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Electronics Production | July 26, 2006

Net sales up 6% for Flextronics in Q1

Net sales from continuing operations for the first quarter ended June 30, 2006 were $4.1 billion, which represents an increase of $236 million, or 6%, over the first quarter ended June 30, 2005.
Excluding intangibles amortization, restructuring and other charges which includes stock based compensation, net income for the first quarter ended June 30, 2006 increased 4% to $104 million, or $0.18 per diluted share, compared to $100 million, or $0.17 per diluted share, in the year ago quarter.

After-tax amortization, restructuring and other charges which includes stock based compensation amounted to $19 million in the current quarter compared to $41 million in the year ago quarter. GAAP net income amounted to $85 million, or $0.14 per diluted share, in the first quarter ended June 30, 2006, compared to $59 million, or $0.10 per diluted share, in the year ago quarter.

On a sequential basis, net sales from continuing operations increased by $528 million, or 15%, non-GAAP operating margin improved sequentially by 20 basis points to 3.1% and GAAP operating margin improved sequentially by 180 basis points. Return on Invested Tangible Capital ("ROITC") improved to 30% in the first quarter ended June 30, 2006 from 26% in the year ago quarter while Return on Invested Capital ("ROIC") improved to 10% from 9% in the year ago quarter.

"There has been a reacceleration of significant growth in our core EMS business, which includes design, vertically-integrated manufacturing services, components and logistics," said Mike McNamara, chief executive officer of Flextronics. "Fiscal 2006 was a very strong year in terms of incremental business wins from both new and existing customers. As a result, we exceeded revenue and earnings expectations in the June quarter and have increased our revenue growth rate expectations for fiscal 2007 to approximately 25%."

For the second quarter ended September 30, 2006, revenue from continuing operations is expected to grow 25-30% on a year-over-year basis to a range of $4.7 billion to $4.9 billion and earnings are expected to grow 10-25% on a year-over-year basis to a range of $0.19-$0.21 per diluted share. For the fiscal year ended March 31, 2007, revenue from continuing operations is expected to grow in the range of 25% on a year-over-year basis to approximately $19 billion and earnings are expected to grow in the range of 15% on a year-over-year basis to approximately $0.80 per diluted share. Management emphasized that there is a range around the fiscal 2007 guidance as demand trends and the economy are dynamic.

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