Flextronics analyst and investor meeting
May 13, 2005
CEO succession plan announced potential restructuring and sale of non-core operations announced
Flextronics (Nasdaq: FLEX) announced at its Analyst and Investor meeting in San Francisco, California, the implementation of a management succession plan with the appointment of Michael McNamara as Chief Executive Officer effective January 31, 2006. McNamara has served in a variety of senior positions during his career at Flextronics, and is currently the Chief Operating Officer.
McNamara will succeed current Chief Executive Officer Michael E. Marks, who managed the Company's growth that established Flextronics as a leader in the Electronics Manufacturing Services ("EMS") industry. Upon his retirement as CEO on January 31, Marks will serve as Chairman of the Company's Board of Directors. Richard Sharp, the current Chairman of the Board, will continue to serve on the Board of Directors after January 31, 2006.
Richard Sharp commented, "The Board is profoundly appreciative of Michael Marks's enormous contributions to the growth of Flextronics and his leadership from the Company's formative years through its emergence as the global leader in the EMS industry. When the Company went public in 1994, it was the 22nd largest company in the industry with annual revenues of only $100 million from three facilities and fewer than 2,000 employees. He has led this Company as it has grown to become the largest EMS company in the world with annual revenues in fiscal 2005 of $16 billion with over 100 facilities and almost 100,000 employees in 32 countries on five continents. Since the initial public offering, the Company has generated a compounded annual return to shareholders of approximately 20% compared to less than 10% for the S&P 500 for the same period of time."
Sharp continued, "Michael has been the visionary for a company that ten years ago provided only contract manufacturing solutions to a company that today provides full product design with vertically integrated manufacturing and logistics solutions. In his future role as Chairman, the Company will continue to benefit from Michael's strategic vision and valuable insights."
Sharp concluded, "The Board of Directors is very pleased to see Mike McNamara assume the CEO position. Mike has held senior management positions with the Company for 11 years and has been an enormous contributor to the Company's success to date. He is uniquely qualified with a comprehensive understanding of the Company's business and operations. He has our utmost trust and respect, and we are confident that Flextronics and its customers, employees and shareholders will prosper under Mike's leadership."
As previously announced, the Company also provided an analysis of the strategic and financial contributions of its operations and related strategies to maximize shareholder value, including potential divestitures, initial public offerings, or spin-offs of operations that are undervalued inside the Flextronics's ownership umbrella.
During the update, management disclosed that it has an agreement in principle to merge Flextronics Network Services (FNS), a wholly-owned Flextronics' subsidiary, with Telavie A/S, a company wholly-owned by Altor, a private equity firm focusing on investments in the Nordic region. In addition, the Company has had discussions with a number of companies about the potential sale of 100% of the Flextronics Semiconductor Design business. Assuming the successful consummation of these transactions, Flextronics would receive cash in the aggregate range of $550 million to $600 million plus additional contingent payments along with a 30% ownership stake in the merged Network Services company. Both of these transactions are subject to completion of definitive agreement terms and conditions and other various customary closing conditions, including certain governmental approvals and, in the case of the FNS transaction, consultation with the FNS unions in Sweden.
These two operations generated total sales of $840 million in the Company's fiscal year ended March 31, 2005. The Company stated that if these transactions are successfully consummated, it will consider using the cash proceeds received from the divestitures to either repurchase a portion of its outstanding debt and/or stock or fund growth by reinvesting in the Company's existing businesses, depending on market conditions and opportunities. As a result, while these divestitures would reduce sales by approximately $840 million, they are not expected to have a meaningful impact on earnings per share.
Along with the potential divestitures, the Company announced it is considering further restructuring of other operations that could result in restructuring charges in the range of $100 million, or approximately $0.16 of diluted earnings per share in fiscal 2006.