PLXS, CLS Both Face Huge Transition and Cost Structure Challenges in 2004 in Electronic Manufacturing Services (EMS)
PLXS 10-Q: "The overall EMS sector will grow 8-11 percent infiscal 2004, based on customer indications of expected demand and managementestimates of new program wins, our internal projections currently anticipaterevenue growth for fiscal 2004 in the range of 25-30 percent; however, actual results may be lower and will depend upon future orders and consequent sales.These future orders may be less than we expect due to many factors, includingthose that we discuss under "Risk Factors" below. The rapid growth anticipated for this fiscal year entails substantialexecution risks. We have hired and trained approximately 1,100 new employees atsites located around the world, principally in Asia. During the remaining six months of fiscal 2004, we also expect to spend approximately $12 million toacquire an existing 164,000 square foot manufacturing facility in Penang,Malaysia and to initially outfit that facility with manufacturing equipment. Wee xpect to complete the purchase of the facility in the third quarter of fiscal 2004 and commence operations in the facility late in the fourth quarter offiscal 2004. The addition of the new Penang facility and related manufacturing fixed overhead will further increase our fixed expense base on a going-forwardbasis. Additional execution risk may also arise as the EMS industry rebounds. The supply chain that supports the EMS industry may tighten, and obtaining required parts may become more difficult."
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