Flextronics International Ltd. FLEX has a very strong position in Silicon Valley, which has been tremendously bolstered over the past two-plus years with our focused and differentiated

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Flextronics International Ltd. FLEX

Investor and Analyst Meeting May 21, 2014

Company▲ Ticker▲ Event Type▲ Date▲

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PARTICIPANTS

Corporate Participants

Kevin Kessel – Vice President-Investor Relations, Flextronics International Ltd. Michael M. McNamara – Chief Executive Officer & Director, Flextronics International Ltd. Thomas K. Linton – Chief Procurement & Supply Chain Officer, Flextronics International Ltd.

Douglas Britt – President-Industrial & Emerging Industries, Flextronics International Ltd. James Rowan – Chief Operating Officer and Board Member, Dyson Ltd. Jeannine Perchard Sargent – President-Innovations & New Ventures, Flextronics International

Ltd. Ian Campbell – Chief Executive Officer, NextInput Inc. Stephane Marceau – Chief Executive Officer, OMsignal

Erik H. Volkerink – Chief Technology Officer, Flextronics International Ltd. Mike Dennison – President-High Velocity Solutions, Flextronics International Ltd. Paul J. Humphries – President-High Reliability Solutions, Flextronics International Ltd.

Charles T. Liamos – Director, Insulet Corp. Steve Bubrick – Vice President Global Marketing and Business Development, Cellnovo Ltd. John Novak – Vice President of Global Sourcing and Procurement, Sensus USA, Inc.

Warren Barkley – Chief Technology Officer, SMART Technologies ULC Caroline Dowling – President-Integrated Network Solutions, Flextronics International Ltd. Maurilio Tazio De Nicolo – Vice President of Engineering, Cisco Systems, Inc.

Christopher E. Collier – Chief Financial Officer, Flextronics International Ltd.

Other Participants

Craig Martin – Vice President-Manufacturing Operations, FireEye, Inc.

Kevin Q. Smith – Vice President of Worldwide Operations, Palo Alto Networks, Inc. Jim Suva – Analyst, Citigroup Global Markets Inc. (Broker) Brian G. Alexander – Analyst, Raymond James & Associates, Inc.

Matt J. Sheerin – Analyst, Stifel, Nicolaus & Co., Inc. Amit Daryanani – Analyst, RBC Capital Markets LLC Wamsi Mohan – Analyst, Bank of America Merrill Lynch

Mark T. Delaney – Analyst, Goldman Sachs & Co. Osten H. Bernardez – Analyst, Cross Research LLC Chris M. Dankert – Analyst, Longbow Research LLC

MANAGEMENT DISCUSSION SECTION

Kevin Kessel, Vice President-Investor Relations

Hello and welcome. I’m Kevin Kessel, Vice President of Investor Relations and on behalf of

Flextronics, I’d like to welcome everyone here, as well as those listening and watching live on the video webcast to our 2014 Investor and Analyst Day.

Before I cover the agenda, I’d like to provide our Safe Harbor statement – a little technical difficulty here kicking things off. Perfect. These presentations contain forward-looking statements, which are based on current expectations and assumptions that are subject to risks and uncertainties, and

actual results could materially differ. Such information is subject to change, and we undertake no obligation to update these forward-looking statements.

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For a discussion of the risks and uncertainties, see our most recent filings with the Securities and Exchange Commission, including our current, annual and quarterly reports. If these presentations

reference non-GAAP financial measures, these measures are located in the Investor Relations section of our website, along with the required reconciliation to the most comparable GAAP financial measures.

I’d also like to point your attention to our guidance sl ide. This is the most recent Q1 fiscal 2015 guidance that we provided three weeks ago during our April 30 earnings. There have been no

changes to this guidance. Shifting our attention back to today in our unique setting, we’re hosting our Investor and Ana lyst

Day on the campus of our award-winning customer innovation center here in Milpitas, California. Flextronics has a very strong position in Silicon Valley, which has been tremendously bolstered over the past two-plus years with our focused and differentiated investments around design and

innovation. Our three operations in Silicon Valley generate more than $600 million in annual revenue,

supported by over 2,000 dedicated and talented employees. We have 1 million square feet of capacity, with the majority of it being here on the campus that you’re visiting and touring later today.

This campus that we’re own today spans across 12 building, of which six are dedicated to helping customers innovate and design successful new products that will ultimately scale across markets and geographies. We have over 100 active customers on this campus. Importantly, they’re across

all four of our major business groups, many of which you will see later on your tours. We’re a true one-stop shop from concept to product delivery, and what we’ve created here we

believe is unparalleled and unmatched in the Silicon Valley. We have an exciting agenda for you today, filled with lots of new elements that we hope will enable you to get a better understanding of Flextronics, the changing nature of supply chain solutions and the overall landscape that we

compete to win in. In addition to hearing from our CEO and CFO, the presidents that lead our four business groups,

you will also hear from customers on multiple occasions throughout the day, both live as well as through videos. We are honored that so many customers were willing to discuss the new role of supply chain solutions and how Flextronics is working hard to perform at world-class levels to earn

their business and help them elevate their supply chains to be an important competitive advantage. To kick off our agenda, we have our CEO Mike McNamara, who will be discussing how Flextronics

is driving differentiation in innovation in a new world of supply chain solutions. Mike has successfully led Flextronics as CEO since 2006. Prior to his appointment, he was the Chief Operating Officer and President of our Americas operation. Mike joined Flextronics through the

acquisition of Relevant Industries, for which he was also the CEO. So with no further ado, please help me in welcoming Mike McNamara, CEO of Flextronics to the

stage. Mike.

Michael M. McNamara, Chief Executive Officer & Director

Thank you, Kevin. So good morning, everyone. First thing I want to do is say: thank you for being here. I know it’s a long way for many of your to come all the way from the East Coast and at the same time if you didn’t come all the way from the East Coast, it’s a lot of time that you’re dedicating

to us and we really appreciate it; that you’re doing that and we’re looking forward to having you as part of this whole agenda today.

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We think it’s a fabulous agenda. Kevin talked a little bit about it, but we just think it’s a great opportunity to showcase some of our talents. Sometimes in PowerPoint in New York, it’s just not

quite as good as being right in the middle of the center of electronics here in Silicon Valley and doing more of a touch and feel. So thanks very much for being here and we’re looking forward to really exciting day.

I’d like to start with kind of framing the macroeconomic environment. We see the world is changing a lot and, particularly, within the EMS industry, it’s changing quite a bit. If we go back to the year

2000 and maybe think about the timeframe between the year 2000 all the way up to the recession 2008, we were largely what I would consider to be more of an EMS company, which is to basically provide low cost services to companies as they looked to try to drive more and more productivity in

their company. So it was a very – it was a much more simple business model. It was built around the OEMs would

give us the business, we’d take it to low costs regions. We liked it because we got more revenue. They liked it because they got costs down. They drove productivity in their company. We drove revenue in our company. Everybody is happy, and it was largely a more simple supply chain, a lot

of it being produced in China, sent to the U.S., sent to Europe for consumption. It was much more simple.

And that’s over. If we think about it, one of the things that we talked about and when I introduced the world is changing last year at the Analyst Day, the supply chain is much more complex now. There are lot of macroeconomic effects that are affecting how we think about our investments, how

we think about where we put our money, how where we put our time, where we put our talent and how we take our resources and apply them in the most optimal way.

And I want to talk about a few of those things before we go into some more details about Flextronics. The first thing is the complexity in supply chain is going up substantially. The amount of regionalization is going up substantially. The amount of middle class that’s being developed around

the world is increasing. As those middle classes develop, consumption increases and their consumption becomes more distributed. As their consumption becomes more distributed, our customers, our OEMs need to provide solutions to that consumption on a regional basis. We need

maybe different products so that the consumption in the different regions is optimized. They need repair. So what you end up with is a more complex supply chain.

There may not be any more revenue, but it means it’s more distributed around the world and it’s more complex. As supply chains become more distributed around the world, there’s more suppliers in the supply chain. There’s more regionalization. As there’s more suppliers in the supply chain,

there’s more sources of fraction: there’s more things that can go wrong. So the risk goes up. The velocity in those supply chains go up, the risk goes up. And this is a reality of where we are today in the marketplace and that will only continue going into the future. And complexity is actually our

friend because we have a big large complex system. Another impact, as important consideration going forward is the growth of the Asian OEMs. It’s

really maybe this is better described as global competition continues to increase. And as that global competition increases, it creates more dynamics. So think about what that means for us: well, everybody knows how dominant companies like Lenovo, and Huawei and Samsung are becoming

in many different industries whether its PCs or TVs or smartphones, telecommunication systems, just a whole variety of different things.

Those companies need also to be able to tap these international markets. And while they might be very, very powerful manufacturers within Asia, once they get outside the world, they need to tap these markets with facilities that have scale and have access and know how to do tax and trade

and be able to get to those markets quickly. And it’s an opportunity for Flextronics as a result of this broad footprint. It’s also an opportunity for us because the traditional customers are now under

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more intense pressure. They’re looking for ways to find partnerships and create strategic relationships that can help them compete in this environment, in this new worldwide environment,

also a great opportunity for Flex. Lot of rapidly commoditizing products. So think about your smartphone, what does your

smartphone do now? Well, it’s your video. It’s your point and shoot camera. It’s your calculator. It’s your navigation system. It’s your alarm clock. It’s your channel changer. It turns the lights on in your house. You can go on and on and on. Yet it’s all driven by a device that’s usually like that or its

maybe a little bit bigger or maybe it’s a lot bigger, but those devices is creating a commoditization of products.

Similarly, even in the infrastructure business, we’re start ing to find more commoditization. And if you think about it, a lot of the data centers that are being created today, you’re having network and storage and the computing power all being converged into more white box type solutions, just raw

competing power, if you will, overlaid by software. And just like the smartphone is overlaid by software and interfacings with cloud software, it’s creating a lot of commoditizations with products and this is creating a lot of challenges in the marketplace that need to be addressed.

And then whether it’s regionalization or whether it was the recession, or whether it’s cloud or mobility and new business models or social, whatever it is, product life cycles are getting faster and

faster and faster. It’s just the reality of the supply chain. And more and more disruptive products are coming out. Think about companies like Square or Nest who went in and disrupted, began to disrupt industries where those industries didn’t even know they were going to be disrupted. They

didn’t even know these new innovators and these new disrupters were coming at them. So even old line industries can be easily disrupted in today’s world.

New hardware OEM. We’ve talked about – I’ve talked about hardware OEMs often. Who are the new hardware OEMs? It’s companies like Amazon, or Microsoft or Google, with a tremendous amount of money and a tremendous amount of power. But they’re taking hardware and software

and content, and it’s the integration of those things that creates the optimized consumer experience. And these companies have figured it out and all of them are chasing into this marketplace.

And innovation is just on the rise everywhere, whether it’s right here in Silicon Valley, where there’s an enormous amount of innovation, whether it’s in Israel, another innovation capital of the world,

there’s more and more innovation going on in China. There’s just more and more going on. So it’s all feeding the faster product life cycles, the more disruptive products, new companies jumping in to then go compete. And this is the world we need to go create value for our customers in. So when I

think about the world is changing and I think about the change in our business, it’s no longer about labor arbitrage, it’s no longer around old line EMS kind of work.

The new world is built around having a sophisticated supply chain that has the ability to manage these macroeconomic affects that are coming at us and are coming at us faster and faster every year.

Last Analyst Day, I also spent a lot of time going through the platform. This is what we call our platform. The platform was built to deal with the realities of this new macroeconomics. It was set up

and designed years ago to begin to deal with all these changes that we’re seeing. And when we think about it, developing this platform, we thought about developing three major layers. We thought about managing software as a top layer, services as a second layer and the physical

infrastructure as a third layer. On the software side, we already have a very robust IT system. It runs one of the most

sophisticated ERP systems in the world today. But we found that the velocity of the supply chain is changing. The velocity is increasing. As I mentioned, the risks are increasing. There’s more

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sources of fractures. And all of these are very, very important for us to think about. I mean, we didn’t have a supply chain solution for that. We did not find anything commercially available in the

market to be able to deal with the speed of information that we wanted to deal with. We wanted a system that created real-time information. We wanted to be built on modern architecture. We wanted it just to be mobile, so we can access and manage supply chain real-time anywhere in the

world. And we wanted to be able to adjust and adapt to any risks and any kind of disruptions that occur in this marketplace. We didn’t find it so we invented it ourselves.

And two-and-half-years ago, we began creating a system that we call Elementum. And Elementum is a SaaS-based company that through cloud, and mobility, and modern architecture has created – it is our solution for managing information on a real-time basis in a faster supply chain world. Jim

Rowan is the Chief Operating Officer of Dyson. He’s going to be up later today and he’s actually – he uses this to run his company, his supply chain and he’s going to demonstrate at least some parts of Elementum.

And then services, we’ve also invested very, very heavily. And I’m not going to go through all those services today, but what I can tell you is we’re going to be heavily focused today on innovation and

design engineering. And the reason we’re heavily focused on that is because we’re hanging with the theme on Silicon Valley, but it’s a major theme for us and in terms of our investment cycles and how we’re going after creating value for our customers once, again, based on the macroeconomic

realities that we see today. And we’ve continued to optimize our physical infrastructure. We continue to view this as a core part

of our system to very, very important part of our system and it’s not just the physical factories and the manufacturing technologies that we have, but it’s also the entire system of tax, and trade, and finance and HR, to be able to system of 200,000 people, so that we can provide our customers a

seamless experience around the world. But this Flextronics platform was designed and developed, we’ve anticipated the problems in the macroeconomics. We’ve been building this system for the last couple of years and we’re well positioned as we look at what the challenges in the supply chain

are going forward. I thought this map would be interesting to show. This actually shows the growth rate by region from

FY 2014 and what we expect in FY 2015. And what you see is a lot of growth in everywhere else in the world and if I were to put up this graph from last year, it’d look very similarly. We’d have double-digit growth rates in the U.S., and Mexico and South America. This is the reality of the world. And

we have the systems, the process, the know-how, the capabilities, the technologies that we need to enable our customers as they distribute their business, as they move to more regional manufacturing, as they become and service that consumer demand as it grows everywhere else in

the world, we have those systems available today. We actually have, on a worldwide basis, the broadest capability of any company in the world. And

this is what is required to take companies to the next level. We have a competitive advantage as this regionalization, as the consumer demand becomes distributed around the world, we have a competitive advantage. And that gap in that competitive advantage is very difficult to close.

Because it’s very difficult to set up an infrastructure of factories around the world that have experience and scale to achieve cost and tax and trade and all the know-how that you need in these kind of places. It’s a huge advantage for Flex.

So let me switch back a little bit and talk about some of the financial highlights for last year. We increased revenue. We increased operating income. We increased EPS. We achieved about $700

million of free cash flow. Our ROICs went up to 22%. So despite the continuous investment that we’ve been putting in an very heavy way to deal with the realities of new world and the supply chain solutions that we need in order to create value in this new world, we’ve still been able to develop

and have a very, very strong execution year. In fact, we exceeded the quarterly analyst expectations virtually every quarter last year.

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So let me switch over to and talk a little bit about some of the each of the different business groups.

As Kevin mentioned, we’re going to have each one of the presidents come up and talk to you in a little bit more detail about their group. And I’ll just start off by just giving you a quick highlight on each one of them. The pie chart reflects what we anticipate for FY 2015 in terms of the share of the

pie, always a very important indicator for us as we continue to manage our portfolio in order to optimize our financial results.

We continued to maintain the largest market share over the last couple of years of about 25%. We still have a very, very strong and dominant position. We expect stable revenue going forward. We’ve got a couple of very interest challenges in that group, one is in opportunities and one is

these emerging technology innovators. In fact, Caroline Dowling, who’s President of INS is going to have a – two of them up on the stage, where we’re going to talk about how the world is changing and how they manage their business. But these are the kind of guys that create appliances for the

new world of cloud and infrastructure and hyperscale and the things that they do in security. And we’ve booked the vast majority of those companies.

And second, it’s really the transition to this converged infrastructure, which I talked about earlier. And Caroline is going to talk about both those in more detail as we move forward. We continue to see this business group operating in the range of 3% to 4%.

In IEI, we actually expect going forward very, very strong multiyear organic growth. And you’ve seen some of that growth rate accelerate over the last two quarters where we’ve had two double-

digit quarters of sequential growth rates. This group is very different. It’s all built around non-traditional customers, very diverse products. They require a broad geographic reach, a lot of different breadth of manufacturing, long product life cycles. And it’s almost like there’s an unlimited

amount of these customers out there and you just have to go find them. And more and more companies are putting more and more electronics into their marketplace. There’s more and more converged technologies that are going into all these companies.

And when we go see them it’s – and I’ve personally spent a lot of time over the last six and 12 months talking to a lot of these companies and it’s amazing the amounts of services they’re

interested and are so much shocked to find that Flextronics has this many services available and offering to help partner with these companies to enable them into a more connected world. So it’s very interesting to see. In fact, you’ll see also Jim from Dyson when he gets up he’s going talk

about some of the things that we do together with Dyson and Flextronics, and you’ ll probably be amazed that the number of different services that were already engaged with Dyson on, yet we’ve only been in business for less than a year. But this is typical of what we’re finding for these IEI

customers. In HRS, we’ve had very, very strong historical growth. And we actually anticipate nice organic

growth going forward. We have very, very strong market positions, particularly in medical and automotive. We’ll talk more about those later. And we have a great backlog. One of the things that’s different about the automotive business from the medical business is once you start booking

business, you book out multi-years. And we’re going to show you some statistics on this. But this business group is an important focus of ours because it continues to build a very stable book of business, multiple years out in time. This group continues to be our focus for M&A. It’s been like

that for several years. It’ll continue to be like that for the next few years. And one of the great things about this group is once again you have this growing worldwide

consumption. The kind of factories these companies need are highly regulated, highly certified, they have unique quality systems and again are great barriers to entry. So we’re pretty thrilled with the fact that we already have factories all around the world at scale. And we anticipate the profit range

of these to be 5% to 7%.

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In our High Velocity Solutions Group, we actually don’t have a revenue target here. Our objective is to move this to the top of 2% to 3% OP range. So as we work to diversify our company and our

portfolio, we are very actively focused at diversifying the portfolio within HVS. And we’re starting to see two really major opportunities that’s going to enable us moving to the top of that operating range. One is a type of customer that’s new product categories or more technically advanced, like a

Wearable’s, a disruptive product. Some of the new OEMs actually act like disruptive companies and with new technologies.

So we’ll see one class of products, which tend to carry a higher margin and tend to have – and the reason is because they also want all our services. And probably have a second group, which is a more traditional group, but they’re going to tend to be more regional in nature. So maybe bu ilding it

as cheap as we can in China is not the right business model for us, but maybe enable them around the world and handle their worldwide consumption as their demand patterns change can be a very attractive opportunity for us. But once again our objective here is to move this to the top of the 2%

to 3% operating range. We’ve made a lot of progress with Power and Multek. Both of these over the last two years have

had complete retrofits in terms of simplifying their footprint, upgrading management, improving operational execution. We’ve had very good success with both of those. We’ve turned Multek into profitability two quarters ago, both as a bundle of running above corporate average, also as a

bundle in revenue they’re about $1.5 billion and the size is roughly equal. And we also as we think about moving their margin up, we also think about improving their portfolio where I’ve showed some pie charts that give some indication as to what those look like.

So if we step back and really take a 30,000 view look at the business, we have consistently and deliberately moved our portfolio over the last few years. And this trend will continue. And as we

move towards our long-term model where we think our model ends up, we would expect to have margin expansion along the way.

So this is my favorite slide, maybe my favorite slide of all the presentations. But if you think about our business, we have a hard business. We have low margins. We have demand changes all the time. We have seasonality. We have customers that sometimes do things that we don’t control. So

we end up with some unpredictability on quarter-by-quarter basis. But one thing that we do have is unbelievable consistency at making money. And by making money, I call that free cash flow.

And the other thing that’s unbelievably consistent is our ability and willingness and the result of taking that money, giving it back to shareholders. So I put two graphs up there, one which is the blue, which is really a five-year rolling average of free cash flow. And if you look at this business on

a holistic basis, it’s stunningly stable and relative to the market cap, stunningly good results. And if you also look at the number of shares outstanding, it’s just a continuous reduction in these shares outstanding. So when a lot of times you ask – you’re going to ask what our strategy is for capital

structure, I think you’ve kind of got a good idea of where we fall. And I think there is obviously a lot of companies that can generate consistently great free cash flow,

probably some less amount that’s going to take all that free cash flow, return it to shareholders. But the one thing that we are absolutely top of class in is the fact that we have a free cash flow yield today, despite this predictability and repeatability, we have a free cash flow yield of 12% to 13%,

which is actually pretty stunning. So I’m going to switch back to Silicon Valley. So why are we here? Why did we invite you all the

way out to Silicon Valley to see, we obviously had lot to show you. Kevin showed you a map. I showed you a more detailed map. This is we’re like right in the middle of what’s happening here. What’s going on is this is like an unbelievable micro-economy that’s occurring right now in the

world. I don’t know if this is the hottest economy in the world, but it might be. There are campuses going up right now for Google, for Facebook, for Apple, for many different new stage companies.

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The amount of design that’s going on here for companies like Dell and Ericsson are probably surprising to people.

Automotive companies are rushing into Silicon Valley. Many people have heard about the Google car, being self-driving car; well, we’re helping redefine what cars are going to look like in the future.

We has also have Tesla, who’s basically created a SaaS based car, a very different business model. But all these companies are rushing in. In fact, Samsung is in process of building one million square foot campus to house 3,000 design engineers.

So what’s happening here is stunning. And what’s really good about this and it’s because of all of those things that I have talked about with disruptions and innovations and new business models,

enabled by cloud and mobility and many different things. But we’re right in the middle of it. Like Kevin said, we have a million square feet. We have the most advanced electronic factories anywhere in the world right here. It is our objective to provide services to all these companies. It is

our objective to help them innovate and help them scale. So why is innovation so important? Why are we talking about Silicon Valley? I hit a little bit of this in

the very first slides when I talked about how the world is changing. But this is a very, very powerful graph. What this shows is in 1950 the average life of a Fortune 500 company was 75 years. The average life of a Fortune 500 company today is 15 years. If you don’t think it’s unbelievably

important for old line companies to reinvent, to look for new vectors of growth, to continuously adapt and innovate and create, it’s wrong. This is going to get more aggressive over time.

So part of who we need to be is to help these companies. So it’s not just the new companies. It’s not just the disruptors that have to innovate, old line companies have to innovate and they have to increase the pace that they’re innovating or they’re going to go away. And whether it’s data, cloud,

mobility, all these things are enabling these difference business models, it’s expected that 1 trillion devices will be connected to the Internet by 2015. This is expected to carry with it 2.5 billion gigabytes of data to be created every single day, not exactly sure how many computers that is, but

it’s a lot. And this is the reality of what we’re dealing with. And we, of course, want to build these devices. We, of course, want to build the back office system that enables it.

But the important part is when it comes to innovation, when it comes to supply chain, the supply chain in today’s world is to help these Fortune 500 companies. It is to help the innovators. It is to help get these trillion devices connected. It’s to help get the wireless module into the Whirlpool

washing machine. It’s to help enable as this convergence of technology occurs, supply chains in today’s world and today’s economy have to enable technology. It has to scale technology. It has to find new technologies. And it has to introduce solutions to customers because they’re under

pressure to quicker, faster, reinvent on a continuous basis. So I’m going to go through one last slide and talk about and try to provide a vision in your mind for

what you’re going to see going forward. If we can identify and harness new ideas and innovations, product technologies, process technologies, new material sciences, technology platforms, we can find these things through a very, very broad and developed set of strategic relationships and

partnerships. And if we can somehow have access to that information in the Flextronics system and then it help enable traditional OEMs, these new hardware OEMs, the disruptive companies, all of them, all of our customers, if we could be that marketplace of innovation, if you will, where we’re

connecting the two. We have companies in every industry. We see new products introductions, every industry. We see

supply chain strategies, every industry, within every industry. In the medical industry, we have over 50 customers. We have over 50 customers in energy. We have over 50 customers in automotive. We see a lot, and we see a lot of the innovation that’s occurring, not only because of Si licon Valley

because we have huge presence in Israel and other innovation centers around the world.

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But if we can find ways to take innovations that occur, component technologies or renovation that occur in consumer technologies and apply them to medical technologies. Or take consumer

company – or technologies and apply to medical companies, if we can take automotive technology and apply them into industrial, we can end up being – creating the value that our customers need to be able to compete in a quicker, faster, more disruptive world. This is who we’re trying to be. And it

is our objective to be able to take that and drive revenue and operating profit from it. What you’re going to see today is a lot of pieces that we’re putting together to go enable th is.

Unfortunately, there’s a lot of things you can’t see because just about everything in this campus is top secret. So most of what we have here you actually can’t see. And we had to clear out a lot of things so you couldn’t see some things.

But the reality is our objective here is to drive revenue and operating profit in a world that’s very, very disruptive. The scale and the amount of things that we touch is pretty stunning. In fact, we’re

so serious about being able to drive this I’ve actually created a new function in my group that reports to me is Jeannine Sargent, she will be talking to you in about an hour, to run this function, to run this innovation function and be sure it creates uncompromising value for Flex.

So with that, I’m going to stop here; I hope that gives you a little bit of a background of why you’re in Silicon Valley, why we’re so focused on it, how we’re structured to be able to benefit from this

and, hopefully, you’ll love the tour. Hopefully, you’ll like being here and we really en joy having you here. I’ll look forward to seeing you again when we do Q&A after Chris Collier’s presentation.

And with that I’m going to turn it back over to Kevin Kessel. Thank you.


Thank you, Mike. Don’t worry I’m not up here to read that Safe Harbor statement again. I don’t have to touch the [ph] clicks time (36:42) either, so we’re in good shape. But it is my pleasure to introduce Tom Linton, our Chief Supply Chain Officer. Tom is not only a key thought leader within

Flextronics, but also throughout the supply chain. He serves as the Chairman of the Board of ISM, as well as on the World Economic Forum’s council for Logistics & Supply Chain. Tom’s rich history of supply chain experience, prior to joining Flextronics, includes serving as Chief Procurement

Officer for both suppliers as well as OEMs, including LG Electronics, Agere and Freescale, in addition to being a 20-year veteran of IBM. Please welcome to the stage Tom Linton.

