Wednesday, electronics manufacturing services provider Flextronics International Ltd. (FLEX) announced that third quarter loss widened sharply from last year, hurt by charges recognized for provisions for doubtful accounts receivable and inventory write-downs. Quarterly earnings, excluding items, missed analysts' estimate by three cents. On an adjusted basis, net profit declined from a year-ago, as revenues decline from the prior year. The company provided financial outlook for the fourth quarter, which is below Street expectations.
The Singapore-based company reported a net loss for the third quarter of $6.02 billion or $7.43 per share, wider than $774 million or $0.94 per share in the year-ago quarter.
Excluding items, adjusted net income declined to $127 million from $250 million, while adjusted earnings fell to $0.16 per share from $0.30 per share in the year-ago quarter.
On average, thirteen analysts polled by First Call/Thomson Financial expected the company to earn $0.19 per share for the third quarter.
Net sales for the third quarter decreased to $8.2 billion from $9.1 billion in the same quarter of last year. Fourteen analysts had a consensus revenue estimate of $7.99 billion for the third quarter.
Operating income for the third quarter decreased to $21.42 million from $22.28 million, while adjusted operating income fell sharply to $185.8 million from $300.1 million a year-ago quarter.
During the latest quarter, Flextronics recorded a non-cash charge of $5.9 billion to write-off the entire carrying value of its goodwill. The impairment charge was driven by a sharp decrease in the company's valuation compared to the previous quarter, primarily due to declines in the stock market and adverse macroeconomic conditions that contributed to an overall reduction in demand for the company's offerings.
These conditions resulted in a significant decrease in the company's market capitalization and required management to perform an interim goodwill impairment test during the third quarter, which resulted in a determination that all of the company's goodwill was impaired. However, the non-cash charge does not impact the company's normal business operations, liquidity or availability under its credit facilities.
Additionally, during the quarter, the company incurred a distressed customer charge of $145 million associated with the filing for bankruptcy by Nortel Networks Corp. (NT, NT.TO). The charge is comprised of $47 million of provisions for pre-bankruptcy accounts receivable and $98 million for the write-down of inventory.
Flextronics has been proactively engaged in executing a risk mitigation plan with respect to its relationship with Nortel for a period of several months.
In December 2008, Flextronics engaged The Blackstone Group as its financial advisor to assist with evaluating the Nortel relationship and planning for any Nortel restructuring strategy. As part of its risk mitigation plan, Flextronics entered into an amendment to its relationship agreement with Nortel to address Flextronics's status as a strategic supplier.
For the nine-month period, GAAP net loss widened to $5.85 billion or $7.09 per share from $547 million or $0.80 per share last year. Adjusted net income increased to $583 million or $0.71 per share from $530 million or $0.77 per share in the prior year.
Net sales for the year-to-date period rose to $25.37 billion from $19.78 billion a year ago.
Looking ahead, Flextronics anticipates fourth quarter adjusted earnings of $0.02 to $0.07 per share and revenue of $5.5 billion to $6.5 billion. The company estimates GAAP earnings to be lower than the guidance provided herein by approximately $0.05 per share for quarterly intangible amortization and stock-based compensation expense.
The Street currently expects earnings of $0.14 per share for the fourth quarter on revenue of $7.17 billion.
Commenting on the results, Flextronics' chief executive officer, Mike McNamara said, "Clearly, we are operating in a difficult economic environment, where demand deterioration has put pressure on our business as reflected in our December quarter results and our fourth quarter guidance."
Flextronics stock closed Wednesday's regular trading session at $2.72, up 10 cents or 3.82% on a volume of 8.85 million shares. However, the stock lost 32 cents or 11.76%, and traded at $2.40 in the after-hour trade. The stock has been moving in a range of $1.23 - $12.70 for the past 52 weeks, with a three-month average volume of about 11.87 million shares.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.