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Filed by Solectron Corporation
Pursuant to Rule 425 under the Securities Act of 1993
Subject Company: C-MAC Industries, Inc.
Commission File No. 001-15108
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SOLECTRON CORP.
MODERATOR: SUSAN WANG
AUGUST 9, 2001
5:30 A.M. PST
Operator: Ladies and gentlemen thank you for standing by. Welcome to
the Solectron C-MAC conference call. During the presentation,
all participants will be in a listen-only mode. Afterwards,
you will be invited to participate in the question-and-answer
session. At that time, if you have a question, you will need
to press the 1 followed by the 4 on your telephone. As a
reminder, this conference is being recorded Thursday, August
9, 2001. I would now like to turn the conference over to
Susan Wang, chief financial officer, Solectron. Please go
ahead, ma'am.
Susan Wang: Thank you. Good morning, everyone, and thank you very
much for joining us on such short notice. We are very pleased
today to announce that Solectron has agreed to merge with
C-MAC Industries in a deal that will further strengthen both
of our capabilities in meeting changing OEM customer
requirements.
Joining me today to discuss the transaction are Koichi
Nishimura, Solectron's chairman [audio break]-- excuse me--
is there an echo? I'm hearing an echo. Operator?
Operator: Yes, ma'am?
S. Wang: There is an echo on the line. Can you take care of
that, please?
Operator: Can you turn down your speakerphone, please, ma'am.
S. Wang: I have got it turned down all the way.
Operator: It's turned down all the way? I'm not sure what happened.
Would you like me to dial you back, ma'am?
Man: Somebody's on a cell phone [audio break].
Operator: Everyone's lines are in listen-only. There would be no
interaction with them.
S. Wang: The echo has just gone.
Man: Yeah, they went on mute.
Operator: All right, please continue.
S. Wang: Thank you. Let me restart. Joining me today to discuss
the transaction are Koichi Nishimura, Solectron chairman,
president, and chief executive officer; and Dennis Wood, the
chairman, president, and chief executive officer of C-MAC
Industries. We will hear from both of them in just a few
moments. As well with me today are Thomas Alsborg, director,
investor relations of
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Solectron; Claude Michaud, chief financial officer of
C-MAC; and Sue Gunther, vice president, business
development of C-MAC.
On this call, we will recap the transaction, discuss how
C-MAC fits with our continuing customer focus strategy, and
provide to you the C-MAC perspective. We will also discuss
our updated guidance and take your questions, with a plan
to conclude no later than 9:45 a.m. Eastern time. I
apologize for the abrupt cutoff, but we do have a very
tight schedule to keep, and I appreciate all of your
support.
Let me now first remind you that during the course of this
conference call, we may make projections or other
forward-looking statements about the expectations, beliefs,
plans, intentions, and strategies of Solectron and C-MAC.
Our ability to achieve planned business objectives involves
many risks and uncertainties. Forward-looking statements
relating to expectations about future events or results are
based upon information available to the company as of
today's date. We assume no obligation to update any of
these statements, and these statements are not guarantees
of Solectron or C-MAC.
The financial results and product development of Solectron
and C-MAC could differ materially from current
expectations. Factors that may affect the ability to
achieve planned business objectives include but are not
limited to the following: one, the company's revenues and
earnings are subject to a number of factors that make
estimating operating results extremely uncertain; two,
competition for the company's products is intense; three,
the uncertainties of whether new products, product
extensions, or product strategies will be successful; four,
risks associated with this acquisition including a,
conditions in the financial markets relevant to the
proposed transaction; b, the failure to achieve expected
synergies and efficiencies of operations; c, risk of price
fluctuations; d, loss of major customers; e, the ability to
manage business integration; f, risks associated with
international sales; and, g, operations and environmental
regulations; five, loss of key personnel; six, litigation
including litigation over intellectual property rights;
and, seven, general technological and economic factors.
The risks associated with Solectron's business are discussed
in Solectron's annual report on Form 10K for the year ended
August 25, 2000, and in subsequent quarterly reports on Form
10Q. The risks associated with C-MAC's business are
discussed in C-MAC's annual report on Form 40S for the year
ended December 31, 2000, and in subsequent quarterly reports
on Form 6K. You are encouraged to read this information
carefully.
We caution you that such statements reflect only our current
expectations and that actual events or results may differ
materially. We refer you to the risk factors and cautionary
language contained in the documents that the companies file
from time to time with the Securities and Exchange
Commission, specifically recent filings on Form 10K, 10Q,
8K, S3, S4, and 40F as well as today's news release. Such
documents contain and identify important factors that could
cause the actual results to differ materially from those
contained in our projections or forward-looking statements.
We undertake no obligation to update those projections or
forward-looking statements in the future.
As I mentioned this morning, we issued the news release
announcing the transaction and on today's call we will refer
to the contents of that release.
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Solectron, its executive officers and directors, certain
other members of management, and employees, may solicit
proxies from Solectron stockholders in favor of the business
combination and C-MAC, its executive officers and directors,
certain of the members of management and employees may
solicit proxies from C-MAC stockholders in favor of the
business combination.
Information concerning the participants in the solicitation
will be set forth in a proxy statement that will be filed
with the Securities and Exchange Commission. Information
about Solectron's officers and directors is included in
Solectron's proxy statement for its 2000 annual meeting of
stockholders held January 18, 2001, and filed with the SEC
on December 11, 2000. Information about C-MAC officers and
directors is included in C-MAC's notice of meeting and
management proxy circular for its 2000 annual meeting of
stockholders held May 3, 2001, and filed with the Ontario
Securities Commission on March 30, 2001. These documents are
available free of charge at the SEC's Website at www.sec.gov
and from Solectron and C-MAC.
Thank you for sitting through that.
Now let me give you the highlights of our announcement.
Today Solectron and C-MAC entered into a definitive
agreement pursuant to which C-MAC Industries will merge into
a wholly owned subsidiary of Solectron. C-MAC is based in
Montreal, and for the 12 months ended June 30, had revenues
of 2 billion U.S. dollars. In this all-stock transaction,
C-MAC shareholders will elect to receive either 1.755 shares
of Solectron common stock or 1.755 shares of a wholly owned
Canadian subsidiary of Solectron in exchange for each C-MAC
share outstanding.
The total enterprise value of the deal is approximately 2.7
billion U.S. dollars, including the assumption of
approximately 30 million dollars in debt, net of cash. This
transaction is structured to be tax-deferred for validly
electing Canadian residents, C-MAC shareholders, and taxable
to U.S. resident C-MAC shareholders. The transaction is
subject to approval by the shareholders of Solectron and
C-MAC and certain regulatory bodies. We anticipate
concluding the transaction by the end of calendar 2001.