Thomas K. Linton, Chief Procurement & Supply Chain Officer

Good morning, everyone. It’s great to see you all at the home of innovation here in Silicon Valley. We’re excited you made the effort to travel across the country in many cases. My topic this morning

is supply chain. And as Mike un-layered for you in our platform this morning, supply chain solutions is at the core or the heartbeat of what we do. And supply chain is one of those functions that’s actually been around for a long time, but maybe you didn’t recognize it.

If you go back 1,000 years ago, the Crusades, Alexander the Great, Genghis Khan, everybody had to move material around the world. But globalization is really one of the things that made supply

chain, professional modern supply chain a necessity. And this evolution continued through a lot of wars, through the 1800s. Railroads had to lay gauge across the country, when they laid the rails across the United States and Europe and, in doing so, had to match the gauges of the rails when

they went from town-to-town and supplier-to-supplier and required specifications to be designed so that the rails would match up. Engineers and managers kind of enforced this as the industry evolved.

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And as we go through the last century, the rise of the electronics industry made the importance of

connecting the different functions in supply all the more important. In the 1970s, Japan became famous for the automotive industry, the rise of the capabilities in Asia, connected with the innovations in the United States. As this kind of move forward into the 1980s and 1990s and the

rise of the personal computer, the birth of the Internet, what happened is supply chains all became a necessary requirement in every company. And as they came forward, enterprise software companies developed software solutions for them and these software solutions enabled faster and

better supply chains. What I would describe was all a period of reactive supply chain. We then entered a period after 2000, and a very brief period over the last 10, 20 years, where

supply chains became resilient. Different disruptions: wars, terrorism caused ports, canals, airports, borders, in general, to become more resistant. It became important because of disruptions: volcanoes, earthquakes, tsunamis, all kinds of different kinds of issues that faced managers around

the world to cause disruptions and market caps to fall. So supply chains entered this resilient phase. But now we’re in a phase, which we’re calling here Flextronics the predictive supply chain.

The predictive supply chain is all about the combination of capabilities, technologies and, actually, creating something that looks around corners, looks ahead and actually makes supply chain for our customers a safer place to be. And so what I want to walk through this morning is a l ittle bit about

that and kind of pick up on a point Mike made this morning on complexity. In supply chain, in Flextronics, complexity, we view, as a competitive advantage. Embracing complexity is what makes us successful in a global way and our customers rely on us to manage that complexity for them.

And in Flextronics, we turn it into a competitive advantage for us, a competitive advantage for our customers and something our investors can see that drives financial performance.

First, let me talk about one of the key aspects of the modern supply chain. And that is the modern supply chain is multidimensional. It is multidimensional in the sense that risk is produced in a supply chain and risk is consumed by other people. One example of that is investors, mutual funds,

banks, insurance companies they consume risk produced below or upstream in a supply chain. We call that really the three-dimensional aspects of supply chain, how supply chain actually influences not only the stakeholders below in the supply chain, but also the stakeholders above in the supply

chain. And that blue line you see in the middle is your traditional supply chain. Because velocity alone in a supply chain is no longer sufficient, you have to have visibility in supply chain, both vertically and horizontally to fully appreciate what’s happening inside of it.

If you look at Tier 1, Tier 2, and Tier 3 below that brings to kind of breakdown of a second aspect of the complex supply chain, which is multi-tiered. A multi-tiered supply chain is one that actually

takes that visibility and breaks it down into multiple levels of understanding as a product is developed. An example of this would be – and here I just have a few iconic examples of a system, a coffeemaker and a game console or a gaming system, each one of those systems has upwards

of 500 part numbers inside of it. In some cases, each one of those part numbers has hundreds of part numbers inside of it. And each one of those parts has hundreds of part numbers inside of it. So a supply chain really is an ecosystem and the health of that ecosystem is analogous to medicine

when a scientist looks at a nucleus and says: okay, inside the chromosome how many strands of DNA are there?

And if you think about supply chain as far as improvement, we’re diving down in two ways where supply chains are going to be more predictable because we know the outcome in advance. We’re able to actually see down through that supply chain.

Let me breakdown an example a little bit further. If you think of a semiconductor, which is a chip, and you break that down, it’s categorized as either a custom component, a semi -custom

component or a standard component. Each one of those components has a supply chain inside of it. Some of you are familiar with companies that are in Singapore or Taiwan that are wafer

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fabrication companies. They produce the silicon wafer. The silicon wafer is then diced and assembled and tested by other suppliers in a supply chain. That is then encapsulated and

distributed through other suppliers in the supply chain, where they are consumed upwards. But below that tier, there’s also another tier of supply chain. Every piece of semiconductor has

components of silicon, gold, copper, palladium, nickel, silver inside of it, combined with resins and metals creates the products that we see today. This multi-tiered supply chain – and I’ve got a couple of examples to show you what I’m talking about. If you look at coffee machine many of you

have this maybe in your home or you’ve seen them or you’ve used them is full of different kinds of components; some of them electrical, some of them mechanical. Some of the mechanical parts are as difficult and is refined to manufacture and distribute and manage as some of the electrical parts.

Flextronics’ expertise in mechanical supply chain are producing most of the parts you’re going to see in these slides, actually, making fabricated plastic parts, fabricated metal parts, castings,

stamping, machining. These are aspects of a supply chain which actually, if you look at it in its macro sense, really come together in a company like Flextronics, which is managing that complexity.

Look at the XBox One. The XBox One, 100% of these mechanical parts are produced by Flextronics, not only the printed circuit board you see in the middle where the SMT with all the

different components inside of it, but each one of these components has a supply chain. We manage metal suppliers, resin consumption and all the capital required to build these things.

And why and how do we do it? Well, we have a global capability which we believe is unmatched. If you look at our industry and you look at the electronics industry, we have over 1,000 global customers. We have 14,000 active suppliers. These are suppliers that are part of our ecosystem

that are defining the modern supply chain. Daily, we’re managing 450,000 unique items on a $20 billion spend base, executing purchase orders, managing inventory and overseeing a world where 10,000 experts are actually working on behalf of our customers to execute a product.

But in order to do that, one of the key concepts and competitive advantage in this new predictable supply chain, is that it first of all it has to be fast. The old supply chain said that you had to move

things very quick through it, but fast here is a little different than just velocity. Velocity is all about making sure that you’re moving products quickly from one point to the other. But velocity here means that at a certain point if you own an automobile and you’re going 75 miles an hour and y ou

want to go 100 miles an hour, you start to rethink the kind of automobile you have. You start to say: well, wait a minute, do I have the right tires; do I have the right brakes; do I have the right headlights; do I have the right car to go 100 miles an hour or 150 miles an hour? It’s a different

automobile. So that’s how we think about predictive supply chain and for that we’re actually building solutions

which actually help us gain competitive advantage by, for example, risk mitigation. How do we risk mitigate a supply chain? How do we take visibility and move beyond that? But at the same time, all of our customers come to us every year and they say they want lower costs. They want to be able

to reduce the cost of what they do in the geographies or maybe expand the geographies in which they do it. So we look at total landed cost as a way of actually making sure that if they want to do business in Brazil, or China, or Mexico, or in the United States or Europe that we have facilities and

capabilities there to do it. So leveraging that geographic flexibility is important. But on top of all this, we have to have a transparent supply chain. And this is not just about green.

This is not just about carbon footprint. Our customers, and increasingly authorities, want to know who is doing it? Where they’re doing it? How they’re doing it? And if you have tantalum in your components was it mined in the Congo or not? And understanding the multi -tiered aspect of your

supply chain from a mindset standpoint is now an imperative because transparency linked to

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visibility, velocity, predictability and cost actually creates a complex environment for supply chains to operate. We believe we’re experts at it.

But to be a leader in a complex supply chain, you also have to be a leader in supply chain systems and cloud technologies. As Mike pointed out earlier on the roll of Elementum, we see that we take a

series – today, we have a series of probably 400 – we actually did a calculation for this presentation, 400 separate distinct systems that are integrated across one common platform in Flextronics. So that means that when we deal with 1,000 different customers, roughly 400 share

common systems, and we integrate those into our common platform in order to execute leverage across our ecosystem.

But what we’re finding is that the next wave of innovation, which we feel is very important to help develop, design and lead is around utilizing the cloud, and in the cloud we’ve incubated Elementum and inside of Flextronics and launched it to actually give supply chain managers tools in their

hands, mobile tools in their hands which are not just linked to their desktop, but actually give them the flexibility to monitor manage, control their supply chain on the fly.

The third aspect of managing this and leading it is around intellectual property. We have a portfolio of around 2,000 patents and, increasingly, just in the last six months, a half and dozen of those were just in this area of supply chain complexity and supply chain cloud. But all of this doesn’t

matter if supply chain isn’t driving financial performance. So one of the things we do when working with the financial organization is making sure that the five key principles in Flextronics – of five key financial principles in Flextronics are linked to how we operate our supply chain. For that reason we

have 500 people actually focused on demand generation, working with customers, dealing with SKU change, dealing with process change, dealing with engineering change, working with each factory, working on a build plan, going from NPI into production. People who are actually

professional supply chain managers assigned to customers. We also work on sourcing. We want to make sure that a supply is not only available, but

competitively available. So we leverage that spend across different customers. As I pointed out earlier, you may have resins and metals, but they’re basically common between different customers. You have components from the same suppliers, which might be common across

different customers. That way, we can leverage our scale and drive financial performance. And then from an inventory standpoint, we have a materials and logistics organization. Materials

and a logistics organization is really managing the asset velocity to make sure that that material is moving around the world efficiently, because asset velocity generates free cash flow, as does managing payment terms, supplier managed inventory. And the all important lead time of how long

it takes to get components in driving those things to competitive spectrums, so that we can actually contribute significantly to the financial performance of the company.

So what that all means is that if you take our capabilities and the technologies, we believe that when we talk to whether it be a customer or an investor that we’re providing a safe and reliable supply chain experience and that it’s fast and efficient and that it’s a global partner in achieving

financial results, whatever those results may be by customer or investor. One of the things that is very apparent and Mike mentioned is the proliferation of objects. The

objects of some people say 1.5 trillion objects by the year 2015, 2.5 gigabytes of data generated every day by 2015. These number of things in this age of network intelligence not only talking to inside companies or between companies, but actually potentially now machines talking machines,

this whole supply chain of everything is requiring someone to step in and actually provide these levels of assurance that managing these outcomes and managing these complexities is done in a secure and in reliable way.

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So with that short introduction to supply chain and, hopefully, you’ll see many of these logos as some of these presentations go on today, it’s my pleasure now to introduce to you Doug Britt, the

President of Industrial, who will be introducing one of the customers on this slide.

Douglas Britt, President-Industrial & Emerging Industries

Good morning, everyone. At last year’s Analyst Day, I shared with you a large win we had with a major floor care company. Our extensive engagement with this customer spans material sciences, engineering, manufacturing, logistics, real-time information visibility and a complete transformation

of their supply chain. That company is Dyson Corporation and we’re pleased to have their Chief Operating Officer, Jim Rowan here with us today to provide you with an overview of how Dyson is leveraging our platform of supply chain services to help them innovate, reduce supply chain

complexity and improve time to market. Dyson is a leading technology company that designs and manufactures vacuum cleaners, hand

dryers, blade-less fans and heaters. The company prides itself on engineering products which will work in different and better ways than their predecessors. Dyson developed the world’s first no bag, no suction loss vacuum cleaner and has strong innovation and technology roots. Dyson’s legendary

founder, Sir James Dyson, famously created 5,127 prototypes of his first vacuum cleaner over five years in a workshop behind his house before developing one that he considered perfect. Innovation, perfection and quality are key driving elements of all Dyson’s products.

[Video Presentation] (54:30 – 55:30)

Jim Rowan is Chief Operating Officer and Board Member at Dyson, responsible for all aspects of core operational functions of the company, including research, design and development, product innovation, technical service, supply chain, logistics and manufacturing. An engineer by training

and holds a Master’s in Supply Chain and Logistics, Jim has been a founder of two successful startups and has held senior operational roles at global companies including RIM, Flextronics and Celestica. With extensive experience in supply chain logistics, global operations and

manufacturing, he sits on the Advisory Board of the prestigious Supply Chain World Organization, a leading provider of supply chain content and community of senior supply chain professionals.

Please welcome Jim Rowan.

James Rowan, Chief Operating Officer and Board Member, Dyson Ltd.

Hey, good morning. Thanks, Steve, thanks for that nice introduction, and thanks also for the opportunity to be here today to talk and present to you guys. It’s great also to be in Silicon Valley, as you can probably tell by my accent I’m from back East, way back East. So it’s nice to get out

here and get a little bit of sun. Also, just listening to Mike’s presentation and also Tom, every time I come and visit with the guys here at Flextronics, I really feel I’m amongst thought leaders in supply chain and indeed in operations.

I don’t do too many of these presentations and I need to come here today really for one reason and that is Flextronics share, with me, a real passion for supply chain and how we solve the complex

problems of not just of today, but how we’re going to solve the complex problems of tomorrow as well. And dare I say it, sad though it may seem, we tend to find supply chain someway sexy.

Moving on. Now we love working with the guys in Flextronics for that reason. We love working collaboratively in solving the problems. Today, I’ve got 45 minutes. However, I’m also a Lean guy and a Lean practitioner, so I’ve got 42 slides, one video and one demo, and we’re going to try and

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nail it in 30 minutes flat. Sound good? Because you guys are going to get deaf by PowerPoint the whole day anyway, so.

Okay, we don’t have a lot of time, so we’ll roll brush the surface, it’s really a complex subject and both Flextronics, and Elementum and Dyson work every day to solve these complex issues in the

supply chain. We’ve created a framework, which we call 8V, and I’ll use that to help explain the supply chain complexities that we face.

Now Dyson is an innovation company. At its very core we’re about bringing new products to market in a different way than it’s ever been done before. If you take the vacuum cleaner, which is a 100-year old technology, we brought that, twisted that and brought it to the marketplace in a different

way. We want to continue to do that and so we want to be able to focus on innovation, on engineering and on design. And to help us do that, we really need to plot out with the business in terms of manufacturing, operations and supply chain and that’s really why we chose Flextronics as

a key supplier for us. Actually, I think I’m pretty well qualified to talk about Flextronics. I have a 360 view of the company,

which spans about 15 years or so. It makes me feel old. But – which spans about 15 years. I started with Flextronics by way of an acquisition. I was acquired by as part of the Altatron Group back in 1998. I then stayed with Flextronics for a further eight years, first of all, around GM. I was

GM running around a factory, and then around a region, the European region, running operations. I then left Flextronics and joined Celestica, as their Global Operations Lead. So that let me see Flex

from the outside down as opposed to the inside out. And that let me also them from the lanes of a competitor and a reasonably formidable competitor at that – excuse me, and it also let me see their global operations as I competed against them.

After leaving Celestica, I then joined BlackBerry or RIM, as you would know it. And so those who follow the RIM story, RIM had two CEOs. We had a COO – we actually had two CEOs as well, but

we had two COOs to match. We had the COO for Products and we had the COO for Operations. I was the COO for Operations and Manufacturing. When I joined BlackBerry, I once again reached out to the guys in Flextronics and asked them to come and help us solve some of the growth and

scale issues that we were facing. And also to shore up and improve some of the manufacturing and supply chain practices that we’d put in place.

Now at this point in time, Flextronics – sorry, BlackBerry was on a massive growth curve. Over the following two or three years, we took that output from 10 million units a year to over 50 million units a year. And that was at the same time as we were growing volume, we are also growing other parts

of the complexity. So first of all if you just took 10 million units to 50 million units over the course of three or four years, that’s pretty incredible growth in itself.

As Mike commented earlier, the technology within the smartphone at that point of time is also massively increasing. It started up with a single radio: if you remember GSM went to GPRS, then went to 3G, went to 3G, 2G and 4G, then went to GPS, then we started putting in all sorts of other

radios like Bluetooth and Wi-Fi and so on. So the complexity of the actual device itself was in terms of the component term, but also in terms of the task capability was massively increased. That led us to be managing together somewhere in the region 40 billion part numbers on an annualized

basis, which is an incredible amount complexity when you think about that. And so to Dyson, the engagement with Dyson, although less in revenue terms, is much more

strategic and is much more comprehensive. At Dyson, we employ Flextronics to help us with a whole variety of different parts of our business. This includes tilling, molding, painting and finishing, metal work, PCB substrates, power products, repair services, logistics and manufacturing and, of

course, most recently software and supply chain architecture via the Elementum platform. So that’s the kind of history lesson that pretty much brought me here today.

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But rather than me [ph] flutter (1:02:08) on about how we work together with Flextronics, let’s

instead talk about how we solve talk about how we solve problems together because at the very core of the relationship between Dyson and Flextronics it’s about solving problems that add to value. If there’s nothing else that you take away from today from a customer’s perspective, that’s

what we need. We need to work together to solve problems that add value and, hopefully, add value to both companies.

So with the limited time today, I’ve chosen to focus on supply chain complexity, which seems to be the general theme of today anyway and so we’ll talk in detail about that. But first, let me stress one thing, unless you’re coupled to strong, world-class manufacturing, truly underpinned by Lean

principles and hardwired to a culture of continuous improvement, finding a supplier or finding a solution to supply chain architecture won’t be the answer. It’s that synergy between world-class manufacturing, and supply chain architecture and deep supply chain knowledge that pervades that

magic. And that’s what we get from an engagement with Flextronics. Okay, so complexity. Over the years, we’ve developed a model or I’ve developed a model in

collaboration with a couple of people, the most important of which, as one of the players in Flextronics, Caroline Dowling. Caroline and I started this complexity model journey probably three or four years, and at the time when we put our brains together, we could come up with five drivers

of complexity. We gave each of them the letter V, so we called it the 5Vs of complexity. Obviously, we’re not in marketing. So on that basis, we’ve since grown that, and we’ve worked together collaboratively since then, we now call it the 8Vs and now use that today as kind of framework, if

you like, to talk about complexity. We can get rid of this. Let’s look at the real stuff which, of course, is the supply chain complexity.

This Tom alluded to earlier in his presentation as well, it’s no longer about printed circuit boards; actually, that’s the easy part these days. If you look at the amount – this is an exploded drawing of one of our products. If you look at the amount of plastic parts, metal parts, seals, caskets, and all of

these are much more complicated, first of all, to find suppliers who can do it very regularly and to the right qualities and then can manage them and all the different associated logistics models that go with that. So it’s complexity equation.

From the 8Vs, we then created this model called the complexity equation. And there’s three parts to that. First of all, understanding complexity; second, not only manage complexity and, ultimately, if

you can get there, harnessing that complexity to provide a competitive advantage. The saying goes: the early bird catches the worm, but the second mouse gets the cheese. So finding this or designing a supply chain that’s fast and effective, but also protects against hidden dangers in the

supply chain world is no longer a differentiator, it’s now become essential. So let’s start with understanding complexity and the 8Vs. Here are the 8Vs and complexity. We

have volume, variation, velocity, volatility, visibility, value, vicinity and virtue. So let’s start with a pretty simple supply chain.

Now we’ve got to add into that end-case volume variation. While I say end-case, but you could put as easily reduced volume and variations, and in many ways when we do that, the complexity is even worse than when you increase.

Now let’s assume because we’re all positive minded people that were on the increase scale today. So let’s increase volume and variation. And we’ll try to scale what that does to the supply chain

model. Now let’s add velocity and vicinity. And again, you see the exponential effects you get on that supply chain. Now I’ll like to add volatility and value. Okay, so you get the picture. The picture is – the point is rather, if we don’t understand and manage complexity then, quite simply, it will

manage us.

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So now we understand the complexity equation in terms of understanding it, how do we then go manage it? With everything that’s going on in the world and supply chain architecture or supply

chain variation, how do we deal with the unforeseen risks and increasing demands, quicker cycle times, improve quality, bird flu, swine flu, tsunamis, floods in Taiwan, the global financial crisis, the ever-growing demands of cultural/social responsibility, and now the move toward mass

customization. This is just a small smorgasbord, if you will, of the things that we need to do in a daily basis if we’re really going to understand complexity.

So let’s take a close look at the 8Vs. First of all, before we go further, let’s look at Dyson and we’ll deconstruct very quickly the Dyson supply chain, so you get to look under the covers, if you will, to see what we need to do in supply chain complexity. So with Dyson, we have roughly 2 billion part

numbers a year that we need to manage. We have 300 suppliers, four factories, 8 million machines per year, 1,000 SKUs, 60 markets, 30 million owners, and that manifests itself in about 10,000 legacy part numbers that we need to deal with.

That is to say that every day we have to manage an annual supply 2 billion components come into from 300 suppliers, coming into four factories, building 8 million machines, over 1,000 SKUs,

shipping into 60 markets and then dealing with a legacy in terms of repair service and logistics that go with getting that to and from the market.

So let’s look at volume. This is pretty much the simplest of all the complexity drivers and it’s pretty simple because the more volume, the more machines, the more owners, the more components, the more distributors.

We move to variation. This is much more complicated. Product mix, how do we manage product mix; how do we manage the mix in technology; how we cut – end technology at the right time to

drive value; the move towards mass customization and then, of course, the variation in demand? Like most companies, the demand and the forecast is usually reasonably inaccurate. So how do we cope with the demand variations?

Volatility. Well, quite frankly, we don’t manage volatility. We just need to be able to react really, really quickly to the changing demands that volatility brings. Be that national disasters such as

we’ve mentioned such as swine flus and ash clouds or the market forces themselves: inflation or deflation, and then the cost of commodities. And this is important because Mike mentioned it earlier as well, in his presentation, about the move towards regionalization. So you imagine that you’ve set

up a factory, you’ve spent a lot of capital in setting up and through either be that through inflation and deflation costs in the country that you’ve moved within the org, the rising commodity prices of certain products, all of a sudden that value proposition is in some way weakened. So being able to

nimbly move through that has become very important. And then visibility. This for me, is really the key and this is one of the key things that the Elementum

platform brings for us, if not the key thing. So it’s about information; really, it’s about information at the end of the day. And the information that we’re trying to make sure is how quickly can we get that information? Is that information relevant? Is that information accurate? Where does it come

from? Is it timely? And does it help us solve the demand/supply cycle? Also in terms of visibility, the contingency plan, does that information that we get then allow us to contingency plan? And I’ll do a live demo later of the Elementum software and talk through how that helps us in that quest.

And then we have value, not necessarily cost, but value. How do we drive value from each of these areas: from quality and reliability, warranty and technology, after-market services? And for us as a

technology company, it’s very, very important that we understand that value equation, especially as it comes from technology. Is that technology adding value or is that technology simply adding cost? Ideally that technology adds value by reducing cost and improvement performance in the machine

to the end customer.

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And then velocity. This is first mover advantage. My favorite saying on this one is that it’s not the big that eat the small; it’s the fast that eat the slow. And we find that in our marketplace, you don’t

need to be the biggest guy in terms of revenue stream, but if you can move fast and you can move nimbly, then you’ve a chance of taking market share. And that’s just what the velocity equation is about.

What we’ve seen in our markets at least is that the need for a much quicker ramp rate, cycle times are becoming much shorter, a much quicker ramp down and not to leave any end-of-life latency or

exposures and also with material or trying to get fewer touch points between the factories and the end customers. And we are trying to get ultimately quicker time to market to take advantage of that first market advantage or that first market mover.

And then we have vicinity. Vicinity for us is very important. It’s all about finding the value propositions in each of the areas. That’s an integrated launch management across 60 markets, in

our case; understanding each of the market value drivers; global launch capabilities; approvals in each markets; safety in each market; compliance in each market; global scale is required in each of the markets and the massive move to online retail versus High Street distribution, and how that fits

into the different vicinities around the world. So in Dyson, for example, we now design specific products for specific markets to launch on

specific dates. And we’ve found that to be a very worthwhile strategy for us. And finally, virtue. No longer a nice to have, now it’s essential. In fact, most of our large customers,

certainly, most of our large retail customers will order if factories can make sure that we’re compliant with their corporate social responsibility standards. And here it’s about people. It’s about workers’ rights. It’s about minimum wage. It’s about minimum age. It’s about safety,

accommodation, environmental controls, CO2 emissions, materials and actually designing products. Here, if you look, we’re actually now designing products with energy levels, that will consume less energy, will consume less materials, will consume no conflict minerals, right at the

design stage of the organization. And then finally, community. How do we as a company be part of the community and not just an employer? So harnessing complexity [indiscernible] (1:13:20) is a competitive advantage is the next step in solving this problem.

Working together with Flex, even before they had designed the Elementum software platform, at BlackBerry, we improved the manufacturing supply chain performance to industry leading levels.

Now BlackBerry, if you follow the BlackBerry story or the RIM story had other problems. Manufacturing supply chain was not one. We had built a manufacturing supply chain organization in collaboration with Flextronics as a key partner to one of the best in the world.

And I’ll talk about that briefly now. Using much less sophisticated and integrated software than Elementum platform allows us, we took the BlackBerry supply chain from outside the Gartner top

25 to inside the Gartner top 10 within one year. The first and I think the only company ever to have done that. [ph] Make a year or two earlier (1:14:18), we then started to talk about Elementum and the seeds of the Elementum software were germinating around that time. Using the first thoughts

around that albeit fairly rough at this stage and the following year, we took the BlackBerry supply chain from inside the top 10 to inside the top five.

The reason I share that with you today is because I think it provides an excellent proof point that this works, especially when you look at that top 10 list. I mean, we really are amongst thought leaders in supply chain in operations: Apple, Dell, P&G, Amazon, Cisco, Wal-Mart. There’s no

slouches in that whole top 25. There are certainly no slouches in the top 10. So it’s my hypotheses that as we work through this and as we continue to work with Flex and the

Elementum guys, this will strengthen – provide an even greater value proposition in the future. The key is that the SaaS-based system coupled to the mobile apps and that capability allows us real-

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time relevant information to anyone with a smartphone, which I heard today is something like a trillion people or something ridiculous, so. So that’s the value. But this for us is a very, very

important and powerful value proposition, as companies like Dyson look to future profit operations, okay.

