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Electronics Production | March 30, 2007

Solectron Q2 revenue up<br>16% axe 1500 workers

Solectron Corporation has reported sales of $2.90 billion in the second quarter of fiscal 2007, a decrease of 3 percent over first quarter fiscal 2007 revenues of $3.00 billion, and an increase of 16 percent over second quarter fiscal 2006 revenues of $2.50 billion.
Solectron has entered into a new Manufacturing and Product Purchase Agreement with one of its largest customers. As a result of this Agreement, second quarter revenue was negatively impacted.

The company reported GAAP profit after tax from continuing operations of $15.6 million in the second quarter of fiscal 2007, compared with a GAAP profit after tax from continuing operations of $6.6 million in the first quarter of fiscal 2007. In the second quarter of fiscal 2006, Solectron reported a GAAP profit after tax from continuing operations of $17.1 million.

Non-GAAP profit after tax was $41.0 million in the second quarter of fiscal 2007, compared with non-GAAP profit after tax of $47.6 million for the first quarter of fiscal 2007. In the second quarter of fiscal 2006, Solectron reported non-GAAP profit after tax of $29.7 million.

"During the second quarter we made progress in our efforts to drive growth, expand gross margins, and deliver positive free cash flow," said Paul Tufano, interim chief executive officer of Solectron. "As we begin the second half of fiscal 2007, I believe we are well positioned to deliver continued improvement in profitability, working capital management, and cash generation."

Solectron also announced that it is commencing the next phase of its contemplated restructuring pursuant to its phased approach announced in the first quarter of fiscal 2007. Restructuring and impairment charges related to today's announcement are estimated to be in a range of $35 million to $45 million, of which approximately 90 percent will be cash expenditures.

The company estimates this restructuring will be completed within the next 12 months. These actions will reduce the workforce by approximately 1,300 to 1,500 employees and will close or consolidate approximately 400,000 square feet of facilities, primarily in North America, as well as Western Europe.

Fiscal third quarter guidance is for sales of $2.90 billion to $3.10 billion, and for non-GAAP EPS from continuing operations in a range of 4 cents to 6 cents, on a fully diluted basis.

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