A combination of Solectron and C-MAC is expected to yield
several compelling benefits. Primary among them is C-MAC's
strong presence in high-end systems integration and
manufacturing capabilities, which Solectron, too, has been
steadily building. C-MAC also provides Solectron with
strategic entry into the automotive industry, which both
companies have targeted as a growth opportunity.
In addition, Solectron will be able to leverage C-MAC's
proven selective vertical integration approach, which
results in higher margins through supply chain management
and provides make-or-buy flexibility in fulfilling customer
orders. C-MAC is a very well-run company and a great
cultural fit for Solectron. More fundamentally, this
transaction represents another strategic step forward in
continuously developing the skills, expertise, and presence
required to meet ever-changing customer needs.
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In addition, it gives Solectron a greater presence and
business investment in Canada in order to provide expanded
support services to our Canadian customers.
Now let me turn to Ko for his comments and perspective. Ko?
Koichi Nishimura: Thank you, Susan, and good afternoon-- good
morning, rather, to everyone on the call. I'm very excited to
talk with you today. I'm also very pleased to have Mr. Dennis
Wood with us. I welcome him and the C-MAC team to the
Solectron organization. Certainly, the combination with C-MAC
will help Solectron continue to expand our capabilities
offering in strategically important areas and extend our
presence into the automotive industry.
I am also very excited about the collective actions we are
taking to enhance Solectron's position as a leading provider
of end-to-end technology, manufacturing, and supply chain
solutions. We always have taken the customer focus approach
to building our capabilities. Our strategy remains very
consistent. As a total supply chain facilitator, we will
acquire or build the capabilities necessary to help our
customers and our company to succeed.
When we entered in this overall market downturn, we said we
would use this time as an opportunity to accelerate key
strategic initiatives and take the steps necessary to meet
customer needs coming out of this downturn. Implicit in that
approach was our anticipation that OEM's needs would change
very quickly and accelerate the outsourcing trends. In fact,
that is what is happening. We are with them all the way.
It wasn't too long ago that the EMS companies would succeed
with a fairly limited scope of capabilities on their circuit
board assembly, new product introduction expertise, and some
skills in managing the supply chain. At Solectron we've
always worked to become an even more valuable partner by
expanding those core capabilities and our success at doing
that has been the source of our industry leadership over the
last decade.
Now, as we have anticipated the downturn is creating the
need for OEMs to rely more heavily on the outsourcing model.
They need reliable, global, EMS partners with a broad range
of skills and expertise. They need partners with the
strength to provide true end-to-end technology, one-stop
manufacturing and supply chain solution and design to full
systems production, product fulfillment, and after-sales
service as well as the logistic skills to make it all
happen.
Just think of it this way -- in the past, EMS providers
would supply various services such as new product
introduction, or NPI, in manufacturing. OEMs utilize those
services, but they also continue to have direct contact with
other parties in fulfillment, component, and materials--
perhaps systems integration and other areas. Today's economy
is forcing the OEMs to reduce costs and focus even more
tightly on the core competencies, and they can no longer
afford, then, to honor resources to have multiple points of
contact in the supply chain process. Instead, they look to
us to provide that, and we have the ability to deliver what
they want and need.
In fact, we are the general contractor of the supply chain
for OEM customers. They can and will rely on us to
coordinate, conduct a make-or-buy decision and
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otherwise do the things necessary to design, make, deliver,
and service their products, all with the fastest
time-to-market and the lowest total cost of ownership. We
have been steadily building precisely those capabilities
through internal development and through acquisitions
including the transaction with C-MAC today.
Today I believe we ought to have the strongest capabilities
to meet the OEM needs. In the last two years, we have
strengthened relevant capability in several areas including
engineering and design, systems integration and assembly,
new product introduction, order fulfillment and
distribution, and after-sales service. We have also
continued to build expertise and a strong customer base in
optical services in other important high-technology areas.
We have also entered important new industries -- first, to
consumer electronics through our relationship with Sony and
now into automotive through C-MAC. In addition, we have
strengthened our geographic presence, particularly through
NatSteel in Asia, which will be a region of growing
importance to us, to our customers, and to their end
markets.
In the global services, we have built a very strong,
full-service, after-sales presence on five continents, most
recently with the addition of Solectron site in Japan and
with the European repair hub in Amsterdam. So you can see
that we have been deliberately and strategically and
systematically building the relevant capabilities,
strengths, and presence required to meet the customer needs
as a leading and preferred EMS partner.
Now let me discuss the important elements of the C-MAC
transaction; first, increased high-end technology
capabilities. C-MAC is an industry leader in high-end
systems design, manufacturing, and technology with very
strong skills that help round out Solectron's complete
system solution capabilities, specifically C-MAC has a
strong high-end systems integration capability including
complex electromechanical design and assembly with strategic
backward integration at the metal and backplane fabrication.
C-MAC also has the breadth of capabilities in optical
networking components application and assembly. Combined
with our current capabilities, we will be even more
effective at competing for full systems work from customers,
as they increase their reliance on EMS partners.
With our combined capabilities, we have a strong competitive
edge in the breadth and depth of the full solution service
we offer our customers. Secondly, is C-MAC's selective
vertical-integration approach. This dynamic make-or-buy
approach enables us to capture the benefits of limited
components application while retaining the benefits of our
highly leveraged cost model. This approach strengthens the
performance of internal business units by requiring them to
be a competitive, stand-alone business as much as their
production is sold to other companies.
On the flip side, in challenging market conditions, we can
boost capacity utilization and revenue by pulling more work
in-house. Having said that let me note that the fab side
represents a modest portion of C-MAC's revenue. They are
focused on high-end applications on specific fab
capabilities needed to further penetrate specific industry.
Thirdly, is revenue and margin opportunities -- we have
added additional revenue opportunities by extending existing
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customer business relationships and developing new
relationships. We will also have opportunities to enhance
margins by increasing our value-added content and more
closely managing the supply chain.
C-MAC's technology-driven manufacturing services provide us
with a more robust high-end technology-focused value
proposition that allows room for solid margins in the
industry we serve. In addition, C-MAC's focus on high-end
component engineering carries margin benefits and creates
opportunities for further penetration into other important
industry.