So I’m going to stop there and I’m going to play you a short video of some of the issues that we’re trying to solve. And I put this in a video format partly because it’s easier just to play and let you hear it, but also just in case you couldn’t understand my Scottish accent it kinds of give you very much a

– okay, do I say: run VC? [Video Presentation] (1:16:08 – 1:20:49)

Okay, so now we’re going to do a quick demo of the Elementum software that we use in Dyson and how we use that. So I’m going to start with – so if you’re familiar with basically the mobile apps that

we use, we use Prospective, which basically gives us performance. We use Transport, which shows us where everything is, I guess, in logistics. And we use the Exposure app, which shows where we think we have risks in our supply chain.

So let me start here with Exposure. We preload where we think we have hot spots in our supply chain and we preload that into the Elementum architecture. So if I have a high concentration of key

suppliers, let’s say, single-source suppliers in a specific region like somewhere in Japan or wherever, I plug that in as a watch-out, as a node on that network there, I want to pay particular attention to. If I have a single-source supplier somewhere that is spread across all of my products

or a lot of my products, again, I’ll choose to call that out as a node on the network, as a watch-out node. And we populate that. And you can put in as many of these nodes at you like. But basically it then calls out anything that’s happen either in that region or in that company. So I can also call out

a company and it will tell me everything is going on with a chip supplier or a plastic supplier, whatever. And again, I’ll get that through the feeds. We can then dig into that data and decide whether that’s a real threat to us or not.

The key thing here is the mobility of the app. I can get this everywhere. If I’m traveling a lot, I can get it as a feed directly to my PC at my office. And that’s important because we want to have that

first-mover advantage. If there is an issue, if there is a fire in a semiconductor company that we’re relying on, I want to be the first guy to be able to go and take that and move it to the second source supplier or [indiscernible] (1:22:47) start rearranging the logistics of then getting that componentry

around the world. And I want to be the first guy to get my unfair share, if you like, of anything that’s going to go into a constrained market. That’s a really important part of the puzzle for us.

Then we move to the Prospective piece. This is showing us the factory performance, and so on. And again, I use that to get a beat, if you like, on how things are going around the world. It will send me these signals if something is out of kilter – it will send me a signal, send it straight to my

smartphone. I then don’t need to go in back to my PC and write a long email. I just take that and I just forward that on to whoever I want to forward that on to, and say: hey, are you guys on top of this? This is what I’m seeing. Are you guys seeing the same thing; what we’re doing to get this

fixed? And it just dings between the different operational guys running the business on a real -time basis. Kind of like [indiscernible] (1:23:38) supply chain, I guess, [indiscernible] (1:23:40). You can use that if you like. I’m giving that one free if you need it.

And then here when we look [ph] at a lot of wait (1:23:50) – this is inventory levels. First of all, let me talk about the Transport app. So the Transport app will highlight to me any of the transport

routes that are not performing to our criteria. So right now that’s showing me there’s a route coming obviously going to open to Europe. There’s something wrong with that route. The boat is going to be late. And I drill down into that, it tells me it’s going to be two or three days late. I then can look at

my inventory levels, which is shown here, and I can just say to that point in time whether that makes sense for me to start re-routing inventory from one place to another, or one customer to

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another, or whether two days is no big deal and we can deal that through the supply chain, through the normal channels. That’s what it gives to me. It gives me that dynamism really, is what it gives. It

gives me the information on a real-time basis. It gives me it to my mobile app and it lets me be very dynamic about what I start to do with that information, how I need to then manage my supply chain.

We’re actually building a control tower in Dyson, which will have all of this. Actually, we have I think 12 or 16 screens where it will show and indicate all of the moving parts to our supply chain to our 2 billion parts, and 300 suppliers, and the four factories, and the 60 markets, and so on. And that will

be in an environment within the Dyson organization. I like a physical control tower. I’ve done this before and I love the mobile app, but I love – I like the physical control. It’s been my experience that when you get six, or seven or eight people sitting in a control tower looking at the same dataset,

then magical things start to happen. People start to question, they start to look at things, they start to bounce off each other and it day, by day, by day strengthens the whole organization and we get really rich content coming out of that. So we have a control tower working up, which will be

operational I think by the end of July. Okay. So and then if you look to the left here, this is an example of what we would get from a

output, so you can see the daily output on this chart here. This shows you hour-by-hour: 7 a.m., 9 a.m., 10, 11, I can see my target and my goal lines. And then the past seven day trends, so as I can see if I’m hitting particular days. Usually, there’s always a dead spot on the night shift

somewhere and we’re always trying to cope with those kinds of things. And then I must say we’ve got quality and nice quality data – incidentally, this data is not live; this is

made up data, just in case you guys are getting excited about our quality performance one way or another. So – but this is how it would show. And we block out the previous, so we can start to see the trend, we block out until today, but we keep it on the chart so we can see if the trend is going up

and down, which I think is a kind of cool part of this app. And so this is [ph] FPPR, it’s first paying parts rate (1:26:36) and DPPM is defects parts per million.

So that’s a kind of real quick run-though of how we use the dynamic effect of the Elementum software to run what is – Dyson is not the most complicated supply chain of 2 billion parts and 300 suppliers is complicated enough.

Okay, so [ph] let me play – (1:27:06) these guys do their thing, I don’t control it from here, I don’t think.

Okay, so a final thought. So what’s next? Well, what’s next for us is we have a deep engagement with Flex in all the areas that I’ve mentioned previously. And they’re mainly operational and – but

it’s something which is very, very interesting to us that Mike spoke about earlier. If we can stop to harness the possession of Flextronics here in Silicon Valley and their view of the world across all of the spectrum of industries that they work within, if we can start to harness that and pull that in and

that starts to feed their innovation engine, it almost turbo-charges their innovation engine, as innovation company that’s really important. So that’s something that we’re getting really excited about and we hope to drive value though in the coming months and years.

So a final though, as our jobs in operations should be quite simply to never constrain supply. Okay, we need to keep inventory levels at the right amount. We need to make sure to protect against

excess and obsolete exposure, I get that. But our job should be, we never constrain the sales engines, really. So we know that supply chain can drive financial performance to the bottom line through all the stuff, reducing inventory levels, improving quality, increasing efficiency and so on.

But really, if we can harness the complexity – if you’re the only guy in the block who can deal with all of that complexity and harness that into kind of a sustainable comparative advantage, then you change the dynamics.

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We move from a backward-looking fragmented process of SNOPs and outdated material to a real-time world of sense and respond using one dataset from mobile applications that harness the

complexity and ultimately drive value. So what if rather than the supply chain always pushing back on complexity, what if we said we’ve

got that covered? What if we said: bring it on; take every order off the street. Now that’s sexy. Thank you.


Thank you so much, Jim; that was a great presentation, a lot of fascinating material. And I also have to admit that I also find supply chain sexy.

Something that Jim said I thought was very telling. He said at the core of what happens between Dyson and Flextronics is that they work together to solve problems in order to add value. And I

think we have no two better people coming up next to speak to you that can help really reinforce that point, then Jeannine Sargent and Erik Volkerink. Jeannine is the President of our Innovation and New Ventures Group. This is a newly formed group at Flextronics, with a primary objective to

align and leverage design technology and innovation resources and investments across the company.

Jeannine has been with Flextronics since 2012 and most recently was our President of Energy. She brings experience across multiple venture backed public companies in the high-tech sector, including CEO and executive management positions at Oerlikon Solar, Veeco Instruments and

DEC. With that, let’s welcome Jeanine to the stage. Jeanine.

Jeannine Perchard Sargent, President-Innovations & New Ventures

Good morning. It’s great to be here to be able to talk about innovation. And as you’ve heard from our speakers until now, it’s definitely a theme that’s not only for ourselves within Flextronics, but it’s the markets that we’re living in and the world that we need to address today. You’ve also heard

about the fact that the disruptive technologies that are affecting our businesses are really changing how we think about business. It’s been almost 20 years, 1995 when two Harvard professors, Clayton Christensen and Joseph Bower talked about and coined the phrase disruptive innovation. It

was about how do market industries and sectors change and evolve as a result or need to change and evolve as a result of what they’re seeing with disruptive technologies.

And no more so now than in the last 20 years or 30 years here in Silicon Valley or even if we step back and look at the last 200 years from the advent of things like steam technology and turbine technology to electricity, telephones, transistors, semiconductors and the Internet. You see that

with each of these disruptions and technologies, markets and industries were created, destroyed. Companies, entrepreneurs, businesses were created and also destroyed.

When we look at what’s happening in today’s technologies – and this is something we’ve taken from the McKinsey Global Institute, as a way to talk about what we see across multiple markets and industries, obviously, you see the Internet of Things, and we’ve heard about the trill ion connected

devices. And that’s actually looking at almost a 300% increase in the last five years of the machine -to-machine connected devices.

We think about what the cloud will do and we just had a great example with how customers are using Elementum and cloud services. This is also creating a disruption from a business model perspective in terms of the availability of low-cost infrastructure and how companies that otherwise

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might not have had access to that, can actually come to market and disrupt. We continue to see the advent of what happens as a result of Moore’s Law and you look at computing power capabilities

that date back to 1975, a supercomputer costing $5 million is now available to us for $400, give or take in our iPhone 4.

So it’s an incredible pace, as well as complexity of advancement of these technologies that we’re seeing, and Flextronics is at the center and really part of the convergence of bringing these technologies and introducing them, not only at a faster pace and a more cost -effective way, but in a

risk-managed way and a way that we can bring it across industries. You look at other industries such as the automotive industry, which we’re leaders in the space in providing an ecosystem in the supply chain for the autonomous cars.

Around here in Silicon Valley, we’re used to seeing the Google cars drive around. The Google cars now have over 300,000 plus miles on them and they only have one accident that they’ve recorded

and it’s a human-error accident. So the technology and the innovation of the connected or the autonomous automobile is coming. And it’s an opportunity in those industries where if we look at the medical industry, where we see lots of digital intelligence and capabilities coming to us in forms

of personalized medicine and the impacts that that will have on us in the industry, to smart energy. Cost of solar PV cells, for example, has dropped almost 85% since 2000. This is an innovation both

in terms of the technology, but how you bring things to market. Flextronics’ will be the top five PV module producers this year. They actually – we also work on developing new technologies and material, some of which you’ll see during the tour today when you an opportunity to go see our

Advanced Engineering Group, where we partner with parts of the ecosystem from universities and governments, to corporate partners to be able to innovate new technologies.

One such example is our SunShot partnership program where we work on new materials to actually innovate the way you’re going to change and manufacture solar cells in the future and bring renewable energy to the marketplace. So there are numerous examples of how we see the

availability of technologies crossing industries and really the reduction in the barriers to entry that you see in terms of bringing these technologies to market. And that creates dislocations and opportunities for companies, but it’s also something that people need to think about how to manage

the risks and how to manage doing these businesses with new technologies in cost-effective ways. So Clayton Christensen and team talked about the innovation dilemma. We see a new innovator as

dilemma and Mike mentioned as well, if you look at the Fortune 500 companies, the statistics are staggering. Almost 90% of the Fortune 500 companies no longer exist from its inception. Emerging companies and we’re used to this very much in the Valley have a very high failure rate and, in fact,

of almost 0.5 million companies that will be created here in the United States, half of those will not make it in the first year.

What we do see happening is the pace at which innovation and technologies and new products are coming to market is increasing. This is also creating a need both for emerging companies as well as established companies to find better ways with higher success rates. And I think how you should

think about Flextronics engaging in innovation is helping our customers not only accelerate the ability to innovate, but the success rate at which they can innovate in a risk -managed way.

There are several challenges when you look at how you bring new products to market. Essentially, the disruptions cause a new way for us to work. When we look at Flextronics and the abilities that we have to help you manage the supply chain, as you’ve been hearing about this morning, we think

in terms of how to reduce that risk, but also help you accelerate thinking about bringing technologies to your products and solutions that you might not even be familiar with.

So when we think about some of the technologies and you’ll hear examples from the segment presidents, where you see companies from appliance companies to automotive companies to

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medical companies who now need to incorporate digital intelligence, things such as wireless connectivity, or other types of cloud services into their businesses. Flextronics partners with these

companies in multiple industries where we’re able to bring to bear our core competencies and subject matter expertise to these companies to work together to co-innovate and to bring new products to market.

We are focused on the innovation because we see a value for our customers. We see the need in the marketplace and, as we’ve discussed, the need is sort of growing in intensity and the

complexity of what we need to do, and you’ve been hearing about that. So from a customer’s perspective, it’s all about how do I increase my time to market, reduce my total cost so I can deliver greater value? But I need to do it in maybe an asset-light or a creative business model way

because I need to be able to incorporate new capabilities and resources and I need to reach new geographies that I’ve never done before. And this can be true both of a startup, which it’s very easy to understand that they have that gap, but also I’d say in terms of emerging industries for

established companies. So more and more we see a crossover happening between many of the verticals that we’re focused

on in terms of how they are crossing over and we have a need to be able to bring those capabilities to market. The benefit to Flextronics, obviously, is it gives us an opportunity to have deeper relationships like the one you just heard about with Dyson in terms of the depth, the stages of the

relationship that we have, all the way from inception and innovation of their new products through delivery logistics and customer care.

It gives us an opportunity to increase and I show here an example of how we think about the addressable customer market both for existing and new customers any opportunity for margin potential. So it is our focus to be able to give our customers new services that create value for their

customers as well. But while doing that, we’re creating an opportunity to ever increase our operating margin and the value to our shareholders.

If we look at the types of services that customers are asking of us, we look at an increased amount of spend. So customers are spending money on R&D. They’re spending money on productization, commercialization. They’re just now spending more of that those dollars with Flextronics. And as

we look to the growing margin potential, you will see it blend more higher single-digit to double-digit margins into the businesses and relationships which we have, which will lead to the trajectories that you’ll hear our segment presidents discuss in terms of the ability for us to create value for

Flextronics. As we’re launching these initiatives and some of them have been ongoing maybe over the last

year, there are a number of new types engagements with our customers, both in terms of business model as well as the types of technologies that we’re engaging with them. So now as you see our platform that we’ve discussed in the end-to-end supply chain solutions, we’re really focused on

what’s happening with innovation and engineering where we have new initiatives that I’d like to share a few of them with you now.

One of them is our Lab IX initiative; it’s almost a year old now. This is where we’re working with startups, some of which you’ll see today and meet today. I have some testimonials and some case studies for you that we’re looking at being able to provide them with resources in terms of facilities,

designing and training capabilities, partner with them to help them design their supply chain, logistics, manufacturing and actually business mentoring as well as financial support. Again, think about the innovators dilemma: it’s about not only being able to innovate, but to do so at a greater

success rate. So when we think about these building blocks not only of our technologies, we also think about what are the new ways that we can help companies, either new companies or new product areas within existing companies, come to market and Lab IX is one of the initiatives that we

have around that.

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You’ll also have an opportunity today to see our Innovation Labs, as Mike said, as much as we can, you’ll be able to see some things many of which are done behind closed doors. The innovation

services are centered around extending and expanding not only our design and engineering services, but really the product realization and commercialization. So more so than not now, we’re partnered with our customers very much upstream in the product design cycle to help them think

differently about how they’re going to not only design their products and make them reliable and manufacturable, but how are we going to do so in terms of designing for the supply chain, designing for the geographies where you’re ultimately going to deliver these products?

It’s a different constraint and engineers, who may not have thought about it and were operating in a serial process before, are now in a more complex parallel world. And we’re finding this is resonating

quite well across our customer base and across the markets and verticals that we serve. So this is also an opportunity for us to deliver greater value to our customers and drive value back to Flextronics.

The strategic partnerships really cross all sectors, both governments, universities, technical partnerships where we actually work with component and sub-system suppliers to qualify, pre-

qualify, pre-test building blocks of technology, which Erik will describe for you in a moment, that help our customers, again, plug and play and go faster. It also helps our customers become experts in things that they otherwise may not have been expert in before. These partnerships are essential

to help and create an ecosystem of innovation that allows markets to move forward. And when we think about how Flextronics can participate, I think about the ability for us to change the way industry is developed.

Personally I’ve been involved and fortunate enough to be involved in the semiconductor industry, in renewal energy industries, and the way consumer and broadband communications have been

brought to markets and the tools and the capabilities that Flextronics now has to work with companies are unparalleled.

I did my first hardware startup in the late 1990s and I would have loved to have the opportunity to have access to the facilities and the resources and the partnerships that Flextronics has and you’ll have an opportunity to see today. And more and more we’re seeing that the next Google and the

next Nest or the next GoPro of companies are looking to have these kinds of relationships and actually reaching out to us, including the companies that are now sitting in the Fortune 50.

This is an overview currently of our some of portfolio from our Lab IX investments and the strategic partnerships that we have. We’re actually going to hear from a couple of those in a moment for a video, but you’ll see that we have sort of two categories here. Our business acceleration, these are

really earlier stage companies where we’re likely engaging with them with providing even facility and resources in terms of design engineering and productization, business mentoring, as well as some financial investments.

Some of the strategic investment customers are larger customers and we’ll give you a few examples. And I’ll also have you note that as you look at these companies, they’re really cross

industry and cross spectrum. And a number of these companies have disruptive technologies that can be applied to multiple markets.

And with that, I’d like to introduce you to one of those companies NextInput.

Ian Campbell, Chief Executive Officer, NextInput Inc.

I’m Ian Campbell. I’m the CEO of NextInput. At NextInput, we’re developing next generation touch technology that can go into devices like GPS device, point-of-sales system, even smartphones and tablets. Touch technology is one of the fastest-growing segments within the overall electronics

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industry. It’s about $20 billion industry today and it’s growing at double-digits. We have a commercialization challenge. We’re very small company. We’re a team of Georgia Tech scientists

and engineers, and we really needed a very large commercialization partner like Flextronics in order to take what we can develop today, mass produce it, get it to a point where we can start selling our solutions to very big customers in a variety of different industries.

And we’re really leveraging Flextronics capabilities in manufacturing and supply chain management to be able to help us commercialize ForceTouch and get ForceTouch ready to sell to large OEMs

beginning in 2015. The partnership with Flextronics has been one of the most important things that we’ve done as a startup company. And it’s really helped advance not only our technology development, but even our advancement as a company: so fundraising, getting other strategic

partners around the table. It’s a very unique opportunity that NextInput took advantage of and we hope to fully leverage it in the future.


It’s very exciting to be able to meet the companies and be part of the companies and also watch how Flextronics and the many groups and people around the world that you interact with when

you’re dealing with our company get the opportunity to be as excited as the startups, to be able to help them and help them bring their technology and products to market.

Another company I want to introduce you to is Powermat. If you haven’t had an opportunity in the back of the room, you’ll have an opportunity to actually use the Powermat technology. Powermat is pioneers in wireless technology and they’re really looking to do for wireless charging, from an

infrastructure perspective, what we now have come to find commonplace in Wi-Fi. It’s a company where we’re working with them, both in terms of the design of the technology and components with our Flextronics Power group, but also working with the other business segments. And in addition to

helping them reduce the risk of technology innovation in their products, we’re actually helping them accelerate market entry and penetration into the marketplace.

Some of the partners that we’re working with them in sort of a triad relationship include companies like Starbucks. So Starbucks will be one of the partnerships where not only will you be able to have Powermat as an independent wireless charging capability, but you’ll actually be able to go to a

Starbucks – and some of them are actually I think located around Silicon Valley and testing right now, to be able to test and have access to just put your device down and have wireless charging of your device, very easily and effectively.

Through a creative integration processes such as the partnership that Powermat has with DuPont and the Corian 2.0 product, you’ll be seeing these kinds of products and technologies integrated

into the countertops that you have in your homes or in your offices and, again, being able to have access to wireless charging.

The Flextronics engagement is all about helping Powermat accelerate their time to market, reduce the technology risk, but also help them think differently about business models and, in this case, the partnership that we have and the relationship includes revenue and profit-sharing relationships in

targeted market, where we are able to work with companies. So we talked about in the earlier slide how does that create value for our customers? Well, it’s a risk -managed way for them to accelerate and go in parallel with the resources of Flextronics and the experiences that we have in multiple

industries and multiple markets to go to markets faster than they might otherwise have done on their own.

It obviously also creates an opportunity for us to have a greater and more enriched relationship with our customers and one that drives higher operating margins back to us, both in forms of market entry services and, again, in some profit sharing.

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Another exciting company is MC10, and this isn’t the space of wearables. And you’ll hear more

about this from Mike Dennison and how we look at this is really one of the new markets and sectors that the capabilities of a Flextronics are helping both new companies like MC10, as well establ ished company like the Nikes of the world and the FitFits of the world, come to market with new

technologies. MC10 is a pioneer in terms of stretchable and flexible electronics. Again, you’ll have an opportunity

to actually see this in action at our Advanced Engineering Group when we take a tour. It’s very impressive to think about the materials, the capabilities that you need to have both at the electronics level, but also when you meet our team at the Interconnect Technology Group, where

we work with our Multek flexible and rigid technology teams, the new materials that are going to be necessary to implement these technologies and do so and bring it in a cost -effective manner.

So again, we’re partnering with them not only on bringing these products to market, but also in terms of market entry. So this is also an opportunity where we have a richer value creation both in terms of customers getting to markets and also for Flextronics because we have an opportunity to

participate in profit in revenue sharing with the customer, with the types of partnerships that we’ve established.

The last customer I want introduce you to is from OMsignal, another wearables company.

Stephane Marceau, Chief Executive Officer, OMsignal

My name is Stephane Marceau, I’m a co-founder of OMsignal. OMsignal is a company that does biometrics smartware, in other words, we turn clothings into connected devices. I’m actually wearing a [ph] biometric (1:51:28) shirt right now. We’ve been working with the Flex gang since the

prototyping stage and we’re developing our hardware together. And the ability to work with one of the best teams in the world is what we were after. And having access to an A team, by any standard, that has done this before, but at the same time that can operate at startup speed and

shows the flexibility, and can turn on a dime and make things happen and work with a changing environment, with dynamic environment, we were looking for all of that. And it’s been a great experience getting to this point with Flextronics.

The best thing about working with Flextronics is the team that we interact with. We can call them anytime, weekend, night. They’ll react and then we solve problems together. Ultimately, Flextronics

represents the credibility of a large organization, a large structure, but at the same time, it’s about the people and how we work with them. And these folks understand and feel like fellow innovators. Flextronics, of course, is one of the largest hardware companies in the world, but at the same time

through Lab IX, they can operate in a far more nimble way than one would think as a large company. They’ve demonstrated that in our interaction that they can work fast, that they can turn around on a dime and still operate with a high level of excellence. I think that’s one of the things

that makes Flextronics remarkable from our vantage point.


Today, you’re going to have an opportunity to meet some of these companies, but really I’ll impress upon you that I don’t think anywhere in Silicon Valley and unlikely anywhere in the world will you find a campus and a set of capabilities that we’re going to showcase for you and you’re seeing a

map of today. So you’re going to have an opportunity to actually come and see where we co-locate companies in terms of our Lab IX and innovation labs, the abilities that we have and the services that we’re trying to connect that allow us to be better at what we do and, again, allow companies

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from startups like you’ve just heard about, all the way to very large established Fortune 50 companies. And as Mike mentioned, some of which we won’t be able to show you and talk about

explicitly today, but rest assured they’re here and they’re working with us. And I think even though they have their own, in many cases, innovation labs or dedicated product

centers, what they’re telling us is they are seeing with the Flextronics and our type of innovation campus is the ability to co-innovate and work in an accelerated environment where you have the ability to have very rapid cycles of learning. So it’s not about just [ph] filling (1:54:27) fast, it’s about

how quickly can we in the entire ecosystem, your suppliers, your sub-suppliers, your partners, your customers, the service providers that you interact with.

And many of the problems that every company faces are similar. So we also see that it’s an opportunity and really we’re a microcosm of what the entire Silicon Valley was developed to be and has evolved over time. It’s not uncommon in Silicon Valley to go into a Starbucks or to go down the

street and run into a company that you may have worked with before or dealt with or that you know of and have a conversation, not talk about proprietary confidential information, but talk about how’s business is developing. What kind of markets? What kind of customers? What are you seeing out

there in the world? And that’s something that is unique about Silicon Valley. And many of us and maybe many of you have traveled millions of miles around the world and,

barring none, it only happens here in Silicon Valley. And what you’re going to see today at Flextronics is really I think an amplified version of what we have across Silicon Valley. And it’s a conscious effort by ourselves and also the customers that we worked with to think about and they

want to participate in creating an ecosystem of innovation in an area and a location where we can actually work to improve and bring new solutions to market in the most effective way. So it’s pretty exciting and I hope you’ll enjoy the tour and the opportunity really to meet the teams of people who

represents some of the solutions that the customers were talking about. And with that, I would like to now introduce Dr. Erik Volkerink. Erik is our Chief Technology Officer

and he’s responsible for managing global technology initiatives and leading the efforts that we’ve talking about this morning to extend and expand our capabilities and services, leveraging our global design and engineering centers, of which we have over 3,000 engineers globally.

Prior to Flex, Erik has held various technical positions at HP/Agilent and including CTO of Advantest and Verigy. So I appreciate your time today. I really appreciate that you’ve come to visit

us in Silicon Valley. I hope you be as excited as we are about innovation and with that I’d like to introduce Erik. Thank you very much.

Erik H. Volkerink, Chief Technology Officer

Good. Thank you very much, Jeannine, for the introduction and thanks, everybody, for being here. I’m very excited to speak with you today. The theme today and for us, as you’ve figured out, is very

much around a changing world. And if you look at the world of innovation, there is significant changes going on. And if I would summarize those changes in just three aspects, one would be complexity. I think you’ve seen some of that today. The complexity is really going up significantly. If

you are a product innovation team or an engineering team for one of our customers, there’s just a rapid proliferation of very diverse technology that is really challenging the situation, as the complexity goes up exponentially.

