Flextronics to Trim Notebook Ops, Ramp Industrial Focus
NEW YORK -- Flextronics yesterday said it would lower its emphasis on its notebook PC business, which is seeing falling revenues and operating losses, while ramping its focus on higher-margin industrial products.
The world's second-largest contract electronics manufacturer had previously seen notebook PC sales ramp from essentially nothing to an estimated $4 billion business for its fiscal 2012, which began April 1. During its annual analysts day, the company said the segment is expected to have revenue of $640 million in the current quarter and an operating loss of $20 million. While not outwardly stating it would depart the business, Flextronics indicated it plans to let the business decline over the next three quarters in order to boost operating margins, according to analyst reports.
Flextronics forecast its core operating margins, excluding its ODM/notebook business, would be 3.3% in the current quarter.
The EMS company gave annual targets of revenue growth of at least 10%, and return on invested capital of 20%. It also reiterated operating margin targets of 3.5%.
Over the past three fiscal years, starting in June 2008, Flextronics' highest quarterly operating margin was 3.2%. Flextronics believes it can meet its target, however, by reducing its stake in notebooks -- where industry margins are down to 1.5% from 3% a few years ago -- and putting more emphasis on its Components group, which includes printed circuit boards, flex circuits and related products, where Flextronics sees margins improving to 4% by year end.
Industrial, automotive and medical traditionally have made up about 17% to 20% of Flextronics' overall sales. However, the company announced four new business units, of which Industrial & Emerging Industries is one. The new segment, I&E, makes up 14% of Flectronics' overall revenues but is expected to see long-term growth of 15% to 20% and and operating margins of 5% or more.
Flextronics also established as business units Integrated Network Solutions, High Velocity Solutions, and High Reliability Solutions.
