Somewhere out there, a box filled with silicon parts has been shrink-wrapped and placed next to another shrink-wrapped box. Repeat this process until thousands and thousands of cases are packed with simple shrink-wrapped boxes. Now stuff those cases filled with boxes into hundreds of warehouses, add in that heap of already opened equipment on countless shelves around the globe and maybe, just maybe, the massive inventory glut will begin to make sense.

As these components for telephones and computers and routers pile up, demand and prices and earnings fall. The deceptive simplicity of supply and demand forces has punched a hole into the just-in-time manufacturing process, which worked wonderfully well when money was flush. Now, few companies need anything next quarter, let alone right now. And so it goes. The stuff piles up.

Today, with that inventory problem weighing heavily on Wall Street minds, analysts dropped ratings and estimates on a bunch of electronic contract manufacturers, once considered a safe haven in a recession. Demand has dried up across the board, say the analysts.

"We have never seen a slowdown of such speed and breadth in over 30 years," wrote

Credit Suisse First Boston

analyst Mark Hassenberg this morning in a note to investors. "Worsening the magnitude of the downturn are excess inventories of products currently in the market that companies are trying to obsolete."

All over Wall Street, estimates were trashed in the wake of Monday night's warnings from


( SLR), which makes chip equipment, and


( SLR), which provides manufacturing services to a wide array of industries like networking, servers, telecommunications and PCs.

Goldman Sachs

dropped forecasts on seven companies that do similar things, snipping at


(FLEX) - Get Report

, Solectron,

Benchmark Electronics

(BHE) - Get Report



(PLXS) - Get Report



(SANM) - Get Report


SCI Systems

(SCI) - Get Report



(CLS) - Get Report

. CSFB cut 2001 forecasts on Flextronics, Solectron,



and KLA-Tencor.

But wait -- there's more.

Robertson Stephens

cut KLA and Solectron, the two earnings warners, to long-term attractive from buy.

Prudential Securities

cut Solectron to hold from accumulate.

ING Barings

dumped ratings on six companies, dropping Celectica, Flextronics and Sanmina to buy from strong buy and

Jabil Circuits

(JBL) - Get Report

, SCI Systems and Solectron to hold from buy. Bear Stearns cut those six companies and


(VG) - Get Report

to attractive from buy.

Two warnings buried the sector, but the dirt and shovels have been there for a while.

Last night, KLA-Tencor warned that third-quarter revenues would fall up to 10% lower than the previous guidance given on Jan. 17, coming in well short of earnings estimates. A plethora of reasons were cited for the miss, including excess inventory, deferred deliveries, delayed orders and low demand. And, going forward, the company said the situation was unclear, quite the reversal from January, when it said that third-quarter revenues would be in line with expectations, coming in between $570 and $580 million. At the time, the analysts, on average, expected $577.5 million.

The good news might not come for a while. "In our view, overall business fundamentals could continue to deteriorate until late summer," wrote Prudential Securities analyst Shekhar Pramanick. "

The company could continue to trade in the trading range. We would add positions only at the end of the trading range."

Meanwhile, the world's largest equipment-manufacturing service provider, Solectron, said it would miss sales figures for 2001. The company once sought to top $23 billion in sales for 2001, but it has shelved that goal, putting third-quarter revenues between $4.1 billion and $4.5 billion. That's quite a downturn from the last two quarters, when the company booked $5.4 billion and $5.7 billion in the second and first quarters, respectively. And to make matters worse, the company didn't give guidance for 2001. With sales down, the giant cut costs, slashing 8,200 jobs from its workforce, which was 79,000 strong.

"In light of the flattish year-over-year revenue and modest earnings per share growth expected in fiscal 2002, we believe there is additional downside in the shares and limited positive catalysts in the near term," wrote Prudential Securities analyst Ellen Chae, who made the aforementioned cut to Solectron's rating.


Apartment Investing and Management

(AIV) - Get Report

: DOWN to market perform from buy at

Lehman Brothers



( CRXA): DOWN to market perform from buy at Lehman Brothers.

FPL Group

(FPL) - Get Report

: DOWN to hold from buy at Credit Suisse First Boston.


(KLAC) - Get Report

: DOWN to long-term attractive from buy at Robertson Stephens.



: DOWN to buy from strong buy at Lehman Brothers.


( MNY): DOWN to market perform from market outperform at Goldman Sachs.



: DOWN to long-term attractive from buy at Robertson Stephens.



( CRIO): NEW buy at Lehman Brothers; price target: $7.

Nautica Enterprises

( NAUT): NEW buy at Lehman Brothers; price target: $22.

Wolverine World Wide

(WWW) - Get Report

: NEW strong buy at Lehman Brothers; price target: $19.