And then if you look at the tools that are out there, the methods, the process, there’s not significant improvement in the productivity of design engineering and innovation teams, at least not to the

extent that it keeps track to the increasing complexity. So those two things happen, while at the same time, the time-to-market pressures go up significantly in certain markets that we’re in.

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And so those three things really put significant pressure on our customer engineering teams. And so today, we’re talking about various solutions and services that we can offer to help reduce the

pressure and to help our customers compete in their markets through innovation and through improving the time to market. So one of the big strategic assets we have is if you look at all the markets we’re in, we’re at scale in all of these markets. If you look at aerospace, defense,

automotive, industrial, fitness, medical, server storage, they’re at scale everywhere. And there’s significant product and market inflections in all of these markets, right, and these product and market inflections cause opportunity for us to gain share.

Let’s look at aerospace and defense. Aerospace and defense people talk about drones. They talk about connected soldiers. Automotive, they talk about driver-assist. They talk about autonomous

vehicles. Industrial automation is all around smart factories. All these different market segments seems to have inflections going in very different directions. And so for us, the Holy Grail is to really figure out what is the commonality, right. What are the building blocks that we can drive that really

help address all these issues? So we spend a lot of time figuring out what our technology roadmap should be. We talk to our business development executives that talk to all the different customers across all these markets every day. We talk to our design and engineering executives and

engineers that design products in all of these markets every day, to really figure out what is the commonality.

And we boiled it down to 10 different technology areas. So our technology strategy, our technology roadmap has 10 different dimensions, right. And there’s major inflections going on in each and every of these dimensions.

Let’s look at sensors and actuators. The cost of sensors becoming down, it becomes cheaper every year. And it’s just a matter of time or every object in the world will have a little GPS, and you’ll

never, ever have to lose anything again in your life. Because if you lose it, you just grab your phone and it tells you exactly where it is, right, so a lot of disruption going on in sensors and actuators.

If you look at human machine interfacing, it’s really exciting what is happening there. There’s not just face detection or gesture detection, it’s the voice recognition. Like about how many keys did you press this morning till now, little rubber buttons. Like 20 or 30? If you think about it, the current

state of the art of voice recognition there’s really no need at all to have any rubber keys in the world. I personally rather just talk to my coffee machine and say: hey, I’d like to have my coffee mocha now. And it starts humming versus me pressing all of kind of keys and figuring out how to

get my coffee done. And so the technology is there. And so it’s very interesting to see why is the larger economy not using that technology yet.

Within a 20-mile radius, I can point to three different software companies that is developing breakthroughs in voice recognition, so why are companies elsewhere not leveraging that? And that’s exactly where we feel we have a strategic advantage because we feel the big gap there is

actually what it takes to bring this technology from these design to manufacturing. That’s not trivial. It’s very different than software.

And so if you look at voice recognition, let’s just talk a little bit more about voice recognition. You need to know what microphone you use, if it goes in a real physical product. You need to know what are resistance? How do I make sure the microphone still works? What if there’s a lot of

vibration? How do I do the system test? So there’s so many challenges that are not necessarily related to software. What we do in these different areas is really building libraries of building blocks, building blocks that reduce the risk for our customers that allow to rapidly expand features in our

customer products and to really improve the time to market. Now Flextronics has an amazing portfolio of technologies. It’s truly amazing. If you look at what we

do in our medical group in terms of human machine interfacing, battery management; if you see what we do in automotive group in terms of new technologies, in our industrial group, in our server

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storage group, it’s truly amazing. And that having said, it’s fair to say that outside Flextronics there’s even more amazing technologies as well.

So what we really do is we look at all those technologies. We look at universities, at research institutes, we look at other OEMs, we look at governments, research institutes, startups and see

what we can leverage there. If you look at what the biggest paradigm shift is in innovation over the last two decades, anybody know what is this? It’s really going from a closed innovation paradigm to an open innovation paradigm. 10, 15 years ago, it was all about creating big ivory towers, locking

up 500 PCs in a room and every once in a while they pop out a new innovative product. That’s not the model any more. Well, we went through an open innovation paradigm, where it’s about partnering and finding the right technologies outside and really leveraging this. That’s a supply

chain problem. Back when I was professor at Stanford, I was doing a lot of research with companies around this

area and we didn’t call it outsourcing, but it really was outsourcing. So the biggest paradigm shift in product innovation is really open innovation, is really a supply chain problem. So for us it makes a lot of sense to model our innovations strategy, our technology strategy around open innovations.

So that’s what we’re doing. So to summarize, we look at the markets. We have very broad visibility in these markets. We see

the commonality in the challenges. We have technology pillars in all those key technology changes and we partner up and we link through the open innovation of products and use that to reduce the complexity that our customers are facing, to improve the productivity and to improve the time-to-

market of product innovation. So let me give you an example. So one of the big common inflections we see is products becoming

smart. So we went from an analog world, to a digital world, to a smart world, and we see that everywhere in all the different segments. This example is from industrial. This is an industrial printer company. And in that space it is really important to create mobile printers connected to the Internet

that allows them to be – make sure that data on the printer is up-to-date. And it allows a whole different user experience than was previously possible.

And so what we’ve been doing is we’ve worked with this company and we developed a solution, leveraging our building blocks in terms of wireless, in terms of connectivity. And you can kind of see how it works. Some of those technologies weren’t ours. Some of those technologies we qualified

from our suppliers, and we have a very rigorous qualification process to make sure that we can optimize, reuse in all the engagements that we do. So we were able to really improve the time-to-market for this customer. So you kind of see how when we sell innovation services the model is

different. It’s certainly about capabilities and we have amazing capacities, but that also means you’re able to do something. That means it takes an amount of hours, which means we talk about an hourly rate and there’s a limited amount of value you can bring.

And so the way we sell these kind of these engagements is sometimes a proactive innovation proposal. We show the building blocks. We show the platform. We show the components that we

have. We show how these puzzle pieces will improve your time to market and allow new features that previously wouldn’t be possible. Now one can argue: well, why wouldn’t a company be able to do that, right? And for sure, they could, right.

Let’s look at voice recognition again. You could absolutely build a prototype, design something, build a prototype, test it out. You realize that it doesn’t meet your requirements. You hire an expert

and you do it again. And before you know it – I’m falling off the stage here. Because it’s really complex, we did all that work already for our customers. We have ready-made puzzle pieces and we pull it together and we improve the time to market and enable new features that previously were

impossible.

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So I just want to kind of draw some analogy with the semiconductor industry. Does anybody here have a semiconductor background? So in the semiconductor industry, in 1997, something very

similar happened. This is new. This is modeled to what happened in the semiconductor industry in 1997. At that time, there were people walking around at conferences showing charts that showed that the complexity went up about 60% every year, which is basically Moore’s Law, more

transistors. The productivity of the design engineers, the design tips went up with 20%, right. And so there was this growing gap between complexity and productivity, while time-to-market pressures were tremendous and increasing. That sounds familiar, right. That sounds a lot like what I was

talking about before. So it’s interesting to see what the semiconductor industry did to deal with that inflection and that

issue. And what they did is they developed a whole suite of new technology, and new standards, and new consortia to really enable a building block of products, a core base designer process is how they call it, right.

And so when they started to introduce building blocks, there was a lot of resistance. There were people saying: oh, you can never use a consumer electronics microprocessor in a medical

application. And there were a lot of concerns, but there were new technologies developed and new infrastructures created to deal with those issues. And right now, it’s around 70% reuse. So they went from a situation where basically a big gap between complexity productivity, which basically

means it’s great that you can make a billion processors, but I don’t have enough engineers in the world to design them, to a world where there’s a lot of reuse and those are building blocks and it really accelerated innovation and it completely changed the supply chain.

There was an emergence of companies that just only did building blocks and chip manufacturing changed. Chip manufacturing was all around qualifying technologies being at the intersection of

innovation. Companies launched open innovation platforms and the world changed. And so we think right now what happened for the chip industry, something very similar might happen for product manufacturing as well.

So what did we do to really be really good in this area? So over the last year, we really reengineered our internal engineering community. We created touch points where previously touch

points didn’t exist. We created centers of excellence along the 10 different pillars of our technology roadmap. So now every two weeks, the leading experts in human machine interfacing and our medical group is talking to the leading experts and our automotive group on the same topic. And so

we create a cadence around that. So there’s a lot of opportunities for leverage and jointly qualifying outside providers and really making sure we stay at the forefront of the technology and really understanding what inflections are next.

That’s really visualized here. Now if you look again at what happened in the semiconductor industry, there’s more things that happened in the semiconductor industry, it was not just one

company trying to drive this. It was about an industry-wide consortia of people really working together to create standardization to make sure that this model would work.

And so similarly, we’ve started this year, for the first year, the Flextronics Open Innovation Conference and we had more than 900 registrations, so it was a huge success. The problem I just outlined about complexity, productivity, time to market, those three axis, the pressure that that

causes is a real problem, and everybody is struggling with it. And this is one approach of driving change and creating a solution to that problem.

We had an online reach of 1.4 million, 1.4 million exposures. We had 15 sponsors, the first year we did it. We had more than 30 speakers, very distinguished speakers. So that’s the approach we’re taking. Let me give you some more results. Nine months ago, we started in one of our segments an

innovation services group. We did 35 proactive proposals that led to $350 million in manufacturing, potential [indiscernible] (2:11:44) manufacturing revenue. This shows more examples, across the

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board. We see it everywhere. It’s a lot of customers where we right now are helping innovate their products and there’s a lot of technology providers we’re working with.

So the way to look at Flextronics from an innovation perspective, if I were to ask you right now what is the best software operating system, I’m sure names pop in your mind, probably one name,

maybe two, probably three, but not more. Everybody knows, okay, you have leading software operating systems. Now if I ask you what is the leading hardware operating system out there? It’s a different question. It’s a very different ques tion yet the big paradigm shift in product innovation is all

about the Internet of Things. It’s all about hardware right now. We are the things in Internet of Things, you could argue.

And so you know it’s significantly different way of looking at this. We want be in a position where anybody in the world if they design a new product, when they innovate a new product they want to innovate on top of our operating system, on top of our open innovation platform because you would

be crazy not to do it, because we have the broadest research of all the technologies out there and the key technology areas where I just talked about. And if you were a technology provider, you would want to design into our open innovation platform because it’s the broadest reach of all

customers, in all the different markets, in all the different technologies out there. So that really concludes kind of the strategy conversation. So thank you very much.

I am going to introduce the next example of a company that we do business with. It’s the thinnest watch in the world. And as you can see, the CEO also wins the award for the most fashionable

CEO. So with that, let’s go look at the movie. Thank you very much. [Video Presentation] (2:13:56 – 2:15:38)


Great. Thank you very much, Erik. So we’re running ahead of schedule, which is good news. It’s

11.15 a.m. We’re going to go ahead and take a break right now and resume in – with lunch in the back of the room. For the webcast, the webcast will resume at 1.30 p.m., when we’re back in this room.

I will also be making an announcement five minutes prior to the start of our tours. The way we’ve organized our tours, you’ll notice on the badges you’re wearing, you should have a color, the circle,

that will be the color that will govern the group that you’ll be with and ultimately the way that we have the flow working with the buses.

I’ll come back and talk more about that at around 12:10 p.m. or so. Thank you very much. [Break] (2:16:22 – 2:16:48)

[Video Presentation] (2:16:50 – 2:18:12)


Great, welcome from the tours. I hope everyone enjoyed it as much as I did. And I hope it really helped take the first part of the day, many of the concepts and the slides that you saw and made it

feel more real and palpable.

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To begin, the second part of the day, we’re going to have our four business group presidents discussing how they enabled next-generation supply chain solutions. First up will be Mike

Dennison. Mike is a 15-year veteran of Flextronics and for the past two years he’s been leading our High Velocity Solutions Group as its President through some tremendous change, as well as entry into new markets. Please help me in welcoming Mike to the stage. Mike.

Mike Dennison, President-High Velocity Solutions

Good afternoon, guys. Hopefully, your lunch was good and the tours were better. I know it’s a little

warm out there and you’re back a little bit late. So we’ll move quickly into this next section. So Mike started the day talking about a changing the world. Well, I think my slide is better than his slide or at least prettier. I want to come back to that statement, I want to come back and talk about what I think

is happening, especially in the consumer space, relat ive to a changing world, a fast-paced innovation change oriented business. So for us, we’ve been focused on a journey for the last couple of years.

In fact, two years ago, I stood up in front of you, I talked about the fact that we were going to take this business a different way. We were going to start to migrate this towards a more diversified

customer base. We are looking at ways to enhance our margin structure, improve our overall OP and drive into new areas, new vectors. So we’ve been very focused on that journey and we continue to stay committed to that drive, based on new hardware, new products, new companies

and new industries really that have formed over the last couple of years. Those are really being driven by the new technologies and we believe the new technologies are

allowing us, enabling us to go support this new customer base in a very successful way. We believe that tying these new technologies that we’re developing here that you saw in the tours that we’ve heard earlier today, tying those into how we go embrace a consumer market helps us to do

so in a much more innovative and differentiated way. So we support everything from young startup companies to large billion dollar companies. We do

so in a way that allows us to go drive the different services and needs of those companies, those products that they’re supporting. And when you look at those kinds of technologies and the innovation in those spaces, you start to see some amazing things happen. It’s the technology that

we create that enables things to start to migrate. And whether it’s a large company trying to act like a young innovative company and disrupt the market or a young startup company trying to being fast, and nibble and first, we’re able to go in there and help them deliver that solution.

The product generations are changing very quickly as well. Now we can argue that the product here on my left, your right, is probably – or your left is probably not last generation. But in any case

it’s an older generation. And the product on the right is the new remote control. It’s done through just hand gestures, so it’s actually doing the same thing as the other remote control, just through the movement of a hand. And you might think that that technology is simpler, it’s smaller, it’s

slicker, it’s easier to design and manufacture and it’s just exactly the opposite. It is extremely hard to design these products. It’s extremely difficult to manufacture these products, much more so than the remote control on the other side.

So these are technologies and capabilities that we’ve created to go help these young emerging companies. And we continue to evolve with these companies as they migrate into new spaces.

Many of our competitors look at some of these complexities, challenges, new spaces, new industries and shy away because they are hard, they are messy. There’s a lot of interaction. There’s a lot of learning. There’s a lot of capability that has to be created to get successful in these

spaces.

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We don’t run from that, we run to it, and we win in it. We absolutely believe that we’re going to win in this consumer space with new technology and new innovation. We believe that this market has

good, solid, growth potential both in new companies and in operating profit dollars, so we are very committed to it going forward.

There’s really two main areas that I have talked about over the last couple of years that I want to bring back to your attention today because they’re still very important to us. One of them is wireless technology and one of them is Connected Home. We believe in both of these spaces that we’ve

made large strives towards being a dominant player in these vectors or in these sectors. And we believe that we can drive these into the future and as these expand and create new markets and new industries.

In wearables, specifically, we started two years ago with a concept, with an idea that a partner of ours could come to us and that we could develop technologies and help that young company, in

that case it wasn’t a young company, it was Nike, they were young in technology, help them develop a product that they could take the market that would have the performance and the customer requirements necessary to be successful.

From there, we’ve branched out into other relationships and other customers. But what we made sure we did was, regardless of the customer or the partner that we are engaged with, we’re

extremely focused on increasing our ability to know that technology, to understand how Multek had to work to support these types of devices, to work on mechanical labs in over-molding and how to make sure these products can work in the real world, to work with our CTO office and our

innovations office to make sure that the things that we learned, we could use. We could help take to other partners to help make sure that in wearables we were differentiated with the abilities the other guys weren’t.

Wearables continues to be a very good space for us. We’re not sure who the winners will ultimately be. We know that in a new industry like this that disruption happens even in disruptive industries,

things are changing fast. What I can tell you is we shipped 75% of the worldwide volume last year in fitness wearables from Flex. So we are the player. We are very engaged here, deeply embedded to not only the top two or three relationships in that space, but since we’ve started, we’ve expanded

that to a dozen more. So this is for sure a major focus for us. We think that that technology helps us in other areas as well. What we learn in the consumer space

around things like wearables, we quickly take into our medical space, even our automotive space into our aerospace and defense. And those cycles of learnings that happen so quickly here, we can use to differentiate over there. And that’s a powerful place for us to be. That allows us to do things

very quickly and to help actually know how to solve customer problems before those customers have those problems. So it’s very important to us to take that technology and migrate it, export it out in the other things that we do.

The other business, the other sector that I talked about last year was Connected Home. And Connected Home for us is a very fast-paced growing space. And I started the conversation last

year I think talking about our relationship with Google and Chromecast, which you guys are familiar with and you saw how it did last year in the market, which was fantastic. Chromecast was heavily designed. Most of that was done right here in the labs that you saw today. And that shows you the

benefit of having labs in innovation right here, right next door to them. It allows them to come over on a real-time basis, look at their products, work with our products, make changes to their product, work with our engineers, look at our technologies and ensure that we can move very quickly from

concept to consumption. Chromecast is a great success story for us. It has gone far beyond that and I am going to show you in a few minutes other areas we’ve taken in that space. But we believe that Connected Home for sure is a future success story for us.

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With the expansion of this into different products and into different spaces, you’re going to see a fast exportation out into homes, 25 million homes in three years. That migration, that expansion

allows us to do a lot of different things. In fact, we actually have a house that we use down in Atlanta, Georgia where we do tests, product development, product creation around Connected Home. We work with our other partners and we literally sit there and work on this house day in and

day out to find ways to connect things better, to make the home smarter, to do things that the consumer is going to want. As we move forward in this space, we will continue to look for those areas where we can utilize the knowledge and the experience within Flex to help drive this platform

forward as well. And this customer expansion has happened at a pretty massive rate. One other data point I would give you on Connected Home, I get asked this question a lot, when

you come in with these young companies and you start to do business with them and you look at how they interact with Flex and how you’re able to use, as Mike says, the supply chain solutions, this portfolio of capabilities, how does that work? How much of that gets used? In this case 80%,

so 80% of the companies that come into us on a Connected Home utilize the services beyond the traditional manufacturing, which allows us to charge margins 2x or better what I would have charged a traditional manufacturing. From a margin profile perspective, this is the way to go.

So these market changes are happening really fast. It’s changing the way that we think internally. It’s changing the way we organize. It’s changing the way that we talk and speak and we think about

co-inventing and manufacturing processes on the factory floor and really inventing on the factory floor. It changes the ways that our factories have to look and feel and operate. Our factories today have to deal with the test for running, bending, flexing, twisting. They have to look at how does

things work in a home environment from one Wi-Fi hub to another. Our world has moved and today, I can for sure tell you that the products of the future will have to be made in the factories of the future, like what you’re standing in today. There’s no way you can do all these things in

traditional factories. So I want to talk through a couple of case studies that I think give you good – exemplify what I’ve

kind of referred to and how we think about the market going forward. So as I’ve told you before and I mentioned earlier today, Nike is a long-term partner of ours in the wearable space for over two years. We started that relationship with the idea that we were going to go learn as they were going

to learn what wearables was about, what we needed to have in technology and capability and how we could migrate that, that learning into other spaces. [indiscernible] (2:30:49) that relationship and that experience led us to other players in that space, guys you’re very familiar with, with Jawbone

and FitFit. From there it led us to lots of smaller companies who came to us and asked us for help and support

in getting their products up into the market, one of those was Basis. Basis is a great San Francisco based company here that’s a good partner and good friends of ours. They asked us to come in and utilize what we had here in Milpitas to support them. We worked on things like waterproofing, which

is critical in wearables electronics, miniaturization, industrialization, productization. We pulled in the Multek guys and said help us with the boards for this. We worked on all those things to ensure that product would be exactly what they had spec’d on their napkins, so to speak for their consumer.

It’s was great success story; it worked very well. In fact, it worked so well that Basis went out and started talking to Intel and as you know today Basis is now part of Intel, which by the way is another

customer of our consumer business, so – and actually other businesses. So it’s a great story of how these young companies grow up with us and then either expand on their own, or merge, or get bought or something else.

In addition to that, not only did we help Basis go that direction, but along the way we picked up other companies that were looking for similar types of technologies, similar types of experiences in

learning, guys like Recon, guys like Amiigo that came through [ph] that line (2:32:17) as an example and guys like Omron. And Omron is actually a medical company. This is a consumer

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device. However, this led us to that medical company where didn’t do business for this consumer device [ph] and it will allow us (2:32:30) to migrate towards our HRS business as more medical

devices get created. So this is a really good way for us to cast a net and to find how to grow business with these young

companies and help them be successful. Now before I go to my next case study, I want to just go to a really quick commercial for a friend of ours, Ben [Kaufman]. So if we can do that.

[Video Presentation] (2:32:53 – 2:33:25) So that really was a commercial actually. But Ben is a great guy. He’s actually going to come out

and speak at our Leadership Conference in about a month, and he really exemplifies some of the leadership of these young companies that we’re engaging with and how they think and how fast they move and what they are looking for from us in terms of a partnership. And these are really

deep, interesting, interactive partnership. So yeah, like I said, Ben is a great guy. So the case study here is very interesting. We actually started working with Home Depot some time

back around developing a home hub. As you know guys like Lowe’s and Home Depot are really trying to get in this space and understand how to be in the smart home category. So they were working with us to try and develop that product. At the same time, we were working with Quirky, a

new customer of our at that point on several different products. They came to us and said: hey, we’re kind of thinking about doing this home hub thing, what do you think?

And we said, sure we can help you with that, so we started talking with them. They then went to one of their retail partners that happened to Home Depot, because they have Home Depot as a partner and said: hey, we have a great idea for a home hub. And Home Depot said: oh yeah, so do

we. And Quirky said: well, we’re working with Flextronics. And Home Depot said: oh yeah, so are we. And so we all got together in kind of a marriage of three and sat down and thought about, okay what kind of products could we make together? What can we do to take the best attributes of all

those different things and find a way to create the best product possible with our hardware, their firmware, their software, Home Depot as the big box retailer and it worked really, really well.

Again, utilizing the Innovation Center, utilizing the pace of development, utilizing our engineering teams here, Atlanta and other places, utilizing our verticals to help put those products together like Multek. In the end, we came out with a great product that’s now a combination of all three of us.

That product is sold from us, to Quirky, to Home Depot and will be out on the shelf shortly. It’s – I think a pretty phenomenal product and it’s really going to be kind of the next iteration in smart home connectivity.

Again, one of the main points of this slide is not so much about our Quirky relationship, although that’s really cool or even Home Depot, which is also cool, it’s about where did it lead us from there?

It led us to two or three different products with Quirky, based on technologies that we had and what they thought we could go support. It led us to three more customers outside of Quirky who needed similar Connected Home types of capabilities, all starting to interact and say: hey, wait a minute, if

you’re looking for a guy that you can do that, go to these guys. I can tell you that this it is amazing to me how many phone calls, how many emails, how many

requests for meetings we get today for companies coming in and saying: we have this great idea can you help us? And that’s a great place to be. It changes the way though that we have to think about how we run our business. And we can’t be just a high velocity guy driving huge volumes with

guys like – they’re really good partners of ours, mind you, but guys l ike our big billion dollar relationships in HP and Microsoft and places like that.

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We needed to slightly shift course. We needed the change the way we were working. We needed to reorganize and kind of retool ourselves so that we can go do this in a different way and a little

better way. And so that’s what we went and did. And I want to talk about that a little bit. So you all knew us, you all knew this team, you all knew us

from our prior slides, prior meetings, High Velocity Solutions, which to me articulated a very generally narrow approach to the consumer space. And we’ve always talked about the margin structures associated with that, the seasonality associated with that, the volatility associated with

that. Today, I’m announcing there’s no more High Velocity Solutions. It’s now Consumer Technology

Group. And the reason for that, I’m going to walk through it in a few minutes is extremely important to where we go from here, how we think about this space, how we want to go work on improving our sustainability, our predictability and our profit expansion, the most important things for us to go

do today. So we’re really proud of this evolutionary step to go from where we started two years ago to here and we think the road forward looks really, really, really good.

So let me talk about CTG, Consumer Technology Group. It still has very strong core piece of business in our large billion dollar relationships. We’re adding tremendous value to these guys, typically outside of China, sometimes in China as well, but these are things, like Mike said before,

where we’re helping with regionalization and other types of services they need that is not just manufacturing in China. This is an extremely important piece of our business. It is not getting de-focused. It’s getting absolute critical committed focus from the organization to be successful.

And in addition to that, over the last two years, we started to develop these new relationships. Guys like Nike, guys like GHD, smaller companies like FitFit, guys like Amazon. These guys are really

trying to change the game. They’re trying to go out and be winners in the industry and really come out with creative innovative new products. These guys are our sweet spot. We really like them. We’re growing these guys as we can. We think that there’s a lot of value in this space and we’re

very committed to sustaining those relationships. Those two pieces today are probably the most close approximation of HVS as you would have known it last year.

This next piece, Innovative, Connected and Emerging Technologies also known as ICE, is our work with these young companies. And it’s growing at a amazing rate. This business is about helping these young companies whether they come through Lab IX or through other innovations, helping

them come to Flex, us studying what they need, understanding their management team, looking at their financial structure and figuring out what makes sense to support these guys.

They’re a fun bunch of companies to work with. They need a lot. They ask for a lot. And they’re willing to pay for what they ask for it. They understand the value of the supply chain that we can put together for them. They understand the ability that we have to scale them to be a competitor of a

billion dollar guy, even when they’re not a billion dollar guy. So that scalability is huge. That ability for us to really go take these companies and put them on a

turbo-charge pace to becoming a real company, with real products in the market, on a global basis is really a quite powerful position to be in. So that takes the third piece of CTG and really creates the total, which is now CTG. So no longer High Velocity Solutions. There’s now three elements and

it’s all included in Consumer Technology Group. So what should you be thinking about? Well, how we think about these three different pieces is

we’re enabling services in our core businesses. We’re working with regionalization. We’re working with things, I’ve said before, to go provide these big company services. They’re deep. They’re built. They’re well established, but they still need the core services that we can provide. That adds a lot

of value to what they’re doing, so we focus on services there.