Fourthly, complemented strength in network and telecom
equipment sector -- the new high-end technology design and
engineering expertise and, in particular, a full system
suite of services and networking and communication will
further develop our industry-leading position and offering
in those critical sectors. At the end of the day, we are
extremely well positioned to capitalize on the upturn and
the continued growth in both network, telecom, and telecom
equipment industries.
Fifthly, the entry into targeted growth segments -- we have
targeted specific new industry segments, and C-MAC brings
access to one of those segments, the automotive industry.
C-MAC generates about 8 percent of the sales from the
automotive industry. It's an attractive industry with
end-market growth expected to exceed its recent historical
annual growth of 15 percent. It's also a challenging
industry to penetrate initially, and C-MAC has established a
very solid foothold. Dennis and his team are approaching it
in the right way -- building a big support and credibility
in key electronic components as a prelude to the future
expansion.
Sixthly, enhanced capabilities for the Canadian customers --
with the complementary strength in technology-driven
manufacturing services in the network, telecom, and
automotive industries, we will be able to provide a wider
range of value-added services to our Canadian customers. We
will also bring greater resources and geographic benefits to
C-MAC and its customers.
In addition to those benefits, C-MAC and Solectron are an
excellent cultural fit. In the last several weeks, I've
spent a great deal of time with Dennis and his organization.
I am impressed with what I've seen from the leadership and
from the operation and from the cultural perspective.
Cultural fit is among the most important of the criteria for
any transaction that we undertake. The good news is that our
companies are very compatible.
C-MAC's strategy is highly complementary with our strategy.
We are both extremely focused on providing value-added
services to our customers, and our decisions are driven by
doing the right things to help our customers succeed.
Dennis, on behalf of all of us at Solectron, I look forward
to working with you and welcoming your worldwide team.
Dennis Wood: Thank you very much, Ko. I'm certainly proud to bring
my team and our customers to the new Solectron family. I
certainly agree more that our two companies are an excellent
fit strategically and culturally.
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For the past 15 years C-MAC has evolved from a company
having one product, the battery-feed resistor, which was
sold to a single customer -- Nortel -- into a global
technology design and manufacturing services company with
over 500 regular customers. Two hundred-seventy of these
customers have a purchase run rate of in excess of a million
dollars.
About three years ago we responded to our customers'
evolving requirements that included a reduction in their
respective supply bases and time-to-pull production,
enhanced technologies, design expertise, and aggressive cost
reduction programs by creating a selective vertical
integration strategy. Our SBI model focuses on the
make-versus-buy decision implemented by our global supply
chain team. Our strategy differs from vertical OEM
strategies of the past in that every one of our plants is a
profit center whose goal is to sell a majority of its
products to external customers. In this way we constantly
benchmark ourselves against industry and have successfully
maintained our industry-leading margins.
In challenging economic times such as these, we have had the
flexibility to pull in some of our outsource production
until such time and conditions improve. In order to maintain
our profitability, we've become a global technology design
manufacturing services -- a TDMS company -- offering our
communications customers total system solutions and,
similarly, we have become a full-service supplier to the
transportation electronics industry.
We have carefully monitored the competitive landscape and
observed our peers engaged in critical capabilities to
varying degrees of the past couple of years. They've added
capabilities in PCBA fabrication, enclosures, cable
harnesses, and systems integration. To effectively compete
with the larger OEM divestitures and increase our market
share in the future, we recognize the need for additional
high-volume PCBA capabilities and scalability.
There were three principal alternatives to broaden our PCBA
capability -- C-MAC could buy or build the capacity for the
capability or merge. The first two alternatives were less
attractive to us, given the time, capital, and resource
requirements, in addition to the condition of the available
properties. Furthermore, we believe that we would lose the
momentum at a time when OEMs are accelerating their
outsourcing activities.
After spending a great deal of time with Ko and the
Solectron team we are convinced that the combination of the
two companies represents the best alternative for our
shareholders, employees, and customers, and we're creating
the leading TDMS company in the industry.
Ko and Susan have articulated-- I'll try that word again--
articulately described the benefits of the transaction, and
I would like to spend a few moments discussing what we
perceive the benefits to be to C-MAC's shareholders,
customers, and employees.
From our shareholders' perspective, the combination of the
two best-in-class companies with complementary capabilities
will increase the value proposition to our customers and
position us to be the premier TDMS company in the industry,
which will bode well for future revenue growth.
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Furthermore, our proven selective vertical integration
strategy will provide revenue enhancement opportunities from
an earnings perspective, and we will be ideally positioned
to benefit from the industry upturn. We have been
disciplined in our approach, and we have not sacrificed
earnings for top-line growth. We will be clearly able to
leverage this model with Solectron's customer base and
product offering, and we will now have the opportunity to
satisfy our existing OEM customers, PCBA and after-market
requirements internally. Keep in mind that for each dollar
of C-MAC revenue equates to $2 to $3 worth of PCBA revenue
and vice-versa.
From a customer perspective, we'll be ideally positioned to
offer a complete end-to-end solution from design and
technology to full systems integration and order fulfillment
to after-market support, and that on a global basis. We are
particularly excited about current and future opportunities
within the transportation electronics industry. We spent the
last five years building the design, electronic, and
mechanical capabilities required to become competitive
within this industry and have been elevated to the position
of a full-service supplier.
Given that the major automotive OEMs are now seeking
increased electronic solutions, capabilities that they do
not necessarily have in-house, we will have the scalability
to take on larger OEM programs. Given that many of these
programs require extensive design expertise and engineering
capability unique to the automotive industry, we are
uniquely positioned to benefit from the accelerated
divestiture activity by the OEMs. Similar to our
transportation electronics strategy, we have been focused on
providing our customers with total solutions within the
communications industry.
We will now have the technology and capability to take on
larger, complex systems programs and have the manufacturing
expertise to produce most of the contents of these systems
in-house -- where it makes economic sense to do so, of
course. Having internal manufacturing capability allows us
to guarantee security of supply for our customers and also
gives us the leverage within the supply chain.
With our combined capabilities, we will also reduce our
customers' time to full production and overall cost
modeling, and from our employees' standpoint, they will
share best practices with the Solectron team and will
continue to play key roles in our company's future success.
They will become part of the premier TDMS company in the
industry. The C-MAC team has always responded to their
customers' changing requirements with a high degree of
integrity, professionalism, and enthusiasm that has ensured
our long-term success. The combined company will provide
additional career paths and opportunities for the C-MAC
team. Together we will build the TDMS company of the future
and prepare for the next generation of outsourcing.
Now I would like to turn the presentation back to you, Ko.
Thank you.
