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Solectron Cutting 12,000 From Workforce

Contract electronics manufacturer Solectron Thursday said it will eliminate some 12,000 of its employees in Europe and North America as part of a cost cutting effort. The Milpitas, Calif.-based company, however, did not disclose its time table.

The firm, which caters to high-tech giants including Nortel, Hewlett-Packard, Cisco, Apple, Ericsson, and IBM, said its restructuring includes consolidating its facilities by about 3 million square feet and whittling its workforce down by 16 percent to 62,000 staffers.

Company president and CEO Mike Cannon said the cuts were necessary to keep afloat.

"There are a number of actions under way, but we must accelerate the pace of change," Cannon told the Associated Press. "With few exceptions, our end markets remain tough with little sign of recovery for the rest of this year."

Solectron helped build much of Silicon Valley. The company builds electronic systems and subsystems for computers, consumer electronics, telecommunications and networking gear, and chip manufacturing equipment. Its services include product design, prototyping, repair, and distribution.

But with the recent downturn, the company has been slowly making cuts it says based on shrinking demand. Already, Solectron has cut back on its manufacturing space by 7.8 million square feet and fired 40,000 employees in the last nine quarters.

"In the near term, we are dealing with several factors: End-markets remain weak, competition for new business is intense, and we will see the impact of the planned wind-down of our optical business with Lucent, as announced last fall," Cannon said.

In the quarter ended Feb. 28, the company recorded a net loss of $111 million, or 13 cents per diluted share, compared with a net loss of $71 million, or 9 cents per diluted share, in the previous quarter and a net loss of $126 million, or 15 cents per diluted share, in the second quarter of last year.

The company said its third-quarter guidance is for sales of $2.6 to $2.9 billion, and for pro forma diluted earnings per share, excluding restructuring and impairment and other unusual items, of a range from a 4-cent loss to a 1-cent loss.

"Despite our near-term challenges, the long-term outlook for the EMS industry remains promising," Cannon said.