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In the Strategics Group, we’re working more around products: how to help them get their products to market. How do they make sure they stay a winner in their space? Get to market faster? Have a

differentiated capability? Making sure they’re using the latest technology? Tied tightly to Multek, all those kind of things. So we’re focusing on products.

And in the ICE, while we’re focusing on products, we’re actually focusing on the company. What is the company strategy? What is the company trying to do? How do we enable that company to be successful? How do we create the financial structure? Can we make the risk portfolio or profile

work? How do we do the things that we need to do to not only make those companies work, but also make sure that we get the return necessary in supporting all that heavy lifting that we do to enable them. And it’s worked really, really well so far. Again, it’s a smaller group, it’s a younger

group, but it’s growing fast and I think this is where long-term, we can see a lot of long-term benefit coming in.

When you think about it from a growth potential profile, here’s the way I think I would look at if I was you. You should be thinking about stability in that core base. We don’t tend to move in and out customers on a frequent basis there. Microsoft has been with us for over 12 years now. HP has

probably been with us for 15; Lenovo seven or eight. It’s just really a stable group of customers. In the second set, in the strategic area, it’s fairly moderate because we look for new customers on a

regular basis there. We’re driving new businesses on a consistent basis. We’re expans ive. We want to do expand that piece. And in some of these cases, these guys get into spaces, then get out of them or they decide not to go as deep into them as they had intended originally. So it’s not

always over-the-moon successes. I kind of call this moderate success. We have a good blended success rate from this group of customers.

And near the top, it’s aggressive. It’s aggressive in one or two ways. They’re aggressively scaling, and growing and winning, but the fail. And we work with them up and down. So as they fail, we make sure that we’re taking care of their risk covered, but we work with these guys to make sure

that we can, as best we can, pick the winners and then make sure those winners stay winners, guys like Basis, as an example, as they get sold to Intel. So in the ICE space, high growth, for sure. These guys grow very fast and the winners here, as you’ve seen recently with guys like Nest and

Beats and Oculus do very well in their plans with other companies or just staying on their own. So the other thing is the margin profile. I know you’re always interested when it comes to consumer

business what the margin profile looks like. Here is where we’re at. So in that core business, those very mature businesses, we run what you would have normally predicted we would run. We’re in that 2% range, 2% plus, and we try consistently stay in that game.

In the strategic space, we’re adding more value, we’re adding more services. These guys typically need more from us and it allows us to charge more profit, more margin for the work we do and that

works really well. That’s actually a very consistent place for us to be. And then in the upper space, in ICE, which is the newer group for us, it’s still evolving, but that’s a

much higher margin range for two reasons, one we’re adding lot of value, we’re adding more value there than anywhere else, relative to people and support. And two, it’s higher risk. It’s higher risk, so we take more profit to ensure that we can get to a netted average profile there that works for the

business. So as you can see, when you blend all these things together, it gets back to Mike’s point in his

earlier slides today and what Chris will talk about later, in our margin profile, we think it’s a very healthy place for us to be in consumer going forward.

One last slide really around how does Consumer Technology Group work? And how do we make it successful? We’re very much integrated into the network of Flextronics. We work extremely close

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with guys like Erik and Jeannine, who you heard earlier, on innovation and the technology office, and Jeannine in Lab IX with that group. We’re extremely engaged in those, because all of those

things touch, a lot of those things interact. We work extremely closely with Multek to make sure that the technologies they’re creating support the roadmaps that we’re creating in conjunction with these customers.

So when Mike talks about and shows pie charts that show how much of the Multek business or the Power business interacts into the CTG business, it’s high. And it’s high because this business

doesn’t really survive. It doesn’t really work as well when we can’t provide the full solution and really use those technologies and innovations to help make it successful. So CTG is very much – you should think about it as a network into those other organizations. That’s how we’re made

successful. So summary slide here, just so you understand kind of what we’ve said over the last couple of

years, and where we’re at today. Again, very much about diversified portfolio. We want to have a broad breadth of customers in our space to help take out the volatility and to ensure that we have the winners in our group. We have to have a flexible business model. How we work with an HP is

very different with how we work with an Amiigo. We understand that. We get that. We’ve built models for that, and we absolutely see how that works. It’s definitely not one size shoe fits all and that’s just fine by us.

Expansive services. We make sure that services are our lead. The more services we have, especially in the ICE category, the more successful we are because the customer can literally hand

us the keys and say: help. And we do. Innovative technologies. So we get to see what is being created real-time. We’re able to take that

back into the company and utilize that for other businesses, again, like HRS or even back into things like Multek of Power and say: hey, here’s where the world is going. Or in mechanical, here’s where we think the world is going. We need to develop that technology.

We’re working with disruptive new companies because these are the companies that might either replace the companies of old, merge with the companies of old, or allow us to at least understand

where their other products are going to come from two, three, four years out. And finally and, probably most importantly, we do all this to ensure that we can get to that profitable

growth, to ensure that we can continue up that margin curve and provide good returns back into the company for all the hard work we do in the Consumer Technology Group. With that, I’ll pass it on and thank you very much.


So thank you, Mike. Mike just spoke about these cycles of learning that we have from CTG and

how they permeate into all of our other business groups. And I think all of you that were able to go on the tours here today likely saw good evidence of that. Our next speaker, Paul Humphries will be able to further articulate it as well.

Paul is the President of High Reliability Solutions that serves the medical, automotive, and aerospace and defense markets. Paul joined Flextronics 15 years ago, with the acquisition of

Chatham Technologies, where he served as the Senior Vice President of Global Operations. Prior to this he held several senior management positions at Allied Signal, Honeywell and Borg

Warner. Paul also serves as the Chairman of the Board for the Silicon Valley Education Foundation, a non-profit focused on delivering innovative initiatives and programs for Silicon Valley schools. Please join me in welcoming Paul to the stage. Paul.

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Paul J. Humphries, President-High Reliability Solutions

Good afternoon. So if you had trouble understanding the Scottish guy, you haven’t heard anything yet. So I’m really pleased you’re able to make it here and the chance to actually tour our sights and see first-hand the changes that Flextronics are making. There’s a lot of really, really good stuff

going on, but we’re really excited about it. And I hope you were equally excited when you went through the tour this afternoon.

So I’d like to start off by just talking a little bit about HRS, High Reliability Solutions. Comprises three businesses: medical, automotive and aerospace and defense. The medical business is the most diversified product portfolio within the EMS industry today. And we have a pretty dominant

position in almost every one of the product categories, being number one, or number two in just about every segment except for one. And in that segment, we’re building additional capability to be able to tap that market and we’re confident over time we can also create the number one and

number two position in that market. We’re doing that using our 300 engineers to not only work on developing innovative new concepts

and designs with our customers and helping to develop technologies that they need for the future; leveraging expertise that we have out of our CTO office, through the Open Innovation platform; the wearables technology, for an example, that we’re leveraging out of HVS; RF technology that we are

leveraging out of our INS group. So it’s not just about the 300 engineers that we have within medical, who have particular expertise, it’s also leveraging the broad capability that Flex has from a design and innovation standpoint.

Within automotive, we’ve really focused on four markets: smart electronics, connectivity, clean tech and lighting. And we’re focusing on those markets because those are the markets within

automotive, which is growing about 5% a year globally. But those are the markets that are growing at least twice the rate of the growth that we’re seeing in the automotive market. So those are the ones where we believe there is strong potential for growth.

And again, we’re using not only our manufacturing expertise, but the engineering competence that we’ve developed in-house in automotive, the 300 engineers that we have in North America, in

Germany and in Shanghai in China to build products for our customers that serve the future needs of that market.

And then finally in aerospace and defense, I talked a couple of years ago, this is a burgeoning business. This is a business that we’re starting to grow and the key here was for us to secure an anchor customer. And I’m really pleased to say that we’ve actually secured two anchor customers.

I’m not in a position to disclose who those are at this point, but we’re highly confident that we’re going to see significant growth in this segment also over the next several years.

As a result of our strategy of having a diversified portfolio in medical, focusing on design as well as manufacturing and also looking at the markets that are growing faster than the average, we’ve been able to secure double-digit growth every year since 2010. And our compound annual growth

rate over that period has been around 21%. We’ve also been able to – there’s something wrong with the slide. So we’ve also been able to create the dominant position and we’re almost double the size of anyone else within the segments that we serve. There’s something wrong with the slides.

So how are we doing that? What’s the strategy that we’re using to do that? So the first thing is we’re focusing on delivering world-class performance, world class performance in quality and world

performance in supply chain. We’re focusing heavily on driving organic growth, leveraging the capabilities, again, that we have within the HRS segment, but also working with the other segments

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in Flextronics and our centralized organizations to provide a differentiating capability that no one else can match.

And we’re also expanding our capabilities through acquisitions and partnerships. One of the things that we’re extremely proud of is the number of awards that we’re winning from our customers and

these just represent the awards that we have won over the last 12 to 18 months. With Ford, we won an award for the performance of our operation in Mexico. But we also won the

global award at Ford for corporate, social and environmental responsibility, which we believe is critical as we support a lot of the recognized brands throughout the world.

With u-blox, we won the supplier not only for 2013 or 2014, but the best supplier over a period of 10 years.

In GE Healthcare, we won an award for program management and being able to work with them to scale their business. So the value that that brings is that we’re not only performing well on existing business, but we’re giving confidence to customers that when they give us new products, we can

scale those products, flawlessly. And we have another example with Insulet where we are able to significantly ramp Insulet’s volume

and to do that in China using automated capability. And there’s a short video I’ll show in a couple slides where a board member of Insulet talks about how Flextronics was able to help.

As a result of what we’ve done, we were able to grow 53% of our customer base over $150 million over the last five to six years, and we’re confident we can continue to grow with those customers as we move forward.

The other area we think is really, really important with the High Reliability segment, so being able to give our customers world-class quality is absolutely critical. We have all of the customer specific

quality certifications that are needed. We have all of the global industry standards that you need to work in these marketplaces, plus we have all of the required regulatory approvals. And we have that in 35 sites in 13 countries and four continents. So we’re able to provide consistent capability to

our customers, regardless of where they need us to operate. So we can help them as they start moving into emerging markets, to grow their business, and to do

that in a standardized reliable way in India, in China, in Brazil, in China, or in Eastern Europe. And we’ve had zero defects, of zero findings from the FDA in all of the inspections that we’ve done since 2007 and we believe that’s an excellent record.

So I mentioned about the Insulet Corporation. So I’ll just let Charlie tell you himself how we helped Insulet to run.

Charles T. Liamos, Director, Insulet Corp.

My name is Charlie Liamos. I’m the former COO of Insulet Corporation. At Insulet Corporation, we

make a disposable insulin pump for people with Type 1 diabetes. We believe we’re poised to expand the market. Flex has been a key partner in helping us scale, in helping us improve our reliability and in helping us reduce our costs. And we’ve been effectively able with Flextronics to

scale our production from 20,000 a year, to now almost 40,000 a day or a million a month. We currently manufacture everything with Flextronics in Asia. Our long-term plan is to continue to

proliferate manufacturing facilities within their network of operations throughout the world, to satisfy those markets as they continue to grow.

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So organic growth. The thing about this business is we have relatively long sales cycles. So we’re

working in FY 2013 and 2014 to book revenue for FY 2015, 2016 and 2017. The great thing about that is we have a high degree of confidence as we look forward about the ability to continue to grow at double-digit rates. 95% of the revenue that we have in FY 2015 is already booked. 87% of the

revenue that we have in FY 2016 is already booked, and 86% of the revenue that we have in FY 2017 is already booked. So we have a high degree of confidence that we can continue to sustain double-digit rates at a margin of 5% to 7% – in the range of 5% to 7%.

Here’s an example where through the acquisition of a company that made wire harnesses, we had access to Chrysler. It was simply producing a wiring harness as a typical EMS manufacturer, with

no design input, very little in terms of process improvement to focus purely on building the print. And by leveraging the expertise that we have within the HRS group, we’re now able to offer the design services for the control modules and for their antenna and to actually build manufacturing

capability to be able to support the growth of [indiscernible] (3:08:20) in those products. So we we’re able to take an EMS relationship and convert that into an end-to-end supply chain solutions partnership.

And that’s seen our revenue with Chrysler grow by over 50% since FY 2013. And this is just one example, where we’re doing this in our automotive business. We’re also seeing increasing revenue

coming from design wins, where we’re partnering with customers right at the beginning of the design process and engaging with them to build a design that meets the market needs, is cost effective and is differentiating. And we’re increasing the number of design wins that we have to over

40% of our total revenue. And the value of this is not only do we see better margins when we engage with customers at the design stage, but it also increases stickiness of those customers, and is really helping to build our credibility in the industry and provide us new avenues for growth, not

only within existing customers, but with new customers and in new markets. There’s a great example where one of our customers was developing an insulin injector with a

competitor and they had lots of problems both from the design phase and from the product ramp phase. So we took the design capability that we have in our design center in Milan, we partnered with Flextronics design centers around the world and we actually went in and provided a proactive

design proposal to that customer. From that we were awarded a development project and we were able to complete reliability testing and design verification testing within their timeline and be ready for mass production ahead of schedule. The result of that we’re able to secure a large

manufacturing contract for insulin injectors and we’ve now developed a relationship with our customer, where we have additional opportunities that we’re now working on.

So not only does EMS for our design potential, but having design potential drives EMS and we find that’s a differentiating capability, again, that is difficult to match.

We have also been doing acquisitions to build our technology competence. One that we did was Stellar Microelectronics. And yes, they make the products, they make products for the medical and the aerospace and defense industry, but it’s more about a competence and a capability that we can

leverage into not only the HRS business, but into the rest of Flex. So we’re us ing microelectronics capability, for example, within the wearables business.

But one area where this is really having some growth potential for us is within the implantable business. Whether its neuromodulation for spinal injuries, deep brain simulation, cochlear implants or a recent product that we secured, a sleep apnea device, an implantable sleep apnea device that

recently received FDA approval. So we’re able to capture those markets that are continuing to grow and to leverage that competence across the whole of Flextronics.

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Within automotive, we hear a lot about hybrids and electric vehicles. And the focus really is on reducing emissions and improving fuel consumption. So to do that, we’re also seeing the

development of technology within traditional internal combustion engines. You’re seeing smaller engines. You’re seeing transmissions with more gears. You’re seeing turbo-charge technology. You’re seeing better exhaust management and a lot of that has electronic content.

And so we were able to secure a company called Saturn that makes transmission solenoids, so transmissions from four, six and seven speeds to eight, nine and 10 speeds, we’re going to see the

growth that’s not only coming from the overall growth in the market, but the increasing use of higher speed transmissions.

We are also able to pick-up from that specialty wiring harnesses that again fit with the growth that we’re seeing in transmissions, but again their giving us access to customers where we can cross -sell our other products like already mentioned earlier with Chrysler.

And finally, we recently acquired a company in Switzerland that has high-precision plastics and automation capability and that really will help us to target both the medical device and the medical

packaging area, particularly in areas like drug delivery, where we don t have a dominant position today.

But in addition to this, we’re also doing smaller tuck -in acquisitions both in Europe and in North America that are going to continue to build our capability to the point that we have the best overall competence in this field globally. And we’ll have experience not only in precision plastics and in

automation, but we’ll also have significant capability in tooling for those products. From that acquisition, we’ve already been able to provide support to our customer. Here’s an

example of one, Cellnovo, Steve Bubrick who’ll tell you about what we’ve able to do to help them.

Steve Bubrick, Vice President Global Marketing and Business Development, Cellnovo Ltd.

My name is Steve Bubrick and I’m the Vice President of Global Marketing and Business Development. Cellnovo is engaged in bringing a novel insulin pump to the market, primarily in Europe and to follow in the United States. I think what’s critical for Cellnovo and the relationship

with Flextronics is that fact they can scale a high-volume disposable in a quick period of time, with high reliability and at a cost structure that’s important for our category in our business. From a supply chain standpoint, we have the opportunity to leverage their relationships with suppliers, their

ability to drive costs with those suppliers. The fact that they source the components that are needed for our product is also integral to this process.

Flextronics will help us get to market because of their skills with injection molded parts and electronics and automated manufacturing, all aspects of what Cellnovo will need to compete in the market and drive the product margins where they need to be, so we build a profitable business.


So in conclusion, we’re going to continue to focus on world-class operational and quality

performance. And that’s leveraging the supply chain expertise that resides across the whole of Flextronics and provides a distinct advantage as we enter into new markets with new customers.

We’re going to continue to focus on organic growth. We believe the potential for continuing double-digit growth organically is available to us. And we’re going to do that by continuing to focus on

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innovation, by using technology and design wins to grow our business, which again gives us a strong assurance that we’ll be able to maintain margins in the 5% to 7% range.

And we’re also going to continue to focus on providing end-to-end supply chain solutions, leveraging our expertise in design, leveraging our expertise in manufacturing, leveraging our

expertise in supply chain and logistics. We’re going to continue to work on tuck-in acquisitions. We believe that there’s still lots of

opportunity for us to build our capability within the markets we’re in, to expand our growth potential and to provide solutions that the customers are looking for. And finally, we are committed to considering double-digit growth in this business. Thank you


So thank you, Paul. Our next speaker, you’ve already seen a number of his customers showcased

throughout the day. You saw Dyson earlier. You saw Tom Linton talking about Nespresso. You’ve seen some of his customers as well on the tours that we’ve done earlier today, and also Erik Volkerink when he mentioned a lot of the design success that we’ve been having over the past one

to two years, a lot of it is also centered in this business, which is our industrial busines s. So next up will be Doug Britt, who is President of Industrial Emerging Industries. Prior to joining

Flextronics, Doug worked in multiple executive leadership positions, including running global supply chain for Selectron. He also ran sales and marketing for Silicon Graphics, as well as the sales and engineering arms of Future Electronics.

Please welcome Doug.


Good afternoon, everyone. Over the last two years, myself and my team, Mike has joined us on several visits, we’ve visited over hundreds of customer. And in the industrial space, there’s some

trends and themes that we’re seeing when go and visit the industrials customer. First of all, many of these customers have grown through acquisition and they at one point were

experiencing accelerated revenue growth through these acquisitions that they made. And what’s happening in recent times is the growth trajectory, although it’s warming up a little in industrial, it’s still not the kind of growth that they experienced three, four, five years ago.

So many of the executives, the CFOs and the CEOs that we’re meeting with, are looking at ways to rationalize their supply chain to improve productivity to generate margin expansion and free cash

flow. That gives us an opportunity to leverage all the things that you’ve seen today, to penetrate more of the industrial market.

Additionally, these customers are seeing new revenue trends and their focused on emerging markets in these new revenue trends and they ’re finding that a lot of their supply chains are not set up to service those revenue trends. And they have to make decisions, if they’re going to invest their

own capital investments or are they going to partner with some like us to leverage our capabilit ies, to leverage our balance sheet, to bring them into those new emerging markets.

And the one area that we’re finding across the board, every single customer that we’re meeting with is extremely concerned about innovations’ disruption in the industrial marketplace. And what happens in industrial when companies like Nest, who were a startup and now in the home and out

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offering a smart capability in the home, attacking and cannibalizing legacy products from the industrial marketplace. So these trends are putting us in a really unique position.

We’ve had, over the last four months, two dozen name brand industrial companies tour this facility that you toured today. So there’s a very interested constituent of customers on how can we bring

innovation into their engineering, into their marketing organizations? You saw Mike Dennison’s presentation. A lot of the capabilities and the learnings that we have we

bring that into the industrial marketplace and they see a lot of value in that. So our marketplace spans a spectrum. It’s very, very broad. We’re in building automation, safety, securities, self-service, capital equipment, industrial automation, appliances, and lifestyles and energy. The lighting

business, it’s very broad. Now many of these customers and subs category segments have similar characteristics. They have

very complicated and engineered supply chains. They require low volume and sometimes ultra low volume, high mix capabilities. They also, as you saw in Jim Rowan’s presentation, they have a lot of mechanical assembly requirements. Those are all capabilities that we possess globally. So we

can bring them regional and global options. Last year, when I had the opportunity to meet with you, we talked about how we’re changing our

approach in industrial. We’ve migrated our team and we’ve invested in a proactive culture. We made significant investments in our sales model by hiring sales people and broadening our coverage model.

The industrial customers, many of them are decentralized still. They have decision-making throughout the globe. Many of them are geographically spread out. So we had to hire up the team

and train the team. We also started with a proactive approach of solution selling and training our teams to make sure that they’re going out bringing all of the things that we have here at Flextronics proactively to the customer before they ask for it and before our competition are doing it.

We’ve expanded the design team. We saw design as a critical element of our engagement. It can help us generate new discussions with the customer, bring in new value and margin expansion, so

we hired up more design capability. We also put in a field applications engineering function within our group, so we can connect the dots to the customers better, people that can walk in and discuss and have system architecture discussions with customers. And of course, we’re leveraging the

platform, looking at all the capabilities of Flextronics and studying the customer supply chain, so we can make the discussion pertinent to them.

We also mentioned that we would grow single-digits. The results for last year, we did grow low-single digits. If you look at our revenue profile that I know Chris and Mike review with you on our quarterly call, we’ve had accelerated growth in Q3 and Q4 and we see that continuing. We’ve had a

lot of new business wins. We recorded $1.4 billion in new manufacturing wins. And as I mentioned last year, our market is a complex business, so it takes time to get the transfers in. And roughly when we win business, it takes between 18 and 24 months to get that business ramped up.

So these new wins are going to help us fuel growth in fiscal year 2015 and fiscal year 2016. We had 10 major design wins that enable manufacturing revenues. So these are engineering led,

design, taking product, designing it, bring it to the market with the customer, launching it in manufacturing. And these are the type of wins that we’re seeing across the board in our engagement models with the customers.

And then we’re really excited to show that we’re growing our large customer base. We have seven customers last year that were over $100 million in revenue for our group. This year, at the end of

fiscal year 2015, we’ll have 12, and we plan to add to that list. We believe the work that we’ve done

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will give us a growth trajectory of double digits for fiscal year 2015 and we’re driving to make that a sustained growth rate moving forward.

I’d like to share with you kind of how it works with our customer engagements. We have three examples that I’ll take you through Sensus, Whirlpool and Schlumberger. All three are core existing

customers that we weren’t accelerating growth. Today, we’re accelerating growth with all three of these customers and they are leveraging the broad capabilities of Flextronics.

The first customer that I’ll highlight is Sensus. And before I go through the detail, I’d like to show a video of John Novak who is the VP of Sourcing and Procurement with Sensus.

John Novak, Vice President of Global Sourcing and Procurement, Sensus USA, Inc.

Hi. My name is John Novak. I’m the Vice President of Global Procurement at Sensus. Sensus is a leading clean-tech solutions company that provides smart meters, communications systems,

software, data analytics for the water, electric and gas industries. As our technology evolved, our strategy is more of an outsourced manufacturing model. And Flextronics stayed with us along the way.

My customers require perfect products that are delivered on time and they’re delivered at the right cost level. One key advantage I see in Flextronics is their vertical integration. Flextronics is

providing manufacturing services, other supply chains services to Sensus on a global basis. We provide them our requirements and their putting everything together, not only the circuit board assembly, but they’re doing the integration. They’re doing the final testing. They’re doing the final

inspection and shipping directly to my customers. It doesn’t sit in a warehouse managed by Sensus. I have the trust and confidence that Flextronics

will deliver and continue to deliver. Flextronics has been a terrific partner of ours, specifically, the Aguascalientes, Mexico site. The leadership team there has just been truly outstanding. And whenever I provide a challenge or something new and I need support of Flextronics, and if

something doesn’t go right, they’ll come to me and say: hey, it didn’t work the way you asked us to try it, but here’s three other ways that we found to do it better. And that’s what makes Flextronics special.

I envision and continue to work with Flextronics to leverage everything they can bring to help me meet my customers’ expectations.


The Sensus relationship began when they had printed a circuit board assembly operation in Juarez,

Mexico and we transitioned those boards into our Aguascalientes facility in Mexico. Since it has had a historical infrastructure of systems integration in North America, systems integration their own factories in Europe, they’re a company that builds water, gas and electric meters with

connectivity devices to bring data into the service providers that are their customers. And over the last two years, what we’ve been able to do with Sensus is we’ve migrated their supply

chain from being a PCBA originated supply chain that we’re managing, we’ve moved the gas meters and we’ve moved the water meters into Aguascalientes for the U.S. marketplace and North America/Americas marketplace. In that supply chain, we vertically integrated to get better lead

times and better delivery.

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In the energy world, there’s perishable demand. If you’re not there to service a tender and you don’t have the product availability, it will go to someone else. So we shrunk the lead time through

providing vertical integration. We also localized the supply chain around the factory to get better lead times. Then we went in and we did a proactive proposal to show how we think we could benefit their delivery performance and productivity by consolidating their electric meters, which

were residing in Mexico through one of our key competitors. We won that tender and we’ve transitioned $80 million of new revenue into Aguas, doing their

electric meters as well. We’ve taken that strategy into Europe and we are launching new products in their Europe theater on the water meters and there’s infrastructure supply chain and partners that they use that we’re looking at consolidating. So the relationship with Sensus continues and Sensus

is a fairly large base of business and we’re going to grow at 42% in fiscal year 2015. We’re also doing fairly well across the board in energy and specifically within metering.

Schlumberger is another customer that has been a strategic customer that we started with in 2010. Our relationship evolved from a Texas-based U.S. centric relationship where we did very complex ultra low volume, high mix, PCB assembly and we launched NPIs for their design centers out of

Houston. That relationship is fairly complex out of Texas. We have about 2,000 different codes that have really low volume and then some have high volume.

