Sanmina-SCI Managment Presents At JP Morgan Global Technology Media And Telecom Conference (Transcript)

Sanmina-SCI Corp. (SANM)

JP Morgan Global Technology Media and Telecom Conference

May 15, 2012, 1:30 p.m. ET

Executives

Bob Eulau – Chief Financial Officer

Analysts

Mark Strauss – JPMorgan

Presentation

Mark Strauss

Good afternoon. Thank you everyone for coming. My name is Mark Strauss. I cover Applied and Emerging Tech here at JP Morgan, and we are happy to have Bob Eulau from Sanmina joining us. The firm doesn’t currently cover the stock, so I’m going to assume that some of you, like me, are learning, kind of just getting to know the story, so Bob, do you want to spend three or four minutes just briefly describing your business, maybe going through your end markets or segments?

Bob Eulau

Sure, and first, Mark, thanks to you and JP Morgan for having us here today, we really appreciate it. Sanmina-SCI has been around since 1980, so we’ve been around for 32 years. We operate in 18 different countries, we have in the neighborhood of 42, 43,000 employees, and we’re I think unique within the EMS industry in the sense that we focus almost exclusively on higher-mix manufacturing opportunities, areas in which we can add more engineering content and provide more value to our customers.

And the other area that causes us to be unique is we also have a component and product business that is in the neighborhood of 30% of our overall revenue, and by products and components I’m referring to areas like printed circuit board manufacturing, backplanes, cables, mechanical systems, which includes enclosures and precision machining, plastic injection molding, memory modules, which is an area that we call components but we’re starting to do products in the solid state drive area, and then we also have a product business in the storage area, where we do ODM products intended for other storage companies, and then finally, we have a product business in the defense area, which we’ve been in for through SCI, we’ve been involved with for about 50 years.

So we think we’ve got a pretty diverse set of manufacturing services that we can offer, coupled with components and products that are unique in the industry. We focus on vertical markets that you might expect given our high mix emphasis. One area that’s about 45, 50% of the company is communications, and within communications we have, we do extensive work in the wireless base station area. We also do a fair amount of optical; I would say among the Tier 1 EMS companies, we have the largest optical footprint.

We also focus on another segment, which we call medical, defense and industrial, which for us is very strategic. Those often times are programs that are suited to our capabilities, where we can add more value due to the complexity and the engineering content. We then have another segment, which we call enterprise computing and storage, where we are, as the name implies, focused on computing solutions, and increasingly over the past few years, putting more emphasis on the storage side, which is going reasonably well.

And then finally, we have a multimedia business which, the largest portion of which is set top boxes, but also includes automotive, which has done well in the last few years, and includes other areas we’ve been diversifying into, including high-end cinematography and areas like casino gaming consoles, any area where we can continue to diversify and has multimedia aspects.

Question-and-Answer Session

Mark Strauss

Okay. So you spoke on your last earnings call, and I think the consensus estimates that are out there are looking for a pretty strong uptick in the back half of this year. What’s driving that? Is that coming from a particular end market, or what kind of visibility do you have into that?

Bob Eulau

Yes, so one of the things that we’ve seen for a while is the second half of the calendar year looks like it’s going to be quite a bit stronger than the first half, and we’ve mentioned that actually in our last two earnings calls. What happens with us is we get a rolling 12-month forecast from our customers, so we have a sense of what they’re expecting to happen in terms of new product introductions, in terms of volumes, et cetera. And what we do is try to transparently provide that to our investment community, and we’ve seen this trend for a while. We’ve also had a challenging last six months, largely due to communications, so we’ve had a period of, I would say sluggishness and even decline on the communications side. We’re expecting in the second half of the calendar year that that situation will get quite a bit better, and barring any new surprises, that’s the way the forecasts look.

Mark Strauss

Okay. So I think that kind of explains communications, but can you maybe go into your other vertical areas and talk about the last six months, the last year or so, and then the outlook?

Bob Eulau

Yes, I can. So, in terms of medical, defense and industrial, as I mentioned, a very strategic area for us. From a defense standpoint, we had a step down in that business last year, actually around this time, and now it has stabilized, it continues to be a very profitable business for us, and we’ve got a new leadership team there. We’re optimistic that we should be able to start to see some modest pick-up on the defense side.

Medical is also an important area for us. We focus primarily on larger products, so it’ll be CT scan machines, MRI machines, X-ray machines. It’s a segment in which we can do more vertical integration. We, as I mentioned, have mechanical capability, so we can apply that to a variety of the segments, but particularly in medical. And we see medical as a steady area. There obviously are significant steps you have to take to get qualified to build product in that segment, and we think we’re very well-suited. I’d say that area will be relatively stable, maybe slightly up in the second half.

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