Industry Pulse - Oct '05

* Solectron continues to lose market share in the industry as it recently reduced its outlook for the fourth consecutive quarter. Inventory management has improved slightly. The company presents a good balance sheet with $1.7 billion cash and ~$1 billion net cash. Meanwhile, the company recently reported a $20 million ‘revenue offset' which is a fee paid to a customer for the privilege of doing business. This could be reason to be concerned as it could mask the company's ability to truly be profitable.

* Nokia brings Sanmina-SCI base station programs back in-house. It is believed excess internal Nokia capacity was part of the decision. One point this highlights is that excess capacity internal OEMs can have adverse impact on all EMS providers, especially if the cost benefits of outsourcing for the OEM are less than significant.

* Asustek and Advantech announced a recent share exchange at a ratio of 1 Asustek share to 1.13 Advantech shares. It is believed Asustek will benefit from ODM business in industrial computing and control-automation systems, while Advantech will leverage Asustek's R&D, cost control, and component procurement capabilities for motherboards.

* Flextronics announced plans to set up an industrial park in southern India. The park will have plastics molding, enclosure integration, PCBA, and logistics capabilities. The facility will ultimately produce telecom equipment for companies such as Nortel and help supply infrastructure for the growing demand for wireless in India.

VentureOutsource.com, October 2005