The service that we provided with Schlumberger they recognize and they made us strategic and over the last two years we’ve been able to evolve the relationship to where we opened up a capability in Eastern Europe to do the same service offering. And just recently we were awarded

the program to open up a footprint for them in Malaysia. So what Schlumberger sees when we deal with Flextronics is they see one company culture that they can work with, one account team, a world class operation, Lean manufacturing, and they can engage with us and we can take their

product anywhere in the world and they don’t have to reduplicate the training the learnings. We can transport them as they need. We’re now expanding the relationship into precision machine. And we’re looking at opportunities in Asia and in North America. And we’re also looking at putting onsite

engineering support at their technology centers. So the Schlumberger relationship, on a large base of business, is growing 28% in fiscal year 2015

and we are winning in the oil and gas marketplace across many different customers. Whirlpool is a relationship that we started out of Europe and it’s a design relationship when it first

started and we started doing printed circuit board layout. The Whirlpool engineering organization wanted to offset some of their engineering capabilities, so they partnered up with one of our design teams. We did a pretty good job and we ended up building the boards that we designed and for

North America consumption of their front-entry system washer and dryer, we started building the boards and then bringing them to one of their facilities in Ohio.

That relationship evolved to where we started designing the human interface panels for Whirlpool. So essentially it’s the panel that when you’re using a Whirlpool washer or dryer, that digital panel on top is designed, manufactured by us. We’re engaging with them on a variety of new products.

You can see in the top of the slide, the KitchenAid product, we designed that product for Whirlpool and they’re launching it. And this engagement continues. The complexity is pretty significant.

We build, as an example, on the dryer unit and the console panel that we build in Mexico, it ’s a one million unit build and there’s 32 different color variations. We’re doing metal stamping, the printed circuit board assembly and we’re also doing the plastic injection molding on that product that we

designed. This relationship, on a large base of business, will grow 43% in fiscal year 2015 and its really deepening our penetration in the appliance world and we’re seeing a lot of opportunity in the appliance and the lifestyle, as you saw by the relationship that we have with Dyson.

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I think Whirlpool is a good segue to highlight some other companies that we’re engaged with. These are wins that we generated this year around design-driven enabling manufacturing revenue.

We had 10. These 10 are leading to $350 million in manufacturing revenue and what I’d like to do is introduce a video and a company SMART Technologies is a newer company to Flextronics. They build interactive displays. And in this relationship, it’s a manufacturing relationship and it’s a design

relationship. We’re actually designing one of their next-generation products right now. We have a lot of capability in human interface and it’s perfect for the application that they have. And I’ll share a video that we have with Warren Barkley who’s the Chief Technology Officer of SMART.

Warren Barkley, Chief Technology Officer, SMART Technologies ULC

My name is Warren Barkley. I work for SMART Technologies in Calgary, Alberta, Canada and I’m

the Chief Technology Officer. SMART Technologies, at the essence, is collaboration company. And so what we’re about is really building solutions in education enterprise to allow people to learn better, to collaborate better and eventually work better together. We’re in about 2.8 million

classrooms today on the education side. We’re seeing huge growth on the enterprise side as people are wanting to collaborate on data together.

And so that’s the really the center of our enterprise value prop is allowing people to work together on data on big collaborative surfaces. So I was looking for a partner who could take the concept, bring it through design, bring it manufacturing, so that we could get in, in our channel. And that’s

where Flex had all the pieces for us. They had the design center. They had the manufacturing. They had the supply chain. And so really that – we were very happy that we found a partner who could do all those things. So could still build our mainline products, but allow us to go and take a

chance on something that’s completely new that allows us to build a whole new set of products that we can go into a completely different market with. And so that was really where we were looking from Flex for.

One of the fabulous things about working with Flextronics is the reach that the company has into different technologies and different startups and things. And so when I’m talking to folks at

Flextronics, they’re always thinking about, hey, we’ve got this piece over here that might actually add to your solution and make it more valuable. And that’s something that really makes a big difference in how we’re choosing partners and in how we’re working with people.


The Nespresso relationship I know has been mentioned a couple of times previous in today’s

forum. In the Nespresso relationship began in Eastern Europe and we were building a manufacturing relationship. We started doing plastic injection molding and printed circuit board assembly within Nespresso. We met with them several times on our engineering capability and

we’ve recently completed a project where we designed the motors, the motor control, we designed the fluidic systems for safe flow of fluidics in an environment that’s going to have food or in this case coffee run through it. Very harsh environments, so we had to make sure that all the products

that we were designing had high temperature characteristics, and we designed the cosmetics. So again, our experience in the consumer market, we’re taking what we’ve learned in other

industries and we’re bring it into industrial, and it’s bringing a lot of value. The customers recognize, as you saw with Warren’s comments, it’s one of the key differentiators that we can bring into the market is our learning across the segment and bringing it into this really vast industrial marketplace.

Xylem is a newer relationship for us over the last, I’d say 60 months. You may be familiar with Xylem in New York City in Manhattan, the large commercial pumps were used after Hurricane

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Sandy to pump water out of the city. And we’re engaging with Xylem, not on those large commercial pumps, but they have a variety of water distribution systems. So it’s a non-traditional

customer for Flextronics, but yet our value in Xylem, similar to what we did with Nespresso, is we did the motor and control systems design. We do thermal analysis. We did the sensor and the I/O and we did the touch screen human interface. This product is actually used in wastewater treatment

plants, so it’s a very corrosive environment and it has to last 10 years and it has to operate in minus 20 to plus 70 degree C. So it’s an industrialized product and it’s a new product that we’re ramping right now, so it’s a great engagement.

Also as Xylem goes through and they’re finding new demands globally. As they’re rationalizing their supply chain, we’re winning other manufacturing products unrelated to just design with Xylem, and

we look forward to our relationship with them. So in closing, at Flextronics we have a wide variety of capabilities and solutions with the customer. I

think within our industrial market, over the last two years, we’ve positioned those solutions proactively with the customer, so they’re really getting a better upstanding of these capabilities that we have at Flextronics and it’s creating a whole different level of strategic relationship engagement

with the customer. And it’s putting us in a position that this fiscal year, fiscal year 2015, we’re going generate double-digit growth within the industrial marketplace. And we have a strong pipeline of new business opportunities that we believe we’re still going to close. And we believe we’ll sustain a

double-digit growth moving forward, based on all the wins and all the capabilities that we have. [ph] We remain (3:41:08) positive, our operating profit model for industrial at 4% to 6%. There’s

mixes depending on the types of industry segments that we’re dealing with. We believe that we’ll experience more margin expansion as we get more of the design element and then of certain supply chains that are very complex, we’re getting the high end of that OP range.

And then we’re working hard to bring in new business to help diversify the mix of revenue and we’re confident that we’ll be able to deliver to become a larger percentage of the overall revenue of

Flextronics. Thank you very much.


Thank you. So our next supplier – excuse me, our next speaker, Caroline Dowling knows the supply chain and the supply chain knows Caroline Dowling. I often joke with her that it’s like the six degrees of Caroline Dowling in terms of anyone I run into in the supply chain somehow, someway

they know who she is. And you heard earlier when Jim Rowan was speaking, referencing Caroline Dowling how she and him worked side by side to develop the 5V model.

Caroline has been running Flextronics’ Integrated Network Solutions business for the past two years. She has been with the company for 17, running many of our businesses, including Global Services. In her current role, she leads an international team focused on design manufacturing and

services, providing end-to-end solutions worldwide for the telecom, networking and server and storage markets. Please welcome Caroline to the stage.

Caroline Dowling, President-Integrated Network Solutions

Good afternoon. Glad to see everybody here today and my sincere thanks for you coming down and joining us, really do appreciate it. I hope you enjoyed the tour. There’s some fabulous stuff that

I’m sure you got to see throughout the tour you did today. So Cisco Live was here in the Valley yesterday, which I’m sure as investors and analysts, you’re well aware of that. What you may not be aware of is that they also brought some of their investors and the analysts here to our campus,

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the Flextronics campus here in Milpitas, where they took the opportunity to share some of the work that we’ve been doing with Cisco in our innovation labs, a couple of doors down from here, which

was kind of pretty awesome for us. So great relationship that we have with Cisco continues to evolve

I also have here a video that we have from the Cisco team, basically focused on their SDN or software defined networking solution, so perhaps we could roll the video.

Maurilio Tazio De Nicolo, Vice President of Engineering, Cisco Systems, Inc.

I’m Tazio De Nicolo, Vice President of Engineering at Cisco and responsible for system development for the next-generation datacenter product, the Nexus 9000, the high-end data

switching and we’re bringing a new architecture to our customer for scalability, cost and performance.

From the beginning, it was scheduled to be very aggressive in terms of timeline and performance. So we had to choose a partner, which has a good track record with Cisco in terms of delivering product, with high volumes and high complexity. So Flextronics has been working with Cisco for a

long time. We had experience with the Catalyst 6000 for a long time and is really a proven vendor in this field. So it has a global footprint, which allowed us to build in different locations and get support from different location for [ph] wireless (3:45:20) engineering and NPI operation. And so we

thought that this was the best choice for Cisco. From the beginning, we have decided to go to Flex because of their global footprint, which allows

us to do mass production in areas like Asia. However, we do rely on a local centralized in Milpitas for help engineering during prototype and some sort of innovation and the back-end of the process and product, while in parallel we’re bringing up much production in Asia for cost [ph] savings

(3:45:52). We end of having like it’s near 100% during prototype, which is exceeding expectation we have in

general for prototype operation. So that alone has been a tremendous help for us to come up fast to speed to first customer shipment. This experience with the Nexus 9000 has been great so far. The expectation is that we continue this relationship. I’m really, really happy about the experience

so far. The quality has been great and I’m looking forward for continuing this relationship. And so far it’s been very, very good.


So our thanks to Tazio, who is the Vice President Engineering at Insieme, which is the SDN platform for Cisco and we’ve been working with them for quite a while, so I do appreciate him

sharing his experience with the global supply chain and network and design team from Flextronics. So I’m going to talk a little bit briefly on INS and where we’re at, our Integrated Network Solutions

business group today. And then I’m also going to talk to some of our customers here from the Valley about their experience as they worked with us.

So as you know the INS business is over $10 billion of our revenue. It’s represents approximately 40% of Flextronics’ overall revenue. We’re number one worldwide, as Mike said this morning, with 25% of the total available markets trending year-over-year. We have a very strong relationship

position in our core such as Cisco, Teradata, Nokia, Ericsson, Huawei, and others, and with the disruptive technology leaders such as F5, FireEye, Palo Alto Networks, Citrix, and so on.

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Converged 3.0, our Converged Infrastructure, or the third platform perhaps as EMC referred to it as, represents the future networking in compute convergence as we see it. Cloud we think about as

a set of technologies and capabilities stacked with the best-of-breed components, including distributive computing and storage and now pushing the network edge.

Finally, we continue to maintain our market leadership position with approximately 2x the next sized competitor here in the advanced economies in the U.S. Based on actual revenue results, we have grown our market share, compared to industry peers shown here, by a number of percent over the

last 12 months. I wanted to give you a snapshot of our core customers and also the disrupting technology and

leadership teams that we’re engaged with today. We have customer here in the United States, a broad base, customers in Europe, customers in China, customers in Korea. We have the strongest leadership position with every leading telecom, networking, server and storage company in the

world. And we continue to expand those relationships. In the last four weeks alone, we have added these new logos to our portfolio: RGB Spectrum, video processing and broadcast ing; we look at Coriant for 100-gig optical; you look at Corsa, which is another SDN platform that we’ve engaged

in; Seagate with this acquisition of Xyratex and complex hyperscale and storage; and, of course, [ph] Vistronix (3:49:23) in wireless.

Well, let me talk about a little bit about our market position. We got a lot of questions about it and of course our industry is very complex and it’s changing on a quarterly basis, you see shifts in technology. So I kind of wanted to give you a level set of how we view it inside Flextronics. When

you look at the telecom sector, the top four OEMs worldwide own 92% of the entire market. We in Flextronics are engaged with all of those top four and have the majority share: Alcatel, Ericsson, Nokia, Huawei. They own 90% of the space. The top three OEMs in networking own about 80% of

the global market. Again, we’re either number one or two in the top supplier bucket amongst that group: Cisco, Juniper, Ciena, Alcatel in the optical and, of course, [ph] Zion (3:50:20).

In storage, we have a dominant market position, in flash space and core storage technologies with Nimble, EMC and others. And in servers, we’re primarily focused in appliance and security with Palo Alto Networks, F5, FireEye, Citrix and multiple other customers.

The circles here represent, as you can see the legends, and the market leadership position, and also our view on where we see this market. Below the baseline is 0%, the old technologies like in

the telecom space, radio access, 2G, older technologies, CDMA, clearly, defining. But then you go above the line, and you look at where the growth sectors are and you look at where our leadership position is. So in the telecom, as I said, we have engaged with the top four.

We look at then the networking and the service storage, which we consider Converged Infrastructure 3.0 or the third platform. So clearly, confusing stories are converging and we also see

it hitting on the network edge. So we view our future in two sub sectors. We see it in telecom, where we’re extremely strong today. We’re engaged with all of the radio access and LTE. We’re greatly engaged with microwave and backhaul and, of course, a small cell environment when you

think femto, pico, and metrocells. So our telecom space is extraordinarily strong amongst all the four working worldwide and

leveraging our supply chain system. You then look at the converged space which is, of course, server storage, compute storage and that one is hitting it on the edge of networking.

Networks and compute for us today with Cisco and Juniper, very strong relationships and we’re growing. Appliance and security, as I mentioned, Citrix, FireEye, Infoblox and many others. You then look at enterprise analytics, the likes of Teradata and Oracle, again, very strong long-term

relationships that are over a decade old. Complex hyperscale, talk about Cloudstack, Seagate Xyratex, you heard from Mellanox earlier today, so there really isn’t many brands out there where

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Flextronics doesn’t have an engagement from design, through manufacturing, through services, through distribution, not alone with the core in the telecom traditional networking server and

storage, but equally in the disrupting technologies in the emerging companies that are coming out. We are capturing most of that business today.

When I look at pre-fiscal 2011 and these are in fiscal years, the Flextronics fiscal years, we served a large core, as I mentioned, and we also captured the disruptors. With Converged Infrastructure 3.0, it’s all about distributed computing and storage and the emerging trend of pushing computing

to the network edge. We support the major OEMs, as they address these market shifts in SDN. You saw a great example with Cisco. You saw us winning new areas in the business with SDN these past few weeks, in security, in appliance, in complex hyperscale and enterprise analytics for the

cloud. We’re delivering a total solution for purposed built security appliance to converge networking, flash storage and software defined networking solutions, helping OEMs optimize best-of-breed components that delivering both node-level and rack-level solutions across the globe.

When you look at our three major manufacturing sites in Europe, all of them are very strong capability across the spectrum for IMS, the same in Asia broadly, in Malaysia and in China, of

course, here in the Americas and in South America and in India. So we have a really stellar worldwide system.

In addition to that, you heard Jeannine and Erik talk this morning about our 3,000 design engineers. We have nearly 1,500 of those design engineers working on jointly developing these solutions today with our customer base. So they provide contract design services or joint development

design services or indeed we design racks that we actually just deliver as a Flextronics solution to our customer base. These designs centers are in Taipei in Taiwan, they’re in Shanghai in China, they’re in Stockholm in Sweden, they’re here in the Valley and they’re in Ottawa in Canada. And

they’re doing an extraordinary job of bringing all of this together. Paul talked earlier about him being able to leverage RF capability, along with Mike Dennison. And

that comes out of the core of our group. So the way we’re able to integrate across the four business units and leverage the skill sets and learning amongst us is actually highly valuable as a differentiator.

So we look at what we’ve done for software defined networking over the past number of years in building that capability, what we’ve done in the node level and we’ve done in the rack level. And we

now look at the future, and big differentiator for us when it comes specifically to the Converged Infrastructure 3.0 is really about configuration and optimization and best -of-breed component stack, which is where we’re delivering. Of course, that does not take away from what we do in the telecom

sector in the three primary areas which I already talked about. So I would like to introduce our two guests here with me today. I’m delighted you’re here, so thank

you for taking the time out. So we have asked Palo Alto Networks – Palo Alto Networks and Flextronics have been doing business together since 2009, so we do work here with them from design, to manufacturing, through repairs, through forward logistics across the world today .

In addition to that, we also have FireEye. So for FireEye, we have been doing business with FireEye for the past two years here in the Valley as well.

And also I’d like to introduce both gentlemen. So Mr. K.Q. Smith from Palo Alto Networks is Vice President of Worldwide Operations. He has extensive experience and career in his senior executive

roles and operations managing supply chain and global operations. And has worked with some of the largest names in Silicon Valley, including ionic companies such as Apple, Cisco and Juniper Networks and is now member of the Executive staff at Palo Alto Networks.

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In addition, I’d like to introduce Mr. Craig Martin. Craig is Vice President of Manufacturing and Hardware Operations for FireEye, responsible for all hardware development, global manufacturing,

supply chain logistics and compliance operations. He has over 30 years of experience of rapid growth, high technology companies and most recently served as Vice President of Supply Chain Operations at Juniper for five years.

Gentlemen, thank you very much for joining me. Appreciate it. So we’re going to have a fire side chat without the fire.

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QUESTION AND ANSWER SECTION

<Q – Craig Martin – FireEye, Inc.>: Without the fire. FireEye is here.

<A – Caroline Dowling – Flextronics International Ltd.>: Indeed, the FireEye chat, there you go, very good indeed. [indiscernible] (3:57:38) thank you both for joining me. I appreciate it. And for our

audience here, our investors and the analysts, I ask both of these key customers to come and share their experience of working with Flextronics, both locally here in the Valley, but also from a worldwide perspective and how they’ve been able to take advantage of our design, and our

platform, and all the other elements, we have been talking with throughout today. And I thought it would great to be able to hear it from customers here in the Valley so thank you both for joining us.

So Mr. Kevin Smith is actually – we refer to as K.Q., so we have known each other a long time. So K.Q., Palo Alto Networks have experienced significant growth and scaled tremendously over the past number of years. And of course, congratulations on your IPO, it’s been extraordinarily

successful for you. Would you care to comment on how Flextronics is participating with you today, and how does that enabled that growth for you over the past number of years?

<Q – K.Q. Smith – Palo Alto Networks, Inc.>: Yeah, Caroline, as you mentioned, in the intro we have a five-year relationship with Flextronics. We were a very different company five years ago when you guys took a bet on us. And we’ve been very fortunate in the intersection of our products,

our engineering talent and our marketplace to grow. Scalability and the end-to-end services that Flextronics provides really has made a huge difference in that.

All of our internal company investment goes into engineering and sales. And we want the operations function to be lean and mean, and we want to be able to get a lot of leverage out of a large partner, Tier 1 partner. And I really think the capability that we get from design to SMT and

FATP here in the Americas, through logistics, to reverse logistics and repair, all of those things as well coupled with the supply chain model that you guys has really helped us accelerate our growth.

<A – Caroline Dowling – Flextronics International Ltd.>: Yeah, appreciate, K.Q., yes, well, over the last five years we’ve evolved well together.

Craig, FireEye is proof that innovation and an agile executive team drives superb results and great success, and again, congratulations on your IPO, again, very successful. Of course technology and end market needs are constantly changing and with that the ability to respond to change. How does

FireEye view that today? And how does Flextronics participate in that rapid response for you? <Q – Craig Martin – FireEye, Inc.>: So change certainly was key and speed is a real key part of

that. So my job in developing hardware and then getting it into production and into our cus tomers is really focused on that speed element. It was kind of three ingredients to that. One is proximity, so I clocked on the way over here. It’s 2.7 miles from our office. It’s been handy. Comes in handy, I can

assure you there’s probably FireEye employees here on the campus somewhere and vice-versa at our campus.

The focus. The fact that I have all of the hardware development all the way through the end-to-end supply chain gives me a small, lean team that I can work with. And rather than having a number of relationships to do test development, design verification testing, mechanical design all that kind of

stuff, I can leverage the relationships and the resources that reside here with Flextronics pretty much on this drive.

<A – Caroline Dowling – Flextronics International Ltd.>: Yeah, exactly right, [indiscernible] (4:00:52) drive. K.Q., there’s a lot of discussions right now in the market around China or perhaps Asia, broad based supply chain solutions versus a regional strategy and even back to made in

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America. So how do you view that? And how do you view Flextronics’ footprint being something available to you for the future? And what do you believe are the key fundamentals in considering

your options for worldwide and supply chain decisions or regional decisions? <Q – K.Q. Smith – Palo Alto Networks, Inc.>: Yeah, thanks so for a security company, Asia is not

one of our priorities to go manufacturing at this stage. That may change over time. I do think that we’ll eventually regionalize. Right now, I’m actually three times farther than Craig is away from here. I’m nine miles away. But our – it’s great to have the proximity, as he mentioned, for both the

design services, as well as being responsive to upsides and changes in our production. We take advantage of the SimFlex model and the tools that you guys provide to help us do the

complete supply chain analysis. So it’s more than just labor arbitrage that we’re looking for. We’re looking for the landed end-to-end perspective here of how we get to our major markets. And so we’re primarily in North America right now. Europe is growing fast. Asia is growing fast. At some

point, we’ll regionalize when it makes sense, as we get larger. But we get great service right now in the Americas and we ship worldwide out of this campus. And so we don’t have any plans at this stage to take it out into regional model.

<A – Caroline Dowling – Flextronics International Ltd.>: Craig, slightly different turn in the same question, but for you, you have gone global with your business as it we were today. Would you care

to share some of the decision-making criteria on Asia-centric versus the U.S. versus regional? And how you chose Flextronics?

<Q – Craig Martin – FireEye, Inc.>: Sure, yeah, the company as it was growing as we started to prepare our initial public offering, the filing, we have some very, very aggressive growth plans in terms of head count growth internationally. And in fact, in our most recent quarter, we just

announced, we had over 50% of our sales for international. So a very, very aggressive expansion plans in that regard. So we’ve started with Milpitas here, given the proximity, getting the stability and getting the product quality and all the infrastructure in place. We’ve made significant

investments on our B2B connection between the two companies. And now the ability to take that and sort of stamp another copy, if you will, in very simple terms to the Flex location in Hungary, is a plant and have in place.

In fact, the Hungary team is here this week working with us is going to give us the ability to then have that footprint in Hungary that can support both EMEA and/or APJ or Asia-Pac region. And that

was a very strategic move. The other thing we gained by working with Flex initially is that we get that leverage, so that third element to speed is a leverage. So now we’ve got database, if you will, agile database of the product structures, a B2B investment that we can take and move to another

site, et cetera. So the more leverage and more common experiences we have together, the more likely the next opportunity will be easy to drop in, if you will. So that was a big part of it. So yes, we’ll expanding into Zala site, shipping out of there this August.

<A – Caroline Dowling – Flextronics International Ltd.>: Very good, thank you. Craig, I want to do one more question with you here now. FireEye is known primarily as a software company. So in

your experience, can you explain to the audience how Flextronics serves a core role in your business model? And with all the choices you have, of course, in the Valley and worldwide, when you now expand into Eastern Europe and to Hungary, you decided to primarily work with

Flextronics. What is it about that relationship business that has been so solid for you to expand it worldwide?

<Q – Craig Martin – FireEye, Inc.>: Well, [indiscernible] (4:04:32) in a little bit, I mean, the fact that we are growing so quickly. Intuitively software isn’t something we think about a hardware company or a manufacturing company like Flextronics, but actually it’s a pretty match. If you look at

the investments that we’ve made, just as K.Q. alluded to, we want to make our investments in software and keep our operations as lean as we can. So if you look FireEye over last year, we’ve

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added several hundred engineers in the software side. I think I’ve added 12 in my whole organization including hardware development all the way through the supply chain because we’re

able to leverage the resources that are already here, so that’s a big part of it. So that’s really the key for us and knowing that all the resources that we have are here is pretty natural. And then being able to extend that into the regional growth is just the next stage of that development.

<A – Caroline Dowling – Flextronics International Ltd.>: Very good, thank you. K.Q., in what way did Flextronics help differentiate Palo Alto Networks today and in the future. And I have a

follow-on to that. How does our worldwide system, as you see it, and locations help differentiate you as you do your three-year plan and five-year planning out at this point?

<Q – K.Q. Smith – Palo Alto Networks, Inc.>: Well, it’s all about scale for me. Like Craig’s company we’re very aggressive. We want to grow as rapidly as possible with getting leveraged into a Tier 1 partner like Flextronics, which offers the end-to-end services that we can take advantage of

to keep our operations team and our hardware design team as lean as possible, very similar model, I think. We can take advantage of those services that throughout the value chain, starting with the design services all the way through to fulfillment and supply chain.

We do take great advantage of the tools that Flex offers. And I think Craig hit on a key point about the B2B integration. It’s one of those things where it’s really some kind of an overlooked important

area, I think, in some cases because, having real-time connectivity and being able to actually go manage, again, late-breaking orders that you’re trying to close inside of a particular window, very, very important.

SimFlex is a great tool for us in terms of our supply chain analytics and being able to look at different locations as we talked about from a regional perspective. And we also use [ph] LeanToss

(4:06:34) and FlexFlow to just basically make sure that the blocking and tackling of building a quality product and getting it out to our customers on time, with the best cost performance, is sort of an ongoing cadence for us. So I do think that tool set is a differentiator, not only for us, but also for

Flextronics and we take great advantage of it. <A – Caroline Dowling – Flextronics International Ltd.>: Thank you K.Q. I think we’re nearly out

of time, but I am going to take one more question each with you both, if I may. Craig, Flextronics has a large diversified customer portfolio. And it’s actually a question I got over lunch today and inside INS alone, we have over 80 clients and ranging from incubation stage right through very

mature companies. What key messages or experiences would you like to share with potential clients in our audience who may be concerned that they get lost inside the Flextronics system? And that question is actually for both of you.

<Q – Craig Martin – FireEye, Inc.>: Yeah, it’s a good question to ask. I think it probably starts with the assumption that Flextronics places a bet, as K.Q. mentioned, on the technology and the offering

that the particular company has. So assuming that there’s an interest in Flextronics and the resources are, therefore, available, that’s 90% of it. Of course, in both of our cases, we’ve had great relationships with Flextronics and the management team over the years with the past

companies. So that just adds to the confidence and, hopefully, the ease of that conversation to engage. So we’ve had absolutely no problems, if anything, just more resources than we can take advantage at this point.

