September 8, 2010 / 6:34 PM / 7 years ago

Flextronics sees pressure on operating margin

* Company has goal of hitting operating margin of 3.5 pct

* Higher wages in China affect components manufacturing

* Has moved some of its operations to inland China

LOS ANGELES, Sept 8 (Reuters) - A Flextronics International (FLEX.O) executive on Wednesday said the company is facing headwinds in hitting an operating margin goal of 3.5 percent, due in part to rising costs in China.

Investors have been cool to Singapore-based Flextronics because of its low margins, even though the electronics manufacturing and service provider which counts Dell Inc DELL.O and Verizon Communications Inc (VZ.N) among its customers had sales of $24 billion last fiscal year.

Flextronics said at an investor event in May that it expects to hit an operating margin of 3.5 percent when it reaches a number of benchmarks, including quarterly revenue of $7.5 billion, which is close to what it has guided for this current quarter.

Chief financial officer Paul Read said at the Citigroup Global Technology Conference in New York on Wednesday that the company still has a goal of 3.5 percent operating margin, but he did not say when the company would reach that goal.

“Short term, we’ve just got some headwinds on the components side (of the business) and as we get past them in the next one to two quarters, as we look ahead to next year we’ll see a lot more improvement (in margin),” Read said.

Flextronics has been pressured by rising wages at its electronics components manufacturing operation in China, and the company has moved some of its operations to inland China in search of lower labor costs.

The company on July 22 reported an operating margin of 2.9 percent for its first fiscal quarter.

Shares in Flextronics rose 2.7 percent to $5.40 in mid-day trade on the Nasdaq. (Reporting by Alex Dobuzinskis; Editing by Bernard Orr)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below