Flextronics ( FLEX) continued its downward spiral Wednesday as one analyst downgraded the stock after the company posted disappointing earnings and guidance.

Flextronics blamed the divestiture of two of its divisions plus the loss of business of two handset customers for the weak second quarter. But the company also noted across-the-board softness among customers that first surfaced in July. Still, company executives said they expect "good growth" to resume in the March quarter and accelerate through calendar 2006.

Investors and analysts focused on the disappointing shorter-term outlook and latest results, punishing shares with a $2.95, or 24.4%, drop to $9.15 in recent trading.

In research notes Wednesday and on a postclose conference call Tuesday, analysts expressed palpable irritation at the company's results and guidance.

Credit Suisse First Boston analyst Michael Walker lowered his rating on Flex to neutral from outperform, while joining other analysts in slashing his estimates for the company and highlighting eroding margins.

"Amidst a multitude of moving parts, we boil Flex's results and guidance down to two factors: mismanaged expectations and weakening demand," Walker wrote. "Despite the magnitude of the shortfall and a developing credibility issue ... given the possibility that incoming CEO McNamara is attempting to reset the bar, we are adopting a neutral stance and would look to revisit the stock below $9."

CSFB has co-managed a public offering for Flextronics in the past year.

Even one bullish analyst, Carter Shoop of Deutsche Bank, another co-manager, titled his note on Flextronics Wednesday morning "Taking Estimates Lower, Again."

"We were surprised by the magnitude of the miss/reduced guidance," Shoop wrote. "It now appears that end demand/margins were worse than expected in the September quarter, and that many of Flex's new wins have been pushed out."

Shoop noted the company's worse-than-expected demand from communications infrastructure, auto and consumer electronics customers was only partially offset by seasonal strength in printers and handset markets.

All that said, Shoop still reiterated his buy rating, arguing that Flextronics is well-positioned in the EMS industry. He said shares will react positively to an upcoming management change and new program ramps in 2006.

Kaufman Brothers analyst Brian White, meanwhile, argued that the Flextronics' results support his cautious stand on the electronics manufacturing services sector as a whole. "Flextronics' results provided yet another 'red flag' in what could still be the early stages of a cycle that is topping out, and yes, ' rolling over,' which we have warned about over the past year."

White has a hold rating on Flextronics and his firm hasn't done banking with the company.

"We have been wary of getting sucked into the enthusiasm surrounding Flextronics' divestiture initiative, record outsourcing wins and margin expansion goals that provided a tonic for the stock a few months ago," White wrote. "However, reality is setting in and escaping the throngs of slowing demand trends with any new initiative has proven to be a fruitless pursuit."

Flextronics posted a loss of $2.4 million, or break-even on a per-share basis, in the quarter, compared with net income of $92.6 million, or 16 cents a share, a year ago. Restructuring charges totaled $50.3 million in the latest quarter, compared with $33.5 million a year ago.

Excluding those and other items, Flextronics earned 17 cents a share in the second quarter, flat from a year ago. That was 2 cents under analysts' estimates of 19 cents a share gathered by Thomson First Call, and a penny short of the company's guidance.

Sales were $3.88 billion in the latest quarter, down from $4.14 billion a year ago. Analysts had been forecasting second-quarter sales of $4.11 billion, which was toward the higher end of the company's guided range of $3.8 billion to $4.2 billion.

"Our year-over-year revenue comparisons are adversely impacted by the divestitures of our network services and semiconductor divisions along with the impact from two European OEM customers divesting their cell-phone businesses during the past year," CEO Michael Marks said in a statement.

"We expect the December 2005 quarter revenue comparison to be the last quarter adversely impacted by these customer actions," he said. After that, Flextronics expects new programs involving its purchase from Nortel Networks ( NT) and client Kyocera should help growth to start kicking in again, Marks said in a postclose conference call.

"Growth is going to accelerate through calendar 2006 as these new programs go on," he said.

Excluding sales from the two divisions divested by Flextronics, revenue fell 4.4% in the second quarter. The decision by two customers -- Siemens ( SI) and Alcatel ( ALA) -- to divest cell phone businesses to Asian suppliers in the past quarter contributed to a $250 million decline in sales during the quarter, Flextronics said.

For the December-ending fiscal third quarter, Flextronics expects to earn 18 cents to 20 cents a share, excluding charges, on sales of $4 billion to $4.2 billion. That would be flat to up 5% year over year on the top and bottom line when excluding the divested businesses from year-ago results.

Analysts were expecting 25 cents a share on $4.56 billion for the fourth quarter.

For the March quarter, Flextronics expects earnings of 16 cents a share to 18 cents a share on revenue of $3.6 billion to $3.8 billion. That represents year-over-year growth of 6% to 12% on the top line and 6% to 19% on the bottom line when excluding the divested businesses from a year ago.

Analysts were forecasting 22 cents a share on $4.41 billion for the quarter.

CSFB's Walker pointed out that the lower earnings guidance partially reflects the company backing away from a pledge to offset dilution from divestitures through stock or debt repurchases, a decision he believes will not sit well with investors.

One analyst on the conference call Tuesday noted that the guidance means the company now expects $1 billion less in sales for the fiscal year than it forecast three months ago.

Flextronics executives said about $550 million to $600 million of that decline comes from divestitures, with $79 million of it hitting the company in the second quarter.

But executives also said they noticed a broad-based reduction in demand from customers in July and August, although they're not aware of any deals they have lost to competitors. "We just think there's some general softness out there," said COO McNamara, who becomes CEO in January.

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