K. Nishimura: Thanks, Dennis. From here, of course, there's a
lot of work to do. Our business teams will get to know each
other better as we work toward completing the transaction. As
the news release indicates, we expect this transaction to
close by calendar year-end. As importantly, we will remain
very busy on additional actions to build our capabilities and
win new OEM business that's in the
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pipeline. It's a very busy and very exciting time, and we
look forward to sharing our updates again. This is truly an
exciting operating environment, and Solectron is best
positioned with size, strength, technology, and skill to
continue our industry leadership. Thank you for you interest
and support.
Now let's turn back to Susan. Susan?
S. Wang: Thank you, Ko. In addition to the news release
announcing the C-MAC transaction, Solectron issued a news
release this morning providing initial guidance for fiscal
year 2002 and updating our Q4 fiscal year 2001 guidance. Let
me recap that guidance.
In fiscal year 2002, Solectron plans to generate sales in a
range of 16 billion to 18.5 billion U.S. dollars and cash
earnings per share of 62 cents to 66 cents. Those ranges are
subject to changes in market conditions and are before the
C-MAC transaction and other potential acquisitions.
Let's turn now to the fiscal fourth quarter 2001. Consistent
with our prior guidance, we expect to generate sales of 3
billion to 3.5 billion dollars and cash EPS of 5 cents to 9
cents -- again, before restructuring charges and one-time
charges. As of today, update on nonrecurring items are
shaping up as follows: as you already know, the fourth
quarter will include 50 million dollars in restructuring
charges that we announced on June 18. At that time, we also
said we would consider what additional restructuring might
be necessary. After analyzing that matter over the last six
weeks, we now plan to record an additional fourth quarter
restructuring charge of up to about 210 million dollars.
Coming in at that level would mean total fourth quarter
restructuring charges of about 260 million dollars.
In addition, we expect to incur a one-time nonrecurring
charge of about 68 million dollars related to credits and
other exposures. While we continue to have general credit
loss reserves, a number of smaller accounts are in or at
near bankruptcy, and we determined that it is appropriate to
build up a specific reserve for such potential unusual
losses under these difficult market circumstances.
That concludes our prepared remarks. Operator, please
prepare the question-and-answer session. Given the time
constraints, we would greatly appreciate if the questions
would be limited to one with follow-up if there is
sufficient time.
Operator: Thank you. Ladies and gentlemen, if you with to register a
question for today's question-and-answer session, you will
need to press the 1 followed by the 4 on your telephone. You
will hear a three-tone prompt to acknowledge your request. If
your question has been answered, and you wish to withdraw
your polling request, you may do so by pressing the 1
followed by the 3. If you are on a speakerphone, please pick
up your handset before entering your request. One moment,
please, for the first question.
David Parrish with Dain Rauscher Wessels, please proceed
with your question.
David Parrish: Yeah, good morning, and congratulations. Can you
just give us a sense as to what level of cost savings you
expect to see from material procurement relative to
reductions in SG&A? Also, I guess the 60 million to 120
million in synergies
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that have been identified, what portion of this is tied to
cross-selling between the two organizations? Thank you.
S. Wang: David, the 60 to 120 million is, in our opinion, a
conservative estimate of synergies that are in those
categories that you have identified in your question. Because
these are very high-level preliminary estimates, it is not
clear that the way we sized each category is quite accurate.
So, roughly, what we would say that we believe, at this
point, for short-term synergies in material procurement and
overhead cost reduction, that we would have benefits through
those categories, the majority of the 60- to
120-million-dollar range.
The greater synergy, on the other hand, is revenue synergy,
and the belief is that the time to develop or close on some
of these transactions and have a meaningful impact on the
results would be a little bit more lengthy. So as a result
the current estimate is quite conservative and at the lower
end of-- less than half of the 60- to 120-million-dollar
range, but it is our belief, as I said, that the revenue
synergy is the primary synergy and, over the long term, that
is very difficult to quantify because the combination of the
capabilities would take us into new realms and significant
business rewards that are very, very broad in scope and
scale.
D. Parrish: So in the short term, is it conceivable that we
could see 60 to 120 million in savings from material
procurement in SG&A? Or would we have to get cross-selling in
order to get to maybe the high end of that range?
S. Wang: It's a very limited amount of cross-selling, as I said,
less than half of that range.
D. Parrish: OK, thank you.
Operator: Our next question comes from Jerry Labowitz with Merrill
Lynch. Please proceed.
Jerry Labowitz: Yes, good morning, and congratulations. When you
look at the larger customer C-MAC has had, it's one of your
largest customers. In doing your due diligence and speaking
to customers, how do they feel about the consummation of this
transaction?
S. Wang: Jerry, we-- both of us have very, very strong
relationships with Nortel. We, of course, are in constant
discussion with them well before this transaction, and we
understand their evolving needs. We believe that what we are
doing here meets a lot of their needs and is right in line
with the expectation that they have of our development
program to respond to their needs. We continue to believe
that the relationship is improving, and we have very high
confidence that this is going to be received very well by
Nortel.
Additionally, other customers have similar kinds of
requirements expressed to us more and more urgently
recently, and we believe that this combined capability again
will provide the strength, the depth of capability, and the
scale to be responsive to all the other customers'
requirements as well.
J. Labowitz: Have they-- when you talked to them, have they
talked about the level of business being any different, going
down the road, compared to what it would be to each company
on its own?
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D. Wood: Jerry, maybe I can answer that question, if I may. I
believe that the combined capabilities of Solectron and C-MAC
will enhance our position with C-MAC's largest customer. This
is something, of course, that they have always questioned
C-MAC and its ability to give them a full product and I think
that this is certainly going to give-- basically, as we
speak, today, new products are evolving continuously. It has
now become-- not time-to-market but time-to-pull production,
and, of course, cost plays a major role in this, and I think
that together-- I mean, if you look from a logistics point of
view, as an industry we are moving product around, you know,
from one plant to the other, and what we want to do is to
consolidate that so that we can support them. They are taking
our product, moving it to another facility.
What the OEMs are looking at in the future is that we will
have total order fulfillment. Basically, we will ship
directly to their customers, we'll support their
after-market, their repair, and what have you, and Solectron
has got a superb operation to handle that, and I think
they'll-- as we speak today, I think we are certainly in the
lead position, and anybody who wants to catch up will have
to start chasing us, because we're going to be that further
ahead.
J. Labowitz: Thank you very much.
Operator: Our next question comes from John McNaus with Needham and
Company.
John McNaus: Yes, could you talk about the future interaction
between some of the products there of C-MAC and modular and
your technology solutions at Solectron?