<A – Caroline Dowling – Flextronics International Ltd.>: Great. Thank you, Craig. K.Q., same question, what experiences would you like to share in terms of going from the smaller startup

environment into a big disrupting company [indiscernible] (4:08:12)... <Q – K.Q. Smith – Palo Alto Networks, Inc.>: Yeah, well, were 10 times smaller in terms of

spend five years ago and, again, Flextronics took a bet, I think, in the securities space, based upon the vision that you put forth today, which I’ve never seen before actually, so it was pretty

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interesting. And I think the way that the company organizes itself around strategic investment in those accounts is really critical. The business side that you run and the operation side that Francois

and his team run, actually work very well together to be able to support these emerging companies. And I’ve actually picked Flex numerous with Cisco, Juniper, Apple, et cetera, and I’ve always had a good experience in terms of that. And those have been vastly different size of businesses. So I’m

definitely happy with the support that we get. Again, trying to take advantage of the scale, the tools the global reach is really key for us because we want to big. And we have to be able to be big and be lean, leveraging a big partner.

<A – Caroline Dowling – Flextronics International Ltd.>: Gentlemen, thank you. We’re out of time. Much appreciate it. Craig, thank you very much. K.Q., thank you very much.

<Q – Craig Martin – FireEye, Inc.>: All right.

<A – Caroline Dowling – Flextronics International Ltd.>: Appreciate it

MANAGEMENT DISCUSSION SECTION


This INS summary last slide, my key message for you today is it’s a strong core business. Strong diversified technology portfolio that you are seeing, winning in all the key growth areas: appliance,

security, SDN, and many others. We’ve invested in the past number of years in the third platform, our Convergence 3.0. Stable revenue outlook year-over-year, it’s over a $10 billion business, and 40% of Flextronics revenues and operating in 3% to 4% OP area.

So thank you very much indeed for your time. We will be here later this afternoon and both Craig from FireEye and K.Q. from Palo Alto Networks have actually kindly offered to stay on and enjoy

some drinks with us later on when Chris and Mike finish the wrap up. Thank you very much indeed.


Thank you, so we’re running a little bit behind schedule now because of the tour, so rather than

have a break, we’re going to go ahead and power ahead here with our last presentation, which is Chris Collier. Chris is our Chief Financial Officer and he is going to be discussing how Flextronics is positioned to create shareholder value through its supply chain solutions. Chris is a 19-year veteran

of Flextronics. Prior to becoming CFO, he was our Chief Accounting Officer. Chris joined Flextronics through the acquisition of the DII Group, where he was their Corporate Controller. He began his career as a CPA for KPMG. Please help me welcome Chris to the stage. Chris?

Christopher E. Collier, Chief Financial Officer

Thank you, it’s a pleasure to be here today and I would like to first thank you all for your support

and interest in Flextronics as well as making the travels here. Today is a real proud day for myself as well as all of Flextronics to – a historic moment essentially by opening the doors here for you all for the Investor and Analyst Day to be hosted here at our Silicon Valley Innovation Center, which

we view as our sandbox of innovation. So it’s an honor and privilege to have you here. The Innovation Center for us is really special. This is where we’re bringing to get the leading edge manufacturing technologies that we have and combining that with the advanced engineering and

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design resources and putting that together in a very powerful way to create value for our customers and in doing so, we’re enabling these customers to do great things.

We’re essentially allowing a customer to come in with an idea and even if that idea is on a napkin and for them to realize that as we commercialize that product with them and take that globally to

volume to scale through our system. So it’s a real powerful opportunity for us and it’s great to have you here to be able to see this firsthand.

As Kevin mentioned, I’ve been with Flextronics, I’m entering my 19th year of dedicated service with this company and I don’t think I’ve ever been as excited as I am today about Flextronics, our opportunities that are in front of us as well as our position to win. Last year found us at a very

challenging place and this year finds us in a much different place. This past year, we’ve been on a very progressive path. We’ve been doing the things we said we were going to do. We’re controlling the controllable elements of our business and we’re putting ourselves on a solid financial trajectory.

Throughout today, you’ve heard from the presentations, from the testimonials and from the tour about this power that we have here at Flextronics and the consistent theme is that we are a supply

chain solutions leader. We’re differentiating ourselves and we’re way out in front in terms of innovation and partnering. For the next 30 minutes, what I’d like to do is take and put all that together and put a financial framework around that and share with you financial attributes and

highlights that will allow you to grasp this promising future that we have, after which, I believe you’ll have the ability to assess whether or not our commitment to shareholder return can be fulfilled, which we believe it can.

My conversation today is going to span these five areas. I’m going to first start off by talking about our consistent financial principles. I’ll then step into talking through how we’ve been further

enhancing our platform for future returns. Then I’d like to talk about how we’re driving ourselves for profitable growth as well as then spend some time to talk about the strong sustainable free cash flow generation that we have in our possession, as well as how that aids in providing a sensible and

consistent shareholder value return. And then, I’ll conclude with some thoughts. So I’m speaking about the consistent financial principles; our strategy is supported by these five

key principles; revenue growth, operating profit expansion, EPS accretion, cash flow generation and a sound financial or a sound capital structure. This is very similar to the slide I put up last year because nothing has changed. We remain consistent, these remain consistent and they remain

intact. These guide each and every one of our decisions as we go through operating Flextronics. Any one of the layers in the platform, where it’s a physical infrastructure type of decision, whether

its opening a new factory, expanding a factory, whether it’s engaging in a certain M&A transaction, whether it’s around hiring individuals even if you think about [ph] on the intend layer (4:15:57), it’s about how we partner in innovation, where we’re investing in our technology roadmap. No matter

what decision we make, they’re grounded and guided by these five key principles. So I’d like to now take you through as we thought about this past year, all five financial principles

for us remain consistent and intact and first off was our revenue growth. We drove 11% growth last year to $26.1 billion in a very challenging environment, not only a challenging and dynamic macro environment, but we were going through a lot of transition as a company. We had a lot of significant

complicated ramps underway as well as we had a significant amount of restructuring and operational challenges that we are facing. So despite all that, we grew our revenue 11%. A c ouple of highlights I’d like to have here is the HRS business achieved 16% year-over-year growth and

now is over $3.2 billion. Another key feature set about that is that we actually grew that business for our 17th straight

quarter year-over-year and you heard from Paul before around the dynamics that – in the characteristics that we have that are going to propel us to grow that forward. We had robust

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bookings in fiscal 2014 that are going to actually provide us a solid foundation for growth into the future. And then lastly, we meaningfully engaged in new, disruptive markets and a great example of

that was what we’ve been doing within the wearables. We’re a first mover. We have a dominant position. As you heard from Mike, we did over 75% of the production last year, global production around the wearables and we’re way out in front of the competition in terms of the right capabilities

as well as the right partnerships in network. Now, as I think about our operating profit expansion, this again was something that we hit the mark

on. We realized operating profit expansion of 9% or over $50 million to $665 million along with that challenging year. We had strong contribution from our higher margin businesses such as HRS. We achieved from our component’s business profitability. That was a very significant effort for us and

an achievement for us. That was a significant headwind facing us and throughout the year through our efforts around our restructuring and operational improvements, we now have a profitable business that’s been sustaining profitability for the last couple of quarters. We also engaged in a

meaningful restructuring launched last March. That restructuring optimized our operational footprint and it was completed on time and achieved its targeted savings of $40 million per quarter.

And lastly, as I think back at this year and as it relates to operating income as well as operating margin consistently throughout the year, we expanded on a quarterly basis our operating margin growing that from 2% up to 2.7%. Now turning to EPS accretion, we saw significant EPS accretion

of $0.16 or 22% when you exclude the investment gain from the prior year. The driver for our EPS accretion was just the meaningful profit expansion I just talked about, as well as our continued disciplined management over our interest as well as our income tax line items and then, we’re

further bolstered by the accretion benefits from our share repurchase activity. Next, cash flow generation. Fiscal 2014 proved to be another strong year of cash flow generation

for Flextronics. We generated $1.2 billion in cash flow from operations which marked the second-highest cash flow from operations in our history. We generated over $700 million in free cash flow. And cash flow continues to be the key attribute in returning value to our shareholders.

Lastly, we further improved our capital structure in fiscal 2014. We refinanced $1.1 billion of our term loans with favorable terms. We had completed a refinancing of our Asia term loan back in

August and then at the end of March, we refinanced and extended our revolving credit facility and along with it, a tranche of $500 million term loan. All of that activity was favorable terms. It also helped position us for the future with a very strong debt maturity schedule, which is in great shape

with no near-term maturities. Fiscal 2014 was clearly a year of tremendous progress for us. Our key financial principles all

remain consistent and intact and we’re grounded in these principles to guide us as we move forward. We’re very pleased with the proof points of our successful progress throughout fiscal 2014.

Now I would like to spend some time talking about how we’ve enhanced our platform for future returns. I’ll start with the first layer, the fiscal infrastructure layer. We enhanced that last year through several strategic tuck-in acquisitions that you’ve heard earlier. We focused those around

precision plastics. We got automation benefits. We completed several other smaller tuck -in acquisitions and we see that as a step as we move forward. So that really bolstered some of those capabilities for us.

As I mentioned earlier, we concluded upon our large restructuring efforts last year and most importantly, a key aspect of that was driving the turnaround of our Multek business. So Multek this

past year, we revamped its operations, we shrunk its footprint. We retooled the management team. We bolstered the sales organization and all of that led to the result of us achieving profitability for the last six months of this past year and we’re now operating a much simpler and less variable

business.

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As I think about the end-to-end services layer for us, clearly today, you’ve seen examples of how we’re actively investing in innovation. We took our Silicon Valley Innovation Center to the next step.

We created Lab IX, we expanded with Innovation Labs and then we put together also the Interconnect Technology Center, leading-edge technologies and knowledge around flexible and rigid flex circuits. So essentially, we took what was a new product introduction center and put it on

steroids and produced what you saw today. Additionally, you heard earlier from Erik how we’ve been expanding and improving our technology

centers of excellence. We’re following our technology roadmap, we’re defining these core building blocks that we see capturing from all the various multiple industries that we work with, the design and talent in those industries help us to identify what our customers are looking at and working on

today and in the future and deciphering what types of technologies we need to make the investments with or where we need to partner. And then putting that all together into that open innovation platform and allowing us to really enhance and engage and enable our customers, so

overall, some just real powerful enhancements to our end-to-end services. Now when you look to our real-time information layer, the greatest achievement or enhancement

this year was around our momentum and you saw first-hand through the demonstration earlier the power and potential of that solution. This is the world’s first multi-enterprise supply chain solution. It’s SaaS-based, bringing together the latest in big cloud or big data, the cloud and mobility. We’re

really proud of this company as well as how this company was born within Flextronics and how it has such a powerful and promising future. It has top-share customers and has some strong financial backing.

Additionally, you heard from Paul Humphries about the level of execution that we have had through quality system as well as throughout the day, you’ve heard other examples of the very deep and

rich information systems that we operate, whether it’s in supply chain or through manufacturing attributes and shop floor. We are very proud of what we’re doing in this layer to provide us the speed and the reliability of this information to help us work with our customers to de-risk their

supply chains and to advance them as they move forward. So as you can see overall, we’ve been focused on investing in our platform. And we position it in such a way that is unrivaled and it’s unmatched and it’s perfectly situated to provide future returns.

Managing change is a core competency for Flextronics. We do it all the time and we do it very well. This meeting today wouldn’t be complete with addressing this looming Motorola-Lenovo

transaction. So I want to just step through this with you all. I’d first like to ground us back in as to the strategic value proposition as to why a year ago we had entered into this transaction. This stems from four key aspects. First is the Google ecosystem, the Google hardware ecosystem.

We wanted to be enabled to get involved with this and to be able to be exploring with them the many, the varied hardware opportunities that exist. Additionally, we want to enable those to secure

a meaningful relationship with this dynamic and highly innovative customer Google, as well as it also further bolstered and enhanced certain capabilities around regionalization and customization and automation for us. And we’re doing it all with a very low-cost investment of $75 million.

It’s important to understand the strategic value that had been created from this transaction and these are proof parts of what we’ve been able to succeed this past year with. We expanded our

capabilities through our automation as well as mass customization. We’ve increased our regionalization capabilities, especially in Brazil. We penetrated our verticals at every facet, whether it’s printed circuit boards, whether it’s power, whether it’s mechanicals. We’ve expanded our

relationship with Google now through other programs and through other innovative ways most notably the Chromecast and we’ve been able to take the cycles of learning from this transaction, all the activities this past year, and create other opportunities with other customers as well as other

industries.

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I’d like to first start here as we think about the future direction and paint a picture of our strong relationship with Lenovo. We built a successful relationship with them that has seen us achieve

several Supplier of the Year awards for the past three years. This is a long and strong relationship with them. We know them very well and we know they have a strong capability and competency and capacity in China. That’s not the same for other parts of the world. So while there is uncertainty

with how this moves forward, I have framed here today a possible financial impact if they were to choose to in-source production into their China footprint. I think it’s important for you to understand that as a result of that potential, you’d see a cash flow generation of $100 million to $150 million as

a result of our ability to flush the system of the net working capital that’s associated with that business.

Additionally, we would anticipate the impact of our ability to redeploy the production assets of around $50 million and redeploy those throughout our system. I would size the EPS impact to be a negative impact of roughly $0.02 to $0.03 as a result of that potential exit.

And lastly, it’s important that you understand that we see limited restructuring impact as a result of this potential, given our ability to repurpose the assets, redeploy the assets, and repurpose and

redeploy key personnel. We’re clearly operating with a different company and with a different relationship. But we expect to have limited financial impact as a result of this pending transaction.

Moving to the next element, I want to cover – what I’d like to do is cover our – how we’re positioned to drive profitable growth. As I look to our future of revenue growth, I see four different vectors that are going to support and drive that growth. First would be our non-traditional businesses, where we

see significant opportunities to grow our market-leading position. What I mean here are our businesses around medical, automotive and industrial. This increasing electronic content, as you’ve heard, is converging technologies. We’re already a market leader in each one of those sub-

segments and we have really strong dominant positions. We’re leveraging the broad scale and capabilities that exist within our framework to further penetrate and service these customers in all parts of the world.

We are extremely confident about our position here and our ability to sustain that and grow that and even more is around the long product life-cycles that exist here and the sustainability and the

predictability that we get from that really provides a sound foundation for us as we move forward. Next, I’d like to highlight is the strategic relationships that we have. We’re partnered across leading

customers and varied industries. We have superb alignment with industry leaders in every single market we serve. You’ve seen and heard evidence throughout the day with each of the other presentations. Our broad supply chain solutions offering allows us to penetrate and partner and

grow with them in many, many different ways. Additionally, we’re continuing to find opportunities to leverage our scale, our scope and our solutions to penetrate strategic relationships with partners in industries and in areas that presently don’t exist within Flextronics.

The next vector is around innovation. And we’re distinctly positioned as a production innovation enabler and hopefully, you’ve been able to really get that sense as we’ve been able to demonstrate

that power today. To me, Silicon Valley is the modern day Mecca of innovation and we are here inside the Valley and we own the Valley in terms of hardware innovation. There’s no one better, there’s no one that can compete with this offering that you saw today and it’s demonstrated by us

growing the number of customers that are coming into the shop here. We have solutions that reduce the speed to market. We reduce risks and costs. There’s no better

solution than to partner with us and come through our innovation system, whether it’s here or whether it’s through the other geographically-located innovation centers. Through this initiative, we’re compelling new demand and finding new technologies, we’re finding new markets to play in

and essentially, our sandbox keeps getting bigger and bigger and we’re getting more and more people to come inside and play with us.

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Lastly, disrupters. We’re partnering with tomorrow’s disrupters, this powerful differentiation to create

future demand. We’re just competing differently here. We’re bringing together concepts in helping them bring them to life. We’re helping them to identify ways to partner within our supply chain to network within our supply chain. Some of those we’re bringing and fostering and growing them all

the way up through and commercializing their products to market. In other ways, we’re enabling into other ecosystems that we have partnerships with. All-in-all, we’re just completely engaging in a different way and it’s an ability for us to grow with our customers and drive a lot of significant growth

for Flextronics as we move forward. Here, I wanted to recast and provide a vision as to how we think we’re positioned to drive operating

profit and operating margin expansion, as well as EPS accretion. Earlier today, Mike teed up the day by identifying each of these segments and the view as to where our strategy and focus is. Then, you got to hear from each of the presidents themselves to elaborate further and provide more

color around those businesses. Let’s just start with the top one, HRS. HRS is a very stable and growing part of Flextronics. We’ve

been making significant investments in this business, whether it’s through capital or whether it’s through M&A. We’ve been expanding its capabilities. You’ve heard of it multiple ways and now we’re partnering with Ford, with Chrysler. We have an expansive feature set that ranges from cable

wire harnessing to lighting to infotainment. There are just many ways that we can bring to bear a broad set of services and compel and expand that market.

We have great confidence in our ability to dominate that space as well as within the medical. So double-digit growth for us is on the back of a long already-booked piece of business as well as expanding relationships within those markets we serve. All-in-all, we also see that sustaining a 5%

to 7% operating margin. If you think through our IEI business, you heard earlier about all the expanding opportunities there

and the extensive visits that Doug and his team have had. We’re seeing more and more ability to penetrate small, medium to large conglomerates in every jurisdiction. We are guaranteed to put new logos up, such as the Dyson you saw earlier, as we embark into fiscal 2015 and beyond.

And those relationships, while they start small, grow. You saw Doug talk about seven customers last year being over $100 million, now it’s over 15. So you’re seeing us come in, the door opens, we

penetrate and we take our broad solutions and find multiple ways to partner and expand with them. So we’re really excited about this business and being able to continue to grow that double-digit and as well as we see it’s securely in that 4% to 6% margin space.

Then you have our largest segment, the INS business, where we completely dominate this space, from leading physicians in telecom, datacom, networking, to all those disruptors that we highlighted

earlier. It’s great to even have some of those key partners of ours on stage here to provide evidence right from their mouths as to how we’re best positioned to grow and enable them for their success.

So the other highlight earlier was Caroline identified how we’re perfectly positioned for the converged infrastructure. So no matter what aspect of that space, we think we have a dominant

position. We’re operating the only worldwide system that can produce and manufacture high-end complex products globally. So while this market has been pretty difficult for us and we’ve been seeing some languishing demand and a challenge, we see this business stabilizing from here and

we think our position is going to evidence itself – our dominant position is going to evidence itself as we move forward. And we’re still very secure with the operating margin profile of 3% to 4%.

Lastly, you have our CTG group, so you’ve heard earlier how we’re evolving this business. We’re diversifying this business. We’re identifying new ways to partner with the emerging players,

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sustaining relationships with some of the core historical partners and players, but playing with them differently, more focused in regionalization. And then we’re enabling these new, very

technologically advanced companies. So overall, we’re just remodifying, retooling this position to one in which it’s going to be focused

more not on just growth, but more around margin enhancement. And we distinctly identified today that that margin profile’s at $0.02 to $0.03 and that our target is to be at the high end of that range and we’re actually doing a bunch of business that’s beyond that. Underpinning all of this is that

we’re continuing to maintain a strong discipline around our costs and we’re driving productivity and we’re driving operational improvement.

Actually, I’m sorry. Let me step back and shift over to the right side of this slide, long-term portfolio, big oversight if I missed that. We’re balancing the portfolio in a way that will drive us to have a strong, sustainable, predictable business model. We see this long-term vision, which is roughly a

three-year to five-year vision, if you will, to see our non-traditional businesses growing to represent roughly 40% of our portfolio. And that gives us that level of confidence around having that sustainability and that predictability. Now stepping back, underpinning all of that is a deliberate

focus, a very strong focus by this company and broadly, the enterprise around a cost discipline, around driving productivity in this new environment, about driving operating expense leverage.

Last quarter, I highlighted that we even launched a rationalization that we’re investing $35 million in our global rationalization. That’s going to drive our SG&A to $200 million and below by September. So within two quarters, we will have paid for that level of investment, again, going back to our

financial guiding principles. Additionally, back in our January dialogue on the quarter, we highlighted that we’d been expanding our India shared service offering. It’s just another example of how we’re thinking about enhancing our cost structure, driving productivity and driving a

standardized consistent way we operate the business. This is going to provide us with a much more sustainable, predictable business. And lastly, putting it all together, we have a vision, a belief and an objective to provide 5% to 10% annual EPS accretion every year.

Now, let’s turn to the strong sustainable free cash that Flextronics generates. Free cash flow relative to the market cap is strong. We knew we had a strong position vis -à-vis the competitive

landscape, but we think this is a very powerful way to think about Flextronics and our strong free cash flow, as well as not being in a sustainable way. If Flextronics was in the S&P 500, its free cash flow yield would have ranked in the top 15% overall and as well as among technology companies

over the past three years. Let alone in 2013, we would have ranked in the top 7% of S&P 500 companies ranked by our free

cash flow yield. We didn’t want to cherry-pick one period. We want to look back in time because we’ve been seeing and what Mike highlighted earlier in this presentation was using a five-year rolling average, the strength of our strong sustainable free cash flow. So we’re really pleased with

this performance. We’re operating a very disciplined approach to our net working capital and this provides the

foundation for the strength in our cash flow from operations. So coupling our improving operating earnings with this disciplined approach, that’s what’s providing that fortification for continuing to see strong cash flow from operations. We believe that we’ll be able to continue to operate within a 6%

to 8% targeted range as we move forward, and that’s 6% to 8% of our revenue. We also believe that that translates to a 25-day to 30-day cash conversion cycle.

You heard Tom Linton talk earlier today about the focus and rigor that we put on our inventory management and the processes. Inventory management for us remains very strong and we’re well -positioned to support our customers’ needs .We’re driving more opportunities here to improve our

inventory performance, whether it’s through increasing our supplier managed inventory positions, to driving different practices around reducing lead time, to even getting into how we hold buffer stock

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at locations. There’s many, many levers that we’re playing here to drive a better inventory management solution.

Additionally, I think it’s important for you to understand from a receivables standpoint that we operate with high creditworthy customer base. We have a very crisp, clear process around

managing our credit and managing our collections. We have little payments that are outside of terms.

So overall, we do not see this model changing for us. We actually believe that we’ll consistently operate at this 6% to 8%. There may be some periods where we may drift up, but that will be just be a one-time occurrence. So, think long-term about our ability to manage our net working capital

within this range, as we’re fundamentally structured and we’re operating with the discipline to do so. The next lever as you think about our free cash flow is around our discipline around our capital

investment. The top left of this chart depicts for you our capital investment over the last four years as well as, as a percentage of revenue. It’s interesting to note that our average investment level or the four-year average was around $430 million and that was actually in line with our annual

depreciation level. However, in late fiscal 2013 and then throughout fiscal 2014, we elevated our levels of investment.

Those were purposeful. We focused around expanding on innovation, expanding capabilities around automation, mechanicals, a heavy focus around investing in our HRS business, all of which is to enable future growth. The bottom left pie chart depicts that over $0.5 billion level of investment

last year was broken down between infrastructure support to growth and technology advancements, that I just talked about, as well as what we had spent on maintenance.

More importantly, if you look to the next pie, the much smaller pie is how we see fiscal 2015. We see fiscal 2015 as having the ability for us to have capital investments ranging from $300 million to $350 million. As I had indicated a couple of quarters ago, we will be under-spending our

depreciation starting last quarter and continuing throughout that year. We also see us being able to sustain that a bit into fiscal 2016.

So overall, here, I want you to get the picture that we are operating with a strong discipline, with very significant rigor and total control around that level of spend. It’s going to be a meaningful contributor to free cash flow as we move forward, while not harming our business and not harming

our future growth. So putting it all together, we have free cash flow depiction that you’ve seen before. We put this up

two years ago. And at that time, back at the start of fiscal 2013, we defined that we had a target of $3 billion to $4 billion of free cash flow generation by the end of fiscal 2017. And I’m here to tell you that that vision is, in fact, going to be a reality and it remains intact.

That strong sustainable free cash flow is being driven by that improving earnings profile. It’s being driven by the disciplined working capital management as well as what I just talked about, the

disciplined capital investment, where we’re going to be under-spending our depreciation. And what that leads for us is to having an ability to have a balanced capital allocation in targeting our goals here.

We’re laser-focused around sustaining that free cash flow as it’s going to provide us that foundation to support these goals. It’s going to be around maintaining the solid capital structure that we have

today, it’s around supporting our strategic M&A investments and it’s around fulfilling meaningful shareholder return commitments.

Let me first take us through a look around our solid capital structure as it exists today. Key characteristics I’d like you to note is that we’re at near-term record levels of liquidity. We have

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roughly $3.1 million in liquidity. If you look to that gap between 2014 and 2017, we have over four years with no near-term maturities. We’re operating with a very low cost of financing at roughly

3.25% based on current LIBOR and we have improving credit metrics that are approaching investment grade. Putting it all together, we’re really pleased with this structure and it provides us immense flexibility and a solid foundation to support our business.

The next way we consider our deployment of capital is around strategic M&A investments. Wanted to frame for you again the key criteria as we think through those M&A transactions. We’re focused

around capturing technology and capabilities. We’re looking to position with strategic partners’ targeted customers in doing so. Out of the gate, every one of these transactions has to be EPS-accretive. And we continue to grow with our concentration around industries that have high barriers

of entry, longer product life cycles and higher margins. Our focus has strictly been around supporting our HRS, our automotive and medical businesses. And so we’ve been seeing a lot of those opportunities and has been evidenced as you note below the three major investments we’ve

done in putting over $400 million of investment to support the expanding capabilities that we have within the HRS business.

We’re completely happy with the continued expansion of those capabilities and you should see us moving forward with a focus around supporting continued investments in strategic tuck -in type acquisitions around that type of business.

To me, this might be the most important slide I share with you today. This defines for us the unwavering shareholder commitment that we have – shareholder return commitment. Over the last

four years, we’ve repurchased 259 million shares. We spent $1.7 billion in doing so and we have reduced our net share count by 27%. Our share repurchase program is supported by two key elements, its ability and appetite.

