UBS: And then Paul, just for you, as a follow-up question, cash conversion cycle days continue to trend-up, as there a way to maybe improve that metric. And I was just curious, relative to one of your larger North American competitors, your cash conversion cycle days is almost 2x, what there is, I would love to hear your commentary on that.

I just want to make a point actually for the June quarter that we were negatively affected by a couple days cash conversion cycle. It probably would be more run to 27 to 28 days. As we reduce our business with our number one mobile customer, we had significant last cash cycle days in the average of the company. And so that negatively affects it. However, there was, kind of, a onetime adjustment also. And that we would be getting some end of period, kind of, compensation from them for high inventory levels and that went away. So that kind of cost us about $150 million of free cash flow. So really if that onetime issue did not occur last quarter, we would be in a $100 million free cash flow positive. And we expect to actually make that up now in the September quarter. The inventory levels with that customer come down considerably. So it's kind of a two-quarter issue. With regards to comparing to our customers, I don't think I have enough information around their business to compare with that. There is a lot of things that's going on and off the balance sheet, that effect the cash conversion cycle. And we certainly take advantage of that. But we actually don't probably do to the same level or to the same extent as others and therefore, as a percentage of a cash conversion cycle, we don't get as positive effect maybe as others would.

Our next question comes from Osten Bernardez with Cross Research. Osten Bernardez - Cross Research: Would you be able to share the rate of bookings for your component business? I can't recall that you mentioned that specifically.

I don't have a number of exactly what those bookings are, but basically that's what I was going to call the non-traditional assembly businesses that we have are all probably growing. As a bundle, we'll grow well over 10% growth this year, the way it's looking right now. So I don't know, I have an exactly a bookings numbers for you. I can tell you that the revenue growth in those places is very strong and certainly much stronger than the company as an overall average. Osten Bernardez - Cross Research: And the follow on to your INS bookings that you highlighted earlier, would you be able to comment as to whether, I believe it was 13, this split amongst those 13, relative to the sub segments in your INS, did they fall sort of relatively in lined with them where your overall book of revenue tends to be?

Well, as it relates to networking communications and server storage. Are you asking that is that roughly is in that line with that? Osten Bernardez - Cross Research: Correct.

That's correct. We are probably a little bit heavier in networking, relative to our total exposure to networking. So I think telecom was a little bit lighter than our overall average. So I'd say we're pretty heavy on networking. And we were probably pretty much inline with server storage and little bit light on the telecommunications.

Your next question comes from Jim Suva with Citi. Jim Suva - Citi: Could you just maybe help us better understand or bridge the statements that I think at the beginning of the call there is a comment talking about the last month of the quarter has seen some softening. And then there were some commentary about the strongest bookings that company ever had. Help us, maybe bridge those comments as well as kind of how July has progress thus far? Then I'll probably have a follow-up.

So well, the bookings aren't related to the shipments this quarter, though, I'd say they don't really bridge. Most of those bookings were INS bookings which you're going to see that's literally going to take 9 or 12 months to go really mature. Especially in that product category, it tends to take a little bit longer. So I actually don't think it bridges to the current quarter. But what we're trying to say by seeing some softness at the end of the quarter is that the last month of the quarter tends to be higher than the other two months of that quarter, particularly, and that what I would consider it to be the higher end product categories. The more complex products because there is lot of configured over that's get pulled at the last minute and that was a little bit softer than we would have anticipated. So that tends to be a surprise because we don't really know what it's going to look like at that last month. And the pulls came through a little bit lower than normal but they really don't bridge to the bookings, that's kind of not really that related. Jim Suva - Citi: And then that July progression and then the follow up would be a question probably more for Paul. Should kind of think of stock buyback another 10% clip right here for this quarter. I think Singapore law allows up to the max of 12% or 10% for 12-month period if I'm correct, and kind of start to build that into expectations?

For the year actually we have exhausted our 10% authorization that gets proposed to the shareholders now in our AGM at the end of August. And we'll certainly take up that proposal and hopefully as it usually does get approve. We want to make sure we have the flexibility on hand to deploy capital in what ever ways most beneficial for us continue to grow earnings and make best season capital. So I think that for now and that the September quarter, you shouldn't really be thinking of anything because two of the three months is actually taking up without any authorization. Jim Suva - Citi: And then comment about how July shapes to shaping up?

We actually don't know yet, the July month, Jim, we know we get weekly reports and everything but I think July month we're only focused on and we'll get some numbers on that that next week.