S. Wang: Sure, John. The products at C-MAC, I will defer to
Dennis to describe more accurately, tend to be at component
levels and primarily address the transportation electronics
industry with electronic components that are more broadly
applied for telecommunication and generally applied to
electronics requirements.
The technology solutions business unit of Solectron has
technology platforms that are very strong in memory modules,
embedded computing systems, board level and system level,
input/output devices, and continuing to expand into modular
designs on that primarily assembled to order. Typically, we
have standard modules that function very effectively, which
we customize to fit the OEMs requirements.
We believe that there is, again, not a lot of overlap, and
that the products will be complementary to serve a broader
range of requirements of our collective customers.
D. Wood: Susan, I think you've answered that question extremely
well, and I think this is one of the major advantages. Your
question is well positioned. I think it basically points out
one of the major advantages of the combination of these two
customers because we have very, very good overlap. We'll now
be able to expand-- C-MAC will be able to expand their
product offering into the data processing computer market
and, of course, this will allow Solectron to do the reverse
in terms of our telecommunications component business and,
certainly, into the automotive business. The automotive and
transportation electronics sector is extremely large, and
we're starting these businesses very similar to the
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way we started C-MAC, where we started with the battery-feed
resistors I pointed out earlier.
Next time you're on a tarmac, you look at every plane that's
on that tarmac. Every one of them has a C-MAC product in it
-- pressure sensors, position sensors, bore sensors -- now
imagine if we take one of those sensors, put our expertise
into it, convince our OEM customers to say let us produce it
at a lower cost, take that 8-, 20-, 12-, 50-dollar sensor,
move it into a 5,000-dollar system with our embedded
computer systems and our operations. So I think it's a great
opportunity. It's got to be a win-win situation.
J. McNaus: Thank you.
Operator: Our next question comes from Michael Zimm with Goldman Sachs.
Please proceed.
Michael Zimm: Yes, good morning and congratulations. Dennis or Ko, I
was wondering if you could address the automotive market? If
you could just talk a little bit more about the size of the
market that you see, the opportunity, and also, Ko, I think
you had mentioned that the automotive market you would expect
to begin to exceed its historical growth rate of 15 percent
or so. I would imagine that means in terms of the outsourcing
growth. Could you maybe give us a little bit more of a
definitive view of what kind of growth you expect from that
market?
D. Wood: Michael, what I'd like to do is ask Sue Gunther to
respond to that question, if we may.
Sue Gunther: Michael, we see a tremendous amount of opportunity.
Currently, TSI estimates that approximately 45-percent to
50-percent growth annually through 2004, and presently EMS
companies has only penetrated this market to the extent of
3.6 percent. More exciting than that is the fact that we have
the capability, we've grown from a component and a module
supplier to subsystem and eventually whole system supplier.
So as the electronic content in the car continues to increase
over the next 5 to 10 years, we see tremendous growth
opportunities based on the in-house technology that we've
developed, as well as all the intellectual property and keep
in mind that we actually have products in this part of our
business.
D. Wood: All right, thank you. As we go forward, electronics are
going to be the differentiator in automotive sales in the
future.
K. Nishimura: Well, you know, when you add that to the
complementary capability we have with the Sony acquisition of
a year ago, then QS9000 qualified, and we do put out complete
assemblies. So coming from the assembly side and coming from
the component side, I think we have a perfect match here to
really penetrate effectively the automotive industry
together.
M. Zimm: And again, what size are you putting on this market in
terms of the total available opportunity?
D. Wood: It's a minimum of 19 to 20 billion dollars. What we
really want of that for next year is 5 percent of it.
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Page 13
S. Gunther: It's also important to note that if you look at the
product that is currently available in the market in terms of
the multi-year contracts, it's estimated by Hanson to be
about 30 billion dollars. So there's just a tremendous amount
of opportunity, and we're seeing a great deal of flexibility
from the OEMs in terms of putting together a creative
solution that will lower their overhead cost structure,
which, as we all know, is quite high at this point in time.
M. Zimm: And are you getting the sense that the divestiture
theme is going to now start to fully develop in the
automotive market?
S. Gunther: It already has, yes.
D. Wood: I think that's one of the advantages of the combination
of Solectron and C-MAC -- it will position us to be able to
take advantage of these transactions because they are a major
transaction. We're not looking at 50-million, 100
million-dollar transactions. I mean, these are billion-dollar
transactions, and we need the critical mass to be able to do
it.
M. Zimm: Thank you.
Operator: Paul Fox with Banc of America Securities, please proceed with
your question.
Paul Fox: Hi, my congratulations, too. Can you also talk about the
system assembly opportunity? Would you size that in the
billions or the tens of billions? You've been saying for a
couple of years that the industry trend was ready to start
there. Would you say now that it is imminent and are you even
better positioned for that now? The size of that, I'd like
you to get to.
S. Wang: I'll see if I can take a crack at this. The systems
business needs to be separated between the low end, typically
the high-volume commodity-like products to semi-custom, which
we need to address in the build-to-stock or build-to-forecast
model. We also have mid-range increasing complexity
requirements for build-to-order, and then highly customized,
high-end, large-frame, complex, build-to-order type of
systems.
The marketplaces are roughly defined this way -- for
build-to-stock, we're looking at things like PCs, notebooks,
cell phones, printers, set-top boxes, and some small
form-factor devices. Mid-range, we're looking at things like
network routers, switches, mid-range service, some medical
equipment, storage-type systems, and some level of
industrial control products. At the complex end, we're
looking at enterprise computing, storage area networks,
central office switches, cellular infrastructure and
equipment instrumentation and test-type products.
The total market estimated is obviously very large, and it
adds up to 900 billion or so. The system content of this
business, if you exclude the printed circuit board content,
would be a number, and then you would have the printed
circuit board content, depending on whether you sell the
printed circuit board through as part of the system. So the
definition is a bit problematic. So depending on how you
define this market, you could add up the system assembly,
without PC board, and come up with 500, 600 billion dollars
easily.
D. Wood: So there's lots of room.
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Page 14
P. Fox: And would you say that's about to accelerate as part of
your business, to a large degree?
S. Wang: Absolutely, Paul. Solectron has been discussing a
strategy and has been systematically deploying it to address
more systems requirements, especially to provide a more
complete supply chain solution, and it is our expectation and
plan to increase the systems assembly business to represent
significantly more than what we have today. Forty percent to
60 percent of our business should migrate toward system
assembly.
