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Electronics Production | February 19, 2007

Suspiciousness rises about Solectron after CEO's resignation

How are things actually going at Solectron? The fact that Mike Cannon, Solectron's CEO left the company for a lower level job at another company has got the analysts and other industry specialists to wrinkle their foreheads.
Seekingalfa has asked some analysts what they think about this CEO resignation.

How are things going at Solectron?

“The timing of Cannon's resignation will likely raise investor concerns especially since a new CEO could reevaluate current strategies. Thus, the transition over to a new CEO raises a risk that the company takes one step back before it takes two steps forward", said Steve Fox, Merrill Lynch.

“Remain on the sidelines as management changes should exacerbate the lack of profitability at SLR. Recent results continue to validate our negative stance, and while SLR has made progress on the revenue front it has come at the cost of cash flow and margins, an unsustainable dynamic", said Amit Daryanani, RBC Capital.

Not all are pessimistic. There are a those who think that the CEO resignation could lead to a fresh catalyst with a new CEO.

“We are not surprised to hear about Cannon's resignation, since it's been our belief that the board has become increasingly focused on the lack of progress for the multi-year turnaround effort. It has not only been six years since the tech bubble burst, it's been four with Cannon at the helm of Solectron. On the opposite end, we were somewhat surprised that Michael Dell would select a CEO from a U.S.-based EMS provider given Dell's Asian-based supply chain and that over time Dell has pulled almost all its business from the U.S. providers and given in to Asian players because of two factors: price and quality", said Louis Miscioscia, Cowen.

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