Our next question comes from Craig Hettenbach with Goldman Sachs. Craig Hettenbach - Goldman Sachs: Mike, there has been a lot of start and stops with demands with that overall tech market in the last couple of years. So just want to get a sense of how you've used the environment today? And how it might be different from a year ago or two years ago, what you're hearing from customers?

Well, I think just in general if I look at the last two years, I think there is more disruption. I think there is more disruptive technologies. I think there are more disruptive companies. And I think it becomes increasing difficult. I think there is just probably, a little more uncertainty in terms of the OEM's as who's going to win and not win. And I think the world moves a lot faster than it did even just two years ago. So I'm believer that technology shifts and the disruptive technologies that are coming and the aggressiveness of some of the certain companies is very significant and it moves in markets. And a good example of that is in the consumer markets both Samsung and Apple are massive disrupters to the normal sense of order. And you can even argue that may be there is little bit of an oligopoly developing for a lot of products with those two companies. That's different than two years ago. I think here, I described some the telecom, datacom storage-server market. You have some companies that are just turning up, often smaller companies with disruptive technologies and you have a lot of traditional companies that tend to struggle with being able to respond to that disruption with some of the bigger systems. So I don't know if I got your question right but I just kind of view it as the market is being a little bit more uncertain and a little bit more, there where disruptive technologies can move companies a lot quicker. And probably the stability in terms of understanding who the market leaders are going to be. Having those same ones, be the market leaders year-on-year actually starts to become more threatened. And that's kind of how we think about our model and our diversification of our model. We actually want to have more customers. We want to understand and make sure those disruptive company's are in our portfolio. We want to make sure that we're positioned in the right way and not heavily positioned than someone that could be disrupted. And so to us, the response to that is the significant amount of customer and even the customer geographic and even manufacturing technology diversification. Craig Hettenbach - Goldman Sachs: The other part, I was just curious on kind of that base business, if you'll understand. So our technology shifts recently but just the underlining base of business today versus a year ago when things also slowed, if there is any kind of comparison you can make, what you're hearing from customers?

Compared to like two years ago, you mean in 2009. Craig Hettenbach - Goldman Sachs: I don't know, just last year. One year ago when things slowed a little bit with concerns around, it seems like we're kind of repeat that. So just curious what you see is the same or different from a year ago?

I just call it kind of more or the same, if you will. I don't think it's alarming. I don't think any of the trend that we're seeing are alarmingly down. I don't think there is huge adjustment coming to us. I just think it's a little bit slow and I think it might be continuing to be slow, at least our new term horizon. But I don't it's a significant shift or any real significant changes, I just think it's little bit slow compared to the base to last year. Craig Hettenbach - Goldman Sachs: And then if I can just quick follow-up on the component side and Multek in particular, any kind of product cycles as you go into the back half of the year and into next year that you guys are excited about with that business?

Well, the biggest one would be the ELIC technology, which is the technology that most which is really Every Layer Interconnect Technology. It's a technology that's used on a variety of cell phones and tablets today. Not all companies have shifted over to this technology. There is still continuing to be a shift into this technology and it just enables more advanced products to be designed and built on the printed circuit boards. So we have quite a nice investment in that. Have a lot of quotes and some nice new business wins in that market. That's kind of the most exciting structural change that we see coming to us.

Our next question comes from Sean Hannan with Needham & Company. Sean Hannan - Needham & Company: Mike, if you could elaborate a little bit around the upsets over the microenvironment as you factored into your guidance for the September quarter. The flat guidance for three of your four business groups other than the High Velocity, can you perhaps maybe rank and discuss which of these businesses saw perhaps the most pull back in terms of the expectations that you had previously, especially as you factor in new programs or what have you? And then as kind of part B to that, where you suspect we could see the most risk among those segments given the dynamics foreseen today.