There are, of course, different ways to approach that. We
can do very high-volume, low-end system assembly that can
bring in a lot of top line, but it comes with a different
set of challenges than the complex high-end arenas that we
believe that C-MAC would significantly enhance our ability
to pursue. Remember, also, that Solectron has acquired
Shinei, which is an enclosure company that would help us
with the low-to-mid range system needs.
In this case, with C-MAC, we have capability for
large-frame, high-end, that currently addresses the
telecommunication and networking markets, but can, in fact,
be very helpful to help us with high-end computing and also
to help us establish high-end capability in Asia, where we
believe, in short- to medium-term, presence in Asia for
large-frame assembly would be very relevant.
So when we look at the opportunities and the customers'
accelerated demand of the fully integrated supply chain
solution, we're looking at opportunities that are very
sizable, where the OEM really wants a top-tier partner to be
effectively a general contractor to manage the whole supply
chain and makes the appropriate decision whether we make it
or buy it on their behalf is something that they would be
happy for us to handle on their behalf.
So the near-term expectation is the systems business will
grow, and I don't know right now whether the high end or the
low end is going to grow more rapidly, because these awards
come in big chunks, and so from time to time you could have
a SKU between the low end and high end. The product mix is
typically a situation that we just respond to.
P. Fox: Thanks.
Operator: Our next question comes from Alex Blanton with Ingalls and
Snyder.
Alex Blanton: Susan, I'd like to change the subject and switch
over to the guidance that you just issued for fiscal 2002.
S. Wang: OK.
A. Blanton: Would you agree that there is a tremendous amount of
new business under discussion being negotiated among the
top-tier providers and the OEMs? I've seen estimates 15
billion to 20 billion dollars currently under negotiation.
Would you agree with that?
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Page 15
S. Wang: Alex, I absolutely agree with that. There is very, very
large pipeline of large transactions under discussion. As you
know, the timing for conclusion-- successful conclusion and
the ramp-up and transition is not easily predictable.
A. Blanton: Oh, right, but your guidance, I assume, doesn't
include any of that.
S. Wang: That is correct.
A. Blanton: OK.
S. Wang: Guidance is-- let me just give you the basic
assumption.
A. Blanton: Yes, good.
S. Wang: We've looked at the fourth quarter situation. We are
seeing stability in the forecast. So at the 3 billion to 3.5
billion dollar level quarterly run rate, we are seeing the
forecast pretty much flattening out at that level, and it's
been like that for several consecutive weeks. We are
encouraged by that. We are not providing any prognosis as to
whether it's going to stay that way, go down, or go up.
Obviously, we hope that it's going to go up, but for planning
purposes, in order to give you some indication of how we're
going to deal with the situation, and to guide ourselves as
to how we restructure the organization to ensure that we
would maintain and bring our margins back to the normal
operating levels, we have chosen to assume flatness in the
base business for the whole fiscal year 2002.
A. Blanton: OK-- that's what I'm getting at.
S. Wang: We do have, Alex, some new business awards that we have
factored into the second half of the year as they ramp up,
and that's how you see the number billed to the 16 to 18.5
billion.
A. Blanton: But there are already awarded, right? And you don't
have any accretion from C-MAC in there, either?
S. Wang: That's correct.
A. Blanton: My question is -- given that people are talking
about all of this very openly and among the analysts there
have been various estimates and surveys done of the
tremendous amount of new business out there and some of your
competitors talked about a huge year next year. I was just
wondering what the logic is of issuing an earnings forecast
that assumes none of that ever happens?
S. Wang: Well, Alex, it's not exactly an earnings forecast. What
we indicated was we planned this business level and assuming
the flatness and excluding all acquisitions--
A. Blanton: -- why would you do that, Susan? I mean, why assume
flatness when we all know that's not going to happen?
S. Wang: Well, I'm saying the economic picture as opposed to the
new business. Now, as you recall, a year and a half or two
ago, when we tried to make a judgment as to how much new
business would be acquired and when it would be factored into
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Page 16
the year, we had a very negative reception on the Street for
being not precise on the timing. At the end of the day, we
made the numbers, OK, but during the year we were not
forgiven-- for four quarters-- to why we weren't precise on
the numbers.
A. Blanton: Well, I think that was a mistake. I mean, you can't
be precise, but neither, I don't think, should you make a
forecast that has zero chance of occurring.
S. Wang: As I said, it's not a forecast, Alex. I appreciate what
you're saying, and what we're saying is that this is our
current plan of record, with a lot of new business that's
being developed, and we intend to update you frequently.
A. Blanton: Perhaps we should look at this as sort of an
indication of what would happen hypothetically if there was
no new business awards for you in the next year, and then at
the basis for making estimates on top of that. Would you say
that's a good idea?
S. Wang: We'll look into it, Alex.
A. Blanton: [laughs] OK, thank you.
Operator: Our next question comes from Thomas Hopkins with Bear
Stearns.
Thomas Hopkins: Yes, congratulations, Susan. Can you hear me?
S. Wang: Yes, Tom. Thank you.
T. Hopkins: Just following up very briefly on the last question
with a little different perspective -- many companies aren't
issuing guidance at all for the next couple of quarters out,
and most EMS companies have been only issuing guidance one
quarter at a time. What has changed, or how have you gotten
comfortable enough, I guess, to go ahead and give-- I was
surprised that you would even give fiscal 2002 guidance.
S. Wang: Tom, thank you for the follow-up question from this
perspective. Because of a major transaction of this nature,
we felt that it was helpful to at least give you a base plan
so that you can determine in your models how this transaction
can be accretive.
T. Hopkins: OK. Yeah, that's great. That makes sense. The
other-- just technical question is-- can you hear me, Susan?
S. Wang: Yes.
T. Hopkins: OK-- I just want to be clear about the vertical
integration element of C-MAC. Can you break down-- or maybe
someone there can break down for us, you know, how much of
their revenue C-MAC has is box bill versus PCBA, and how much
of their revenue is any kind of assembly service -- box bill
or PCA, versus how much of their revenue comes from any kind
of vertical components? Say, enclosure, bare board, resistor,
whatever?
D. Wood: In effect, if you look at the C-MAC process, if you
take-- we'll use the last fiscal year, which most of us might
get rid of that year, but let's that one as an
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Page 17
example, where we sold 2.5 and change billion dollars
Canadian. In effect, to get to that 2.5 billion dollars, we
actually produced 3.1 billion. So, I mean, it is a totally
different process in terms of selective vertical
integration, and, of course, those numbers were eliminated
to come down. So you need the infrastructure to be able to
do that. What this allows you to have is considerably higher
gross margins, and you're working in more of a pseudo-OEM
model because, within that, you have intellectual property
and proprietary components, and what have you. It is
certainly something that we-- at the systems level, it
builds up.
