Flextronics' Billion-Dollar Bolt from the Blue

Updated from 9:04 a.m. EDT

Why didn't Flextronics warn investors that it could be on the wrong end of a nearly $1 billion civil verdict? The company never saw it coming, CEO Michael Marks said on Thursday.

Marks said his company thought its exposure was limited to just $2.1 million, the amount Beckman Coulter(BEC Quote) was asking for in what seemed like a routine contract dispute. "This is unbelievably shocking, right out of the blue" Marks said during the company's analyst day meeting in New York. "There has never been a moment when anyone thought this could be material," he said.

But the "routine dispute" on Wednesday ballooned into a major problem when a jury in Orange County, Calif., socked the contract manufacturer with a $934 million verdict, including $931 million in punitive damages, one of the largest such verdicts in California history.

Marks said the company will ask the judge to set aside, or at least reduce the verdict, and said Flextronics believes the maximum damages it can legally be required to pay is a much more manageable $9 million or $10 million.

Verdicts of this magnitude are often reduced on appeal.

Investors didn't seem too worried. Although the stock is being very heavily traded, its losses are modest. In recent trading, shares were off 54 cents, or 3.6%, to $14.46.

In a release announcing the "runaway" verdict, Flextronics said it was -- among other things -- "appalled" by the order, said it is "unsupported by either the law or the facts," is "excessive and unwarranted," "reflects a number of errors," is "irrational," "particularly surprising" and "exemplifies the need for reform of a legal system in which juries are allowed to impose absurd punitive damages."

The company believes that the jury acted improperly in levying such a large punitive verdict, and said various state and federal precedents should cap a punitive award at three times damages. Adding legal costs, that would bring the judgment to under $10 million. "We're prepared to settle for that amount," said Marks.