I think the biggest pull back was probably in INS segment. Relative to the expectation we have seen the softening that we've talked about. I think that's probably the biggest change in terms of total dollars that affected us and it's probably the place where we saw the most change in June when we talked about quarter end, seeing a little bit of a problem. We also saw kind of a broad-based over the last quarter. Even though last three months, I mean on a continuous basis some disruption and a lot of different industrial technologies, call it semiconductor, just a variety of different company. So I'd rank that second. We've seen almost no impact in our High Reliability segment which is predominantly medical and automotive, both of those continued to hold up and continue to be strong that we've seen virtually no hold back on that. And then HVS, we're seeing a very, very normal consumer recovery coming into this quarter. And even while we talked about the HVS and Apples still be taking some negative June to September revenue impact on RIM. Though it's actually overcoming that impact and actually delivering some more to add. I must view that as the kind of third, so I'd called INS the most aggressive downturn industrial probably second. And again a lot of the industrial downturn is because of expectation. Even though, we grew 9% quarter-on-quarter, our expectations were actually grew higher. So it's actually down from a higher expectation as opposed to be a down as a segment. Sean Hannan - Needham & Company: And in certain, when you think about then the risk from here in September, would you assign kind of a similar ranking to those segments, just based on the movement you've already seen?

Yes, I probably would. I think the risk I would assign to it is do we have just another drifted little bit softer. Can I move down as a result of some of the softness? So I would almost assign it almost the exact same way. Sean Hannan - Needham & Company: You talked about wrapping the HRS business, how should that materialize? You did $671 million in the quarter. Obviously, we're looking for flat next quarter. Is there is step function that we would see then in either December or March or is there more of a straight progression, once we go through those two quarters based on the ramps that you're aware of today?

Yes. I think we'll end up with the same characteristic we've had in the business last couple of years. In medical, Paul talked about 10 straight quarters of just steadily increasing numbers. The medical and the automotive businesses are one of the most stable businesses. They have some of the longest product life cycles and you have some of most visibility that you have of any other product categories. So what it does is it gives us a good view. But basically, the answer is, I've been alluded just expect a nice continuous steady up tick. And we expect that for the next couple of years and certainly, almost hopefully, on the steady basis quarter-on-quarter. Sean Hannan - Needham & Company: And a quarterly level of roughly about $1 billion, say, exiting March of 13?

Right now, our High Reliability Solutions in the June quarter was $671 million. So it won't go to $1 billion run rate in March. So there is not a step function that's going to occur in that business. It's going to continuo as a nice slow continuous, steady, March in a positive direction. And I think the way to think about it is very consistent with the last years few results. We should kind of expect that, we can grow that business segment 10% to 15%. But there is not a step function changed that we anticipate.

Our last question comes from Amit Daryanani with RBC Capital Market. Amit Daryanani - RBC Capital Market: Maybe a couple of questions, one, the component business, you guys sounds like you'll be done with restructuring by September quarter. Could you verify the goal has still to achieve 4% margins by December? And do you need a revenue list to get there with the restructuring amount that will get you there. And then in the event, you aren't to get that, both the restructuring. Would you actually look to divest or shutdown these operations?

So we've already said our target is to get to 4% by the end of the year. So we're not saying that's December, but December, March is really what we're driving to. That's why we're aggressive in getting these realignment costs done by the end of September which is something we planned. No new news there. And certainly revenue levels are going to impede some of that particularly in the printed circuit business. But we think we've looked at this carefully enough to think that we could still achieve close to that target even with some downturn. That's kind of September, we think there will be slightly profitable even with the charges that we've talked about. And given to your last question, we're just focused on building this business and investing in this business, and continuing to plough our head to them accretive to our overall business. But we constantly are looking at options and opportunities in all of our businesses to continue to invest in. Amit Daryanani - RBC Capital Market: And then, maybe if I just look at the September guide of up 2% sequentially, your business has gone to a fair amount of transition on the portfolio. Can you just talk about, what do you think normal seasonality is because if we now look at our models, it looks like to be up 7%. I'm sure you'll get a sense of how much are you discounting normal seasonality with the September quarter guide.

Yes, you're right. September is normally up around on average. I think around the 7% and mid-points around 2%, but the high end of the range is up around 5% to 6%. So we're just trying to be cautious here in our guidance. It's quite a wide range, $400 million and we want to make sure we hit the range. We certainly set our sights towards the high end of that. But at the midpoint, we feel pretty comfortable that we've taken into account, what we see or what we've experienced in the last quarter is any downside that we've been expecting. So we'll still have sequential growth and whether it's 2% or slightly higher than that. We don't know at this stage. The visibility is a lot less than it used to be.

But we're clearly being a little bit more conservative as a result of the macro economy.

Thanks, for your interest and for joining our call today. You'll be able to access a replay of the call as well as obtain a transcript in the Investor section of our website. This concludes the conference call.

Thank you. That does conclude today's conference. Thank you all for participating. You may disconnect your lines at this time.