I mean, if you look at our model, and we go all the way from
design, all the way from the-- up to the top of the system,
as you move up that system, you end up with considerably
less-- smaller and smaller and smaller gross margins. So
this is why volume is not the total answer and, of course,
we, as a new industry at the EMS level, we have been pushed
for top-line growth, and it's one of the things that we have
kind of stayed away from, rightly or wrongly, but-- and it's
worked.
What the goal is, is to have, because of our 40-percent
rule, where we try not to buy anymore than 40 percent of our
own produced product, in house, because it keeps us
best-in-class, gives us the right disciplines, but when
times are difficult like they are today, we pull them back
in. So in effect, what we try to do, if we were to sell 2.5
billion dollars or 3 billion, only 40 percent of that would
be at the systems level.
T. Hopkins: OK. So I guess what that implies is that 40 percent
would be systems box bill, and the other 60 percent would be
some kind of vertical component -- an enclosure, cable
assembly, a resistor, or something like that?
D. Wood: You mentioned PCBA. In our case we only build PCBAs for
our own utilization within our subsystems and systems. The
majority of our customers acquire their PCBA from another EMS
company.
T. Hopkins: OK.
D. Wood: Here's the real value-add that we-- a lot of the
value-add that this combination brings.
T. Hopkins: Great, thank you.
Operator: Todd Copeland with CIBC World Markets. Please proceed.
Todd Copeland: Yeah, good morning. I'm just wondering -- C-MAC has
some vertical capabilities that have not been traditionally
Solectron's, such as the printed circuit board fabrication
and some other activities, and I'm wondering if you can just
lay out for you, where Solectron is going from a vertical
perspective? It seems like you're moving a little bit away
from the business model that you talked about before. So just
give us some perspective on that. Thank you.
K. Nishimura: This is Ko. Certainly, what we've-- if you notice
what we've done is, we have moved vertically and [audio
break] just like C-MAC has. We come from the assembly side,
and so you can see that we took on the design side first, on
embedded microprocessors, memories, and data I/O, and we have
gone that way. So we have also picked up Shinei, which does--
at the smaller form factor,
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Page 18
power package and cooling, and they also have a very
interesting-- had an interesting capability-- it's been
integrated at Solectron, which is industrial design, and so
we are looking at things selectively, and the higher-- in
the area of-- some of the area that C-MAC possesses,
especially in the fab area. We will do limited scale for and
make-buy decision on a scale side, but certainly in order to
maintain and be able to keep pace with technology in the
engineering side of this, we will do some of that now.
T. Copeland: And should we read into that, that you may see
Solectron scaling up some of these other areas, such as the
fab business, like you've seen some of your competitors?
K. Nishimura: No, I don't think-- that was the point I'm trying
to make -- there's a difference between having technology
capability and engineering excellence versus making a
large-scale and volume production. In our case, we're going
to be technology-driven and we have-- since we have a huge
supply-based organization, we'll probably end up buying most
of it, but on the other hand, it also helps us with our
supply base in terms of enhancing our supply base's knowledge
in order to be able to keep up with the market trends.
T. Copeland: Great, and just-- could you-- a technical question
-- could you just pro forma Solectron's 10-percent customers
post this deal? So give us a sense where Nortel goes to and
your other 10-percenters? Thanks very much.
S. Wang: We don't think that there's going to be significant
change in the top 10. We have, from time to time, the over
10-percent customers, being Nortel, Ericsson, or Cisco, and
the business level from quarter-to-quarter does move around a
bit. In aggregate, we believe that these three customers
should still show up from time to time in 10 percent or over.
Exactly where it comes over is not necessarily clear.
Sometimes the range of total business concentration, so to
speak, if you want to look at this as concentration, it's
somewhere in the 8-percent to 15-percent level. So even on
the Nortel account situation, depending on the program's
requirements, the inventory situation, and so forth, I would
say that after the combination, we could still be somewhere
in the 8-percent to 15-percent range.
T. Coupland: Great, thank you.
Operator: Mark Lucey with TD Newcrest, please proceed.
Mark Lucey: Hi. I'm out of the office. I didn't get some of the
technical details on the deal itself. Is there a lockup or is
there a break fee? What kinds of arrangements have been made
to ensure the deal goes through as planned? What are the
critical cost items on the approval? Is it Canadian approval
or are there other kinds of items there that you see as a
critical path item? Then on the business question, if I may,
the synergies associated with the revenue side of the
equation, given that C-MAC has now put a sharper pencil on
its Q3 guidance, is there an implication there that this deal
will solidify the outlook and perhaps we'll even see, prior
to closing, some results of the pending deal in actual
revenues of the respective companies? Thank you.
K. Nishimura: OK, Mark, it's Ko. I'll answer some of these
questions. In terms of a lockup, there is no lockup. In terms
of a break fee, there is a 75 million dollar U.S.
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Page 19
breakup fee. In terms of the path, I mean, basically you
have two shareholder meetings needed here. You need
shareholder approval-- existing Solectron and shareholder
approval, and you also need shareholder approval-- C-MAC
shareholder approval-- to agree for the plan of arrangement.
This is a transaction which is structured as a plan of
arrangement.
You need and, Susan correct me if I am wrong, but Solectron
shareholder approval is to allow Solectron to issue the
number of shares required to do the transaction. So that's
really the reason for that approval. In our case, in the
case of C-MAC, is to agree to this converger, essentially.
S. Wang: I believe that the requirements for a shareholder vote
are as follows: for C-MAC shareholders, we need 66 2/3
percent vote for. For Solectron, we need 50 percent of the
vote [background noise].
M. Lucey: And is there going to be a listable exchange vote for
Canadian trading?
K. Nishimura: Yes, it will be listed on the TSE.
M. Lucey: All right. So-- and how about the revenue synergy
question prior to closing? What efforts are being taken to go
after some of the large business that is out there that you
would benefit from the combination on it? So what do you do
in the meantime?
D. Wood: Mark, until such time as this is a done deal, we have
to work as independent companies. We will continue to run our
business as usual, and, of course, some of our strategy in
terms of our forward-looking position, we will certainly
exchange, but in terms of our everyday business, it will be
business as usual for both companies.
At the present time, we do supply-- I mean, Solectron is one
of our top 10 customers, and, hopefully, they'll continue to
do business with us.