When you think about our ability, you should think about the strong free cash flow generation that’s being sustained. You should consider the cash position and liquidity that we hold today and you

should think about that strong capital structure. So, check mark on ability. As it relates to appetite, the share repurchase program has been, is and will continue to be the key feature for us in returning value to our shareholders. For us, there’s been great accretion that we’ve been able to

capture as a result of these actions. And we have a strong belief in the intrinsic value of the company today as it relates to where we have – as it compares to the market share – or, I’m sorry, the market price of our stock, the market value.

So while we sit here today, it is immensely important for you to understand that this is a key feature set for us as to how we return value to our shareholders. Two weeks ago, there was a question on

our call around the dividend for Flextronics. And at that time, I said it’s not a matter of if, but when for Flextronics, we would be able to engage in a dividend. The key feature set as we think through that process is around the predictability of our business and the lessening the volatility of our

business, as well as, right now, again, the intrinsic value of our share price is overwhelmingly compelling for us to stay within the share repurchase program.

So I do still see in the future an opportunity for us to include that as a means for us to provide our return to our shareholders, and we’re committed to returning over 50% of our free cash flow to our shareholders as we move forward. Right now, it’s focused on the share repurchase. And in the

future, it probably moves to be in a blend. So let me take you through some final thoughts. I’ve never been more proud to be part of

Flextronics and I’ve never been as excited as to the position where we’re at today. And I’ve never been more confident in our ability to win. Our scale is unmatched, our service offering is unrivaled and we’re way out in front of everyone in terms of innovation. We are clearly demonstrating

ourselves to be a supply chain solutions leader. We design, build, ship, and service more products across more diverse industries than anyone else in the world. We have a strong focus around

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sustaining free cash flow. We’re completely disciplined, measured and structured to sustain and deliver that free cash flow into the future.

Thinking about accountability, myself, the entire management team and all of our Flextronics employees embrace accountability. We’ve learned from past lessons and we’re modifying our

approach based on those lessons. We’re focused on our execution, as evidenced by the continued progression that you’re seeing for us. And we remain completely grounded in our financial principles guiding us on our way and providing that sound foundation for profitable growth.

So bringing it all together, we are perfectly positioned to sustain and provide a commitment to our shareholders of increasing shareholder value as we move forward.

So with that, I am concluding my presentation. What I’d like to do is, again, thank you all for your interest, support. I’m going to call Mike McNamara up on stage so he can provide you with some of

his own final thoughts on the day and then we’ll turn this over to the Q&A. Thank you.


All right. Thanks, Chris. So what I would like to do is just give you a one-page summary. I know you guys had a lot of PowerPoint today. I have a one-page summary I’d like to go through and just kind of summarize where we are. And it’s a good way to get like some broad perspective, kind of a high-

level view again. I talked about a 30,000-foot view before, think about it as the same. So when I think about last year – when I think about FY 2013, I really think of it as about building

the platform, building the supply chain solutions system and evolving from an EMS company. That was really a couple of years ago. This was our theme when we came into that year and what we’ve been able to accomplish. We talked about real-time information; we talked about end-to-end

services. We talked about a physical infrastructure and we talked about it in response to a very significantly changing macroeconomic environment. Managing supply chains today are different. You need a different set of capabilities, different set of scales, different ways that you add value to

your customers. So we’re very, very focused on transitioning our company in terms of scales and capabilities.

If I think about FY 2014, you saw a lot of the numbers. I’m not going to go through them again, but this was a very heavy investment year for us. There was a lot of new programs, a lot of very, very complex programs. And when we take on the programs that we’re now taking on and maybe this is

a result of being this more comprehensive, more sophisticated supply chain services company, the programs are harder to bring along, they take longer to bring along, they have longer product life cycles to bring up and it takes more time. And all last year, we were positioned and burdened by

start-up costs, all of which are rapidly evaporating as we speak. But we still were able to deliver financial progress. We’ll still be able to deliver very, very strong free cash flow.

And if I think about this one next year, if I was going to leave you with a concluding thought, think about stability. We’ve actually done a lot of the hard work, we’ve paid for a lot of the transitions that we went through last year. We’ve ramped a lot of the programs or we got them into position to now

ramp. A lot of those startup costs have been paid for. A lot of the capital has been invested in. Those things have already occurred. Now, what we need to do is just reap those benefits.

So we think this year is one as of real focus around efficiency, around continuous operating profit and margin expansion, and really be able to continue our program of generating free cash flow and shareholder return. So, we said last year was going to be a very difficult year. It was. We said this

year is going to be a more stable year. Hopefully, it will. And we’re looking forward to actually reaping a lot of the benefits and the hard work that we put in place last year.

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So with that, I’m going to pause and you don’t have to see any more PowerPoint. And what I’m going to do is ask our President to come up and join me on stage and Chris on stage. And then,

we’ll open it up for Q&A and you can have an opportunity to talk to these guys or talk to me or just talk to – or Chris and I will run interference here as we go through the questions. Jim?

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QUESTION AND ANSWER SECTION

<A – Mike McNamara – Flextronics International Ltd.>: Oh, sorry.

<A – Kevin Kessel – Flextronics International Ltd.>: Go ahead, Jim.

<Q – Jim Suva – Citigroup Global Markets Inc. (Broker)>: Thank you. It’s Jim Suva from Citigroup. Maybe this is either for Chris and Mike, but Chris, I thought I saw on one of your slides, you said EPS growth of 5% to 10%. I just want to make sure I got that right and understand it,

because it seems like that with just stock buyback you can get there and no margin improvement . So maybe I didn’t know if that was referring to organic or what exactly, because I probably misread it?

And then also if I add up the pie pieces that, Mike, you put up at the beginning and, Chris, at the end about the segments and the profitability. Am I right, I kind of get out to an average of your

company’s operating profit long-term should be about 3.4% to 4.8% compared to 2.7%, so quite a bit of upside to profitability?

<A – Chris Collier – Flextronics International Ltd.>: So, Jim, yeah. I’m sorry. I must not have been a good job of explaining that slide. So that slide is specifically around organic or operating generated EPS. So we are committed to returning 5% to 10% EPS accretion each year, excluding

a share repurchase type of an element. And then, as it relates to the second question you had, when you aggregate out the margin profiles for the business, you’re correct. You’d see a much greater from the 2.7% we’re at today, a much higher 3%-plus, as we have those margin profiles

centered in our sites for each of those segments. <Q – Brian Alexander – Raymond James & Associates, Inc.>: So, Chris, I just want to follow up.

It’s Brian Alexander, Raymond James on Jim’s question. What timeframe are we talking about? I know it’s long term, but is that three years to five years, is that longer than that to get to that types of margin goals? And then where within the segments are you operating today, when we look at

those segment margins? Where are you within the range? Which ones are you below the range? I’m just trying to get a sense of where the most opportunity is within the business? Thanks.

<A – Chris Collier – Flextronics International Ltd.>: Okay, there is a lot of different elements there. So let me try to break it down and you can enhance [ph] on that as well (5:00:26) as our friends here. So first, we are focused around generating operating profit dollar expansion and mix

for us is still going to be, the margin is still going to be a fundamental impact from our mix as we think through that model, I define as a three-year to five-year horizon. As I break that down, you heard earlier from our – Paul Humphries, we’re presently operating in that targeted marketing range

for his business. And as I think about each of the other businesses, HVS, we’re certainly not at that level right now,

but you heard how we’re retooling and actually revisiting the entire model set to drive a richer mix. So that’s not operating there. We’re probably at the lower end of the range with regards to NIS and then [ph] as IEI (5:01:16), we’re roughly in the low end of that range. Again you’ve got to look about

where we’re at from a model and from the base level of revenue that’s committed at those businesses, but as we grow from here, we see those margin profiles clearly in sight. Would you like to expand that for me?

<A – Mike McNamara – Flextronics International Ltd.>: Yeah, I would just say in terms of looking at actual results, a lot of those results in a lot of these segments are burdened with these

start-up costs. IEI is a good example. We grew double digits the last two quarters. So that is performing not as expected, unless actually it is performing as expected. But it has a lot of start -up costs, a lot of challenges. You bring on a lot of new programs.

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So as those programs flush through and as those start-up costs start to evaporate, you’ll see a lot

of these programs get close to those levels. So we actually do expect to see a kind of a flow of margin improvement across the whole back half of the year.

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Yeah. Hi. Matt Sheerin with Stifel. Just wanted to ask for a little bit more clarity on your expectations for high velocity of the consumer business this year. I think, Mike, this morning you talked about in the pie chart HVS representing 29%. It was

34% last year. And the two growth segments, each at 17%, and then INS at 29%, so that – or 40%, sorry, so that would imply that HVS is down sort of in double digits in revenue for fiscal 2015, which would imply a much steeper decline in the back half and not much seasonal revenue growth that

you typically see, so just trying to get an idea of that. And then, as a follow-up, on Motorola, Chris, you talked about that going away completely and that

representing a $0.02 to $0.03 hit to EPS. So that would imply that that business is barely profitable and I know that you were on a trajectory to get it to kind of the margin profile of HVS. So where do we stand there?

<A – Chris Collier – Flextronics International Ltd.>: Let me start with the Motorola question. So the construct that I provided you there, that framework was potential impact as a result of the China

insourcing scenario. So it’s not the full evaporation of that. And at the end, it would be a $0.02 to $0.03 type of an EPS impact. A couple of quarters ago, we said we weren’t going to get into the profitability specifically around that customer, but albeit we have not been operating at our originally

targeted margin profile for that business. So the contribution is not at that same level, so that’s why you probably see [ph] it (5:03:55).

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: [indiscernible] (5:03:58). <A – Chris Collier – Flextronics International Ltd.>: I’m not going to get into specifics around

that, but I would say that you can think of that business as a $1 billion plus, okay. <A – Mike McNamara – Flextronics International Ltd.>: Yeah, and as far as the overall revenue

mix or if you think about the 34% trending down to 29%, we had some unusual characteristics in that 34% this last year. So we had a big Motorola or a big Microsoft launch with one of the new Xbox platform. We had a very, very heavy flow-through of Motorola launch, a low cost Motorola

phone that was extremely popular in the marketplace. And if you remember, we kind of said our tranche is usually – our tranche quarter in terms of revenues is usually in March, it’s actually in June this year.

So what you’re kind of seeing is kind of an overkill into last year and that kind of excess amount into last year into that March quarter which got pulled out of the June quarter. So you’re kind of starting

with a lower level, if you will, and there is probably maybe there is probably – maybe we’re not anticipating as much seasonality next year. We actually don’t have a big refresh in the Microsoft Xbox. We aren’t really sure about what the Motorola product line will look like over in that time as it

switches over to Lenovo. So maybe there is conservativeness in the back-end, but that 34% going to 29%, part of that is the June being so low and the March being so high has kind of distorted those numbers a little bit.

<Q – Amit Daryanani – RBC Capital Markets LLC>: Thanks. Amit Daryanani, RBC Capital. I have two questions. One, Mike, I think initially in the slide deck, you talked about fiscal 2015 free

cash flow being about $1.27 per share, that equates about $747 million, $750 million of free cash flow. I want to make sure, is that the right number, because it’s much higher than what I think most for our modeling? And then I have a follow-up after that.

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<A – Mike McNamara – Flextronics International Ltd.>: Yeah. So if you look in the slide I did, an illustrative example of what it might look like and it says $700 million. So if the calculation is

different, then there must be something different with your calculation and my calculation. But if you notice what’s footnoted on the bottom there for FY 2015, it’s $700 million free cash flow. And just so you know, the only reason I use $700 million is because we basically did $700 million last year and

we did $700 million the year before that. So I was just trying to take a known rate that we’ve been demonstrating over the last couple of years and just use that. So once again, think about that as an illustrative example, but what numbers we used was $700 million.

<A – Chris Collier – Flextronics International Ltd.>: And I’d like to expand on that. I specifically put up the framework that we had shown two years ago achieving $3 billion to $4 billion in cash

flow generation in five years. We have three years remaining. If we just were at the midpoint, we’re at the $700 million type of an annual achievement. And that’s ground again by improving operating earnings, the discipline around net working capital management as wel l as the strength in under-

spending our depreciation level as we move forward. So while that was an illustrative purposes, the midpoint of our range would be a $700 million a year type of return of free cash flow.

<Q – Amit Daryanani – RBC Capital Markets LLC>: Got it. And I guess just as a follow-up, I thought the Lab IX walkthrough was fascinating. And I guess, how do you guys monetize these relationships? This is a case where like stakes are equity stake and all these companies are

effectively incubating and hopefully, one of them ends up like a work investment for you. Is that how the process works, so you have a better commitment that when they get bigger and you have mass manufacturing, [ph] Slice (5:07:28) is going to be the sole supplier, how does that monetization

work? <A – Mike McNamara – Flextronics International Ltd.>: Yeah. I don’t – that’s a possibility that

there’s a financial outcome, but that’s not really the objective. The objective is to bring on new technologies, particularly commodity technologies that can be used across multiple industries and help engage those companies to be successful. And it’s in almost being the – taking those

technologies and apply them across to other customers. So we can take some of those Lab IX customers, introduce some of the technologies they have, maybe it’s for the thinnest watch to other companies that have a scale and size and channels and market weight and introduce those to, it

might be a hugely value-added opportunity for that existing OEM with the channel. So when we think about the value of these things, the fact that some day a [ph] Micro (5:08:23) IPO

is not a primary driver at all. It’s really getting their technologies into our system, making sure we pick the technologies that have multiple applications, whether it’s industrial, medical or automotive, and they can actually be used in multiple applications and trying to leverage it into our system to try

to find kind of uncommon value. It kind of gets back to that marketplace of innovation kind of concept is actually more valuable to us than the expected investment return itself.

<A – Chris Collier – Flextronics International Ltd.>: The only thing I would enhance on to that was that as Janine had mentioned in earlier, the various business models with various different investments and different partners, some of which have revenue sharing and other profit sharing.

So there’s very different degrees as far as investment level. So it just depends, but it’s not the investment return isn’t a key feature set in partnering with them, as Mike just said.

<A – Mike McNamara – Flextronics International Ltd.>: Yeah, I might have been answering your question too literally. Lab IX are the small companies with needs innovations with just a few people. Where we do have other investment profiles, we actually do expect a return, a direct return.

<Q – Wamsi Mohan – Bank of America Merrill Lynch>: Thanks. Wamsi Mohan, Bank of America Merrill Lynch. Chris, you mentioned the potential negative impact if Lenovo was to in-source, but

could you also address what could be a tailwind if Lenovo were actually not to in-source the

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business and do you see if you were to retain the business that the profitability level would be at current or better levels in that and then, I have a follow-up?

<A – Chris Collier – Flextronics International Ltd.>: I would like to first start by – I missed one point when I was presenting that in that I identified a $0.02 to $0.03. If I take the cash flows that

we’d receive as a result and actually put those to a share repurchase type of return, I’m neutralizing that type of an impact. It is our intent to have limited financial impact as a result of any of this process. There is a lot of uncertainty. I don’t really want to speculate as to what type of a pricing

environment we would have in a new relationship with a Lenovo, but what I could say is that if that was to exit, you would see a margin profile difference as well in the company if that was to fully exit.

<Q – Wamsi Mohan – Bank of America Merrill Lynch>: Thanks, Chris, and then just a follow-up on your dividend comments. You mentioned volatility about, I wasn’t sure if you meant business volatility, EPS volatility, what did you exactly mean as what you would look for within the next

several years to make the determination if you would pay a dividend? Thanks. <A – Chris Collier – Flextronics International Ltd.>: Obviously we have a predictable cash flow.

So it’s not volatility there. Our concern there is strictly around business volatility. It’s not in the P&L. The P&L even if it moves up and down, you’ve been able to see a sustained net strong free cash flow. It’s around having a more stable business. Right now we have big uncertainty that was

looming. We just want to make sure that we have that stability and when progressing in that fashion, so it perfectly lends itself to come into the equation as we move out.

<Q – Mark Delaney – Goldman Sachs & Co.>: Mark Delaney from Goldman Sachs. Two questions and first of all, thanks very much for all the detail you put into the presentations today. First question is on the free cash flow and I understand that the $700 million framework that you

guys discussed for fiscal 2015, I think you had some customer advances that you received last year that was a benefit in fiscal 2013 – or excuse me, fiscal 2014. That would be a headwind potentially in fiscal 2015. Maybe you can just remind us how much that is this year and what’s assumed in

those numbers? <A – Chris Collier – Flextronics International Ltd.>: Okay. First, so back in December, we first

highlighted that we had customer advances of around $700 million. It was something unique and distinct that’s why we highlighted that. What that did was essentially provided us an economic consignment of that inventory, as I discussed back then. We had been operating with inflated levels

of inventory. We’d essentially been carrying $700 million of inventory greater. So in my net working capital, I sought and got compensated appropriately for carrying that heavier burden.

I also highlighted that we kind of supercharged the quarter because some of the payables were flow out differently. So we may have played a little bit with the free cash flow. It’s not in the magnitude of anything more than, say, a $50 million type of an impact of last year. You’re going to

see that play its way out by the end of the September quarter. And it really has no bearing as that moves out into our free cash flow.

Our cash flow, as we see next year, our free cash flow, distinctly separated around earnings, around the working capital management, with that type of an impact from the customer advance, which was very unique last year is in the recurring type of element and then, the under-spending of

our depreciation. One of the feature sets that’s different this coming year, last year we had about $130 million-plus of restructuring charges that burdened us. After this coming – after this June quarter, I’m not going to have any further burden around the restructuring benefit. So that’s another

cash uplift that sits in our cash from operations line. <Q – Mark Delaney – Goldman Sachs & Co.>: Thank you for that. And then for my follow-up, can

you clarify the analysis you did on what the potential EPS headwind from Motorola being in-sourced might be, the $0.02 to $0.03? Is that an annual impact or is that a quarterly impact?

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<A – Chris Collier – Flextronics International Ltd.>: That is an annual impact.

<Q – Mark Delaney – Goldman Sachs & Co.>: Thank you.

<Q – Osten Bernardez – Cross Research LLC>: Hi, Osten Bernardez with Cross Research. I guess, would you be able to provide some context with respect to HVS on what your Google business would be net of Motorola Mobility? I believe you mentioned a $1 billion number just

recently, I don’t know if that’s just for the China portion of your Motorola mobility business? And then also secondarily, with respect to the ICE portion, what’s now CTG, what’s the timeframe that we should be thinking about in terms of when that becomes a meaningful portion of your CTG

operating profits? Thank you. <A – Mike McNamara – Flextronics International Ltd.>: So let me make sure I understood your

question about Google. When you say Google, you mean Motorola or do you mean non-Motorola Google business?

<Q – Osten Bernardez – Cross Research LLC>: Non-Motorola Google business, what is the size of that business?

<A – Mike McNamara – Flextronics International Ltd.>: Okay. We don’t really like to disclose the size. I think we disclosed last quarter that it was a 10% customer in the December quarter, this is all the information that we’ve been delivering right now. It continues to – so we continue to make

progress, we continue to be engaged in more programs and we’re super happy with that, but we don’t want to really give exact revenue numbers for any of our customers. So and as far as the ICE numbers and when that’s going to turn into meaningful revenue, in some cases it already is, and I’ll

let Mike take a shot at that. <A – Mike Dennison – Flextronics International Ltd.>: Yeah, so I think, I think we were working

on ICE for a while now and I think we expect to see that materialize in FY 2015. As we develop it, as those customers mature, customers who start an ICE can start from being a $2 million or $3 million customer to a $100 million customer and as they mature and we get products in the market,

you see the revenue grow with those engagements. We almost measure ICE customers in terms of the numbers of customers we can get into that pool versus the revenue on a quarterly basis initial ly, because we’re looking for enough of a pool of customers so they all grow. So we start to see that

growth across the broader group. I would say, by the end of this year and for sure in the next year, you’re going to see significant growth in that space.

<A – Mike McNamara – Flextronics International Ltd.>: I mean, we actually expect to move our margins towards the high end of that range over the – say, over the course of the next year. And it’s largely on the back of those customers gaining traction. So we’re actually positively inclined to think

it’s going to start making a difference this year. <Q – Osten Bernardez – Cross Research LLC>: Thank you.

<Q>: For Paul and for Doug, since you guys have the double-digit expected [ph] growers (5:16:32) and obviously it’s been sort of hit or miss, whether that’s been the case in the past. Can you talk

about how much of the growth that you expect past this initial period here over the next 18 to 24 months, where you guys say you got good visibility on bookings and launching products and so forth, how much of that expected longer-term growth is really going to come from you guys doing

more tuck-in acquisitions that either add capability, add customers, all the various criteria there? And then a quick one, so I get both of them in, Caroline, you have a lot of customers in your

segment, who you just look at their numbers, a lot of their business is switching to services. Software is driving a lot more of their revenue now. Your revenue has been struggling the last

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couple of years and obviously with the slide where your growth rate is just sort of at -market, well, at-market hasn’t really been growth the last few years from a hardware perspective. When you

think about it longer-term, is your business a lot more about just trying to grow whatever operating dollars that you can out of that business in an environment that’s sort of maybe flattish would be really good over a three-year, four-year time period?

<A – Doug Britt – Flextronics International Ltd.>: I’ll go ahead and start. Regarding industrial growth, we see in the market it’s pretty vast and we see a real good potential to organically grow

the business at the rate that we discussed. Occasionally we’ll run into opportunities with customers to do asset acquisitions and take over parts of the supply chain and we’ll see those opportunities and we’ll take advantage of those opportunities as they come, but we certainly see this type of

growth opportunity in the foreseeable future. <A – Paul Humphries – Flextronics International Ltd.>: I think in HRS and all the markets we’re

in, what we showed today is organic growth and double digit growth and we think that will be actually supplemented by tuck-in acquisitions. We’re seeing that from not only the sort of deals that Doug is talking about, but what we refer to as transformational deals but we’re working with the

customers who may be cost challenged and they’re looking it as their cost structure and they were also working on multiple opportunities where we’re bringing in design or supply chain expertise to enable them to be more successful going forward. So we’re confident we can maintain double-digit

organic growth. <A – Caroline Dowling – Flextronics International Ltd.>: Thank you for your question.

Regarding INS, we said it actually was trending year-over-year rather than trending to market. I think that some of our peers in the industry are perhaps declining a little bit. To answer the second part of that question on the last few quarters trailing on revenue, the set -top box business is

actually in the infrastructure and INS portfolio and we made some strategic decisions to exit out of parts of that business over the last three quarters as it was dragging on our results and getting a lot of attacks from the ODM space. So we decided to exit it.

It’s equally being attached by video streaming. Video streaming, the likes of Apple TV, Google, Amazon TV and so on and so forth, we’ve been highly successful in winning but that business

actually sits and we view that business as consumer-type business. So that sits in Mike’s consumer technology group. So you can see that pick up over here while actually the set -top box business comes out of INS. So you’re absolutely correct in terms of the market is certainly going through a

lot of change, which you do you see in the telecom sides. There are has been from the 4G rollout, United States is 80% to 85% covered today. But we still have the emerging markets like China seeing a lot of build-out of telecom and Europe is quite lagging. So Europe still has only 18% 4G

build-out, so you still have a lot to come in the telecom space and then the converged, 3.0 as we refer to it inside Flextronics, absolutely challenged, but we generated significant free cash flow. You go look at what we’re doing in winning and growing in the security and the appliance and the

actually complex hyperscale into the environment in [ph] next year (5:20:32). So there’s a lot of confusion on virtualization and software-defined networking. It absolutely does

drive a level of commoditization into that space, but you still need hardware to run this. And you have an extraordinary complex system externally. So the Amazon affect or Google affect as I would refer to it in the web-scale environment for public cloud absolutely clear growing, but equally in the

private cloud sector, the likes of where Cisco are going and how they are attacking and defending that does not deteriorate the need for hardware in the future. So I think this – need a little balance in the conversation, which is why we’re trending or guiding you flat year-over-year as we go and

attack that. Thank you. <Q – Chris Dankert – Longbow Research LLC>: Hi. Chris Dankert with Longbow Research. Just

a quick question on components. I believe I saw up there it was about $1.5 billion of sales. My last figure was closer to $2 billion, I don’t know if I’m using an outdated figure or if part of the Multek

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restructuring, some of that business had to go away. Could you just kind of clarify that for me? Thank you.

<A – Mike McNamara – Flextronics International Ltd.>: Yeah, over time, there is – we had other components in there, over time things like camera modules in that that we’ve exited over time.

We’ve also had some business in Multek where we closed that operation in Germany. That business was not able to be reallocated in any of our factories just because of the nature of the product, it couldn’t be built in China. So that was a pure loss at Flextronics. We closed a factory in

Brazil also, which wasn’t able to go to another Flex Brazil factory, for example. So there was some business that was lost in that whole reshuffling of the capacity. What came out of it is lower revenue, better profit and a simpler, easier-to-run operation that we’ve demonstrated a very high

level of operational execution along within the management team. So there was revenue leakage in that whole transition, that’s correct.

<A – Chris Collier – Flextronics International Ltd.>: And the only other thing I would add to that was I think you are using an outdated figure. If you think back in the last 18 months, we’ve restructured both of those businesses. So when we consolidated the footprint in power, which is

just like six quarters ago, we actually pruned that and actually eliminated some factories and some customers in that set. So that’s why we wanted to grind it back in and ground everybody in to where that business is today, sitting at a roughly $1.5 billion size and growing.


Okay. To be respectful of time, we’re going to be ending Q&A now but we can certainly continue it

in the back of the room, where we’re going to have discussion and cocktails. Also, there is one thing I wanted to bring to everyone’s attention, a clarification, I think it actually came from the question that Osten had asked or brought to my attention regarding Google and the size of Google.

Google, we had said publicly had become a top 10 customer of Flextronics back in our December quarter, not a 10% customer of Flextronics, so just so everyone is clear on that. Thank you.


So, thanks, everybody. We really appreciate you being here. I hope this provided a different experience than you normally get with your PowerPoint in New York, even though you got a lot of

PowerPoint here. So sorry about that, people. Wanted to be thorough and have a comprehensive review and hopefully enjoy the tours. We’ll look forward to having a drink. Thank you.


Thank you.

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Flextronics International Ltd. FLEX has a very strong position in Silicon Valley, which has been tremendously bolstered over the past two-plus years with our focused and differentiated