Changes at Jabil Circuit

August 10, 2007

Bear Stearns analyst Kevin Kessel opines on Jabil Circuit's recent announcement Jabil will establish a dedicated consumer division (focused on handsets; televisions, set-top boxes, peripherals, and vertical integration) - along with an electronics manufacturing services (EMS) division (focused on all other segments).

The company's realignment will be effective September 1, 2007 and, while the change could increase company costs near-term, Bear's Kessel believes it should help improve focus and success in the long-term. There is also speculation the move could position Jabil to eventually spin-off their consumer division (similar to what Hon Hai did with FIH).

Jabil's consumer division makes up more than 25% of sales, but is in the middle of a transition from the company's horizontal model to a vertical model. Upon formation, the consumer division will be headed by 17-year veteran John Lovato, who will be named its executive vice president and CEO. Dedicated design resources will be combined with vertically integrated supply chain solutions and certain existing and planned manufacturing operations, to help better serve the customers of the consumer division.

Bill Muir, a 15-year Jabil executive will become the executive vice president and CEO of the EMS division. The new group will focus on traditional networking; computing, storage, and telecom sectors, as well as on the emerging sectors of the auto, medical, industrial, instrumentation, defense and aerospace markets.

Source: Bear Stearns