M. Lucey: Great, thank you -- and the rationale for putting a
sharper focus on Q3? Are there any business conditions from
C-MAC's perspective that you decided to put a sharper point
on that Q3 number?
K. Nishimura: Well, the reason why we did provide the guidance
for Q3 was really in the context of this transaction.
Solectron has put out guidance for the following quarters and
for next year-- for their next fiscal year, and so we felt
that, you know, to be consistent and to support Solectron's
guidance, going forward, that it was needed for us to be more
precise on how we saw the rest of the year unfold,
quarter-by-quarter.
M. Lucey: OK. I guess, by that logic, you would have to give
some sort of view on the '02 kind of outlook as well, too, to
be consistent with Solectron.
K. Nishimura: The reason we haven't given guidance on '02 is our
year-end is December. Solectron's year-end being August,
Solectron is in a position today to provide guidance for
their next fiscal year, whereas in our case, we're actually
just starting the budgeting process for next year. So it was
too early for us to really come out with any guidance for
next year. We really have to complete the budgeting process.
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M. Lucey: Great. Thanks a lot, guys.
S. Wang: We have time for one more question.
Operator: Jeff Rosenberg with William Blair, please proceed.
Jeff Rosenberg: Morning. I just wanted to ask a little bit more
about the guidance and the restructuring. I mean, Susan, can
you describe what this guidance implies in terms of-- what
the restructuring implies in terms of where you'll be in
terms of operating margin, going forward, and, in other
words, to the revenue level that you're at, at what point did
you expect to be able to see operating margins come back up
to historical levels?
S. Wang: The restructuring plan objective is to bring us back to
the historical operating margin levels, but, of course, it's
not going to come immediately. There's a period in which we
implement the actual restructuring events. The original
restructuring plan that we discussed on June 18 tried to size
the business to a 4.5 billion dollar quarterly run rate. If
we believe that the business is going to stay closer to the 3
billion to 3.5 billion-dollar level, this restructuring would
allow us to, over several quarters, target the 5-percent to
5.5-percent operating margin levels. As I said, because it
takes time to cut in these changes, initially we would be
looking to 2 to 2.5, going up to 3, 3.5, and then
incrementally improving quarter-by-quarter.
The maximum number of the 210 is to achieve this 3
billion-dollar to 3.5 billion-dollar sizing. If we see, in
the next couple of weeks, that things are not just
stabilizing but they, in fact, pick up, we may not trigger
the entire event. So we're still indicating to you the plan
that we are prepared to deploy if we believe that things are
going to stay flat for a bit yet.
J. Rosenberg: Is there anything in this additional charge, or
the 58 million-dollar charge, that relates to situations with
inventories?
S. Wang: Yes, it would be the total exposure of receivables and
inventory, possibly there could be some mitigation, but-- and
also, possibly, some of the companies that are near
bankruptcy and may still be resolvable, but it will be the
entire exposure of the smaller companies that, as I said
before, are in or near bankruptcy.
J. Rosenberg: That's in the 58? Or is there anything related to
inventory in the 210?
S. Wang: No. The 210 is similar to what we discussed before --
severance-related, facilities-related, and equipment
write-off.
J. Rosenberg: Just one last thing on inventories -- as you made
your way through the quarter, any revised outlook on what
type of inventory reduction you expect to see this quarter?
S. Wang: We expect to see meaningful reductions.
J. Rosenberg: So conditions with what you said on the last call,
500 million to a billion?
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Page 21
S. Wang: It's very difficult to be precise because of timing for
when you are able to settle up is, again, very difficult to
call, but we are certainly shooting for that level, and we're
not resting at that level. There's still work to be done, and
we are pleased that we're making good progress, but I can't
say that we are satisfied that the inventory is where we want
it to be.
J. Rosenberg: OK, thanks a lot.
S. Wang: Thank you. Thank you, everyone, for participating, and
we will be pleased to report progress to you, and, hopefully,
as some of the new business development activities conclude,
that we would be talking to you on a frequent basis. Thank
you and good morning.
Operator: Ladies and gentlemen, that does conclude your conference call
for today. We thank you for your participation and ask that
you please disconnect your line.
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We encountered the following in your conference call:
At points of the call that were inaudible, we have put a note either stating
[inaudible] or [unintelligible] or [background noise] or [audio break] or
denoted by a short blank line.
23
Additional Information and Where to Find It
Solectron plans to file a registration statement on Form S-4 in connection with
the combination and plans to mail a proxy statement/prospectus containing
information about the combination. C-MAC plans to distribute a circular to its
shareholders containing information about the combination. Investors and
security holders are urged to read the registration statement, the proxy
statement/prospectus and the circular carefully when they are available. The
registration statement, the proxy statement/prospectus, and the circular will
contain important information about Solectron, C-MAC, the combination, the
persons soliciting proxies relating to the combination, their interests in the
combination, and related matters. Investors and security holders will be able to
obtain free copies of the U.S. documents through the Web site maintainedby the
SEC at www.sec.gov. Free copies of the proxy statement/prospectus may also be
obtained from Solectron by mail to Solectron Corporation, 777 Gibraltar Drive,
Milpitas, CA 95035, Attention: Investor Relations. Solectron's telephone number
is 408-957-8500. Copies of the circular will be available to the public on the
System for Electronic Document Analysis and Retrieval maintained by the Canadian
Securities Administrators at www.sedar.com.
In addition to the registration statement and the proxy statement/prospectus,
Solectron files annual, quarterly and special reports, proxy statements and
other information with the SEC. C-MAC files annual and quarterly financial
statements, annual reports, annual information forms, management proxy circulars
and other documents and information with the Canadian Securities Administrators
in Canada and annual and special reports with the SEC. You may read and copy any
reports, statements or other information filed with the SEC by Solectron or
C-MAC at the SEC Public Reference Rooms at 450 Fifth Street NW, Washington, DC
20549 or at any of the SEC's other public reference roomsin New York, Chicago
and Illinois. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Solectron's filings with the SEC are also available
to the public from commercial document-retrieval services and at the Web site
maintained by the SEC at www.sec.gov. Since January 1997, C-MAC's filings with
the Canadian Securities Administrators are available to the public on the System
for Electronic Document Analysis and Retrieval maintained by the Canadian
Securities Administrators at www.sedar.com.
Information Concerning Participants
Solectron, C-MAC and their respective directors, executive officers and certain
other members of management and employees may be soliciting proxies from
Solectron and C-MAC stockholders in favor of combination. Information concerning
the participants in the solicitation will be set forth in the proxy
statement/prospectus.