SAN FRANCISCO -- Get the peeled grapes out of the fridge and start waving those palm fronds. Flextronics( MOT) CEO Mike Marks gets the pharaoh treatment for having something good to say about wireless handsets.

Notepads quivered with excitement at the Robertson Stephens Electronic Manufacturing Products and Services Conference Monday as Marks whispered the words of delight investors have been waiting for these past six months, "cell phones are getting better. We're seeing more orders."

That will have to hold investors for a few quarters because the good news stopped there.

Cell phones are the only area picking up. When asked about end markets and who was buying, the chief of the world's second-largest contract manufacturer could only console the audience that the September quarter would be the bottom for the his industry. "It's not necessarily the bottom for our customers," he added of the company's high-profile tech clientele.

It seems the latest customer trend is not orders, but ugly credit ratings. "Marconi has a terrible balance sheet," the CEO offered matter-of-factly. He's judging the credit risk of

Lucent

( LU),

Motorola

( MOT) and

Ericsson

( ERICY), before he takes their business.

Flextronics handles

Ericsson's

( ERICY) and

Alcatel's

( ALA) mobile phone production, as well as a big part of

Motorola's

( MOT) business and a smaller piece of

Nokia's

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.

"The channels are cleared out," said the supercharged CEO as he described last December's Christmas shelf-stocking gone awry, leaving 50 million phones in the retail sales channels. Today that level is back to the normal level of 20 million. Orders, sweet orders! At long last, good news. Tell us more, tell us more!

Unfortunately, he did. No pyramid for him.

Marks called the market for wireless telephone equipment "awful."

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Telecom is a "train wreck," an opinion he later refined to "pretty lousy."

Datacom is "terrible." "You tell me when

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

is going to start ordering products again," he said of the equipment giant, a big Flextronics client.

The PDA channel is still full up, no orders in sight. Investors wanted some more scraps of good news. Who's ordering what? Is anyone buying anything? That cell-phone crack would have to sustain them.

Flextronics works with the biggest names, and knows their suffering. From

Juniper

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and

Dell

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in datacom; to Ericsson, Motorola and Siemens in wireless equipment; to

Palm

( PALM) and

Handspring

( HAND) in handhelds; to Lucent, Marconi and Cisco in telecom.

In the June quarter, Flextronics' inventory turns went down to seven, which Marks labels "absolutely terrible," but industry-leading. He expects to get that number back up to 10 turns by the Christmas season. Those seven turns don't look good for him, but they're a lot better than the billions in unused inventory his customers are writing off their balance sheets. Marks stands firm in allaying investor fears about his business. "We don't take inventory risk, period."

Marks says his company negotiates deals upfront to minimize risk even when dealing with a huge contract such as Motorola, which recently had to back out of an agreement with Flextronics that guaranteed a certain production volume the collapsed market would not support. He is hurt by the slowdown in orders, but not by customer inventories.

The crowd got the Flextronics smiley face view of what Marks and preceding presenter

Jabil Circuit

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(which does 53% of its business in communications) called a "recession." As Marks has opined before, he believes times like this break the backs of original equipment manufacturers and pushes them to outsourcing -- think of an Ericsson, though that wasn't his example.

"Cost has taken over absolutely," explained Marks. "It used to be 'I want it here and now.' Cost has taken over. It's 'I want it cheap.'" And so Marks expects 2002 to be a "rock 'em, sock 'em" year for contract manufacturers as companies push more business to the outsourcers, inventory clears up and business gets rolling in greater volume.