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Flextronics Pops on Call, Upgrade

Flextronics (FLEX - Get Report) rose in early trading Tuesday, after the stock was upgraded and estimates raised by Wells Fargo Securities following an upbeat midquarter conference call.

Recently, shares were up 55 cents, or about 5%, at $12.12.

Flextronics said on the call that it has seen demand increase in several sectors and that business was better than expected in July and has been strong in August. The company expects to save about $45 million in interest expense after a convertible debt offering and pending tender offer for senior subordinated notes.

Analyst Jim Savage said the company's confidence is warranted, partially because of the long-term advantages of a pending acquisition. Savage upped his investment rating on the stock to buy from hold with a $15 price target.

On Friday, the company announced that it will acquire Microcell Group, which makes mobile communications devices, for $80 million. Though Flextronics does not expect the deal to impact revenue substantially, Savage said he believes that in 2005, the company "should see revenue growth from new product ramps." He also noted that Flextronics should keep the engineering team that "forms the core of Microcell's talent," in order to see any long-term benefits from the deal.

Savage upped his second-quarter 2004 sales estimate to $3.5 billion from $3.3 billion and upped his adjusted EPS expectation to 7 cents from 6 cents. For full-year 2004, the analyst expects earnings of 34 cents a share on sales of $13.76 billion, raised from his prior estimates of $13.26 billion in revenue with earnings of 29 cents a share.

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