---

FORM 10-K

---

(MARK ONE)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2001

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO  _____________

Commission File Number 1-11098

SOLECTRON CORPORATION(Exact name of Registrant as Specified in its Charter)



|Delaware                                                       | 94-2447045                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

777 Gibraltar DriveMilpitas, California     95035(Address of Principal Executive Offices including Zip Code)

(408) 957-8500(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
                                  Common Stock

---

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X]       No  [     ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K.     [     ]

The aggregate market value of the Registrant's Common Stock held by non-affiliates on
November 1, 2001 was approximately $ 7,512 million (based upon the last reported price of the
Common Stock on the New York Stock Exchange on such date).  Shares of Common Stock
held by each officer, director, and holder of 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates.  This determination of
affiliate status is not necessarily a conclusive determination for other purposes.

As of November 1, 2001, there were 669,165,039 shares of the Registrant's common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on January 23, 2002, which Solectron will file with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this report, is incorporated by
reference in Part III of this Form 10-K to the extent stated herein.









SOLECTRON CORPORATION
                            2001 FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS



|Part I.    |                                                                                       | Page
|---------- | ------------------------------------------------------------------------------------- | ----
|Item 1.    | Business                                                                              | 4   
|Item 2.    | Properties                                                                            | 13  
|Item 3.    | Legal Proceedings                                                                     | 14  
|Item 4.    | Submission of Matters to a Vote of Security Holders                                   | 15  
|Part II.   |                                                                                       |     
|Item 5.    | Market for the Registrant's Common Equity and Related Stockholder Matters             | 18  
|Item 6.    | Selected Financial Data                                                               | 19  
|Item 7.    | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20  
|Item 7a.   | Quantitative and Qualitative Disclosures About Market Risk                            | 38  
|Item 8.    | Financial Statements and Supplementary Data                                           | 39  
|Item 9.    | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  | 73  
|Part III.  |                                                                                       |     
|Item 10.   | Directors and Executive Officers of the Registrant                                    | 73  
|Item 11.   | Executive Compensation                                                                | 73  
|Item 12.   | Security Ownership of Certain Beneficial Owners and Management                        | 73  
|Item 13.   | Certain Relationships and Related Transactions                                        | 73  
|Part IV.   |                                                                                       |     
|Item 14.   | Exhibits, Financial Statement Schedule and Reports on Form 8-K                        | 74  
|Signatures |                                                                                       | 75  

Solectron and the Solectron logo are registered trademarks of Solectron Corporation. All
other names are trademarks and/or registered trademarks of their respective owners.

---

PART I

PART I

ITEM 1: BUSINESS

Overview

We provide electronics manufacturing services to original
equipment manufacturers (OEMs) who design and sell networking equipment, mobile
and land based telecommunications equipment, computing equipment, including
workstations, notebooks, desktops and peripherals, and other electronic
equipment. These OEMs include Cisco Systems, Inc. (Cisco), Compaq Computer
Corporation (Compaq), Ericsson Telecom AB (Ericsson), Hewlett-Packard Company
(HP), International Business Machines Corporation (IBM), Nortel Networks Limited
(Nortel) and Apple Computer Inc. (Apple). These companies contract with us to
build their products for them or to obtain other related services from us.

We furnish integrated supply-chain solutions that span the
entire product life-cycle from technology solutions, to global manufacturing, to
global services. Our range of services includes:

- Advanced building block design solutions;
- Product design and manufacturing;
- New product introduction management;
- Materials purchasing and management;
- Prototyping;
- Printed circuit board assembly (the process of placing
components on an electrical printed circuit board that controls the processing
functions of a personal computer or other electronic equipment);
- System assembly (for example, building complete systems
such as high end routers and servers, and testing them to ensure
functionality);
- Distribution;
- Product repair; and
- Warranty services.

Providing these services to our customers allows them to
remain competitive by focusing on their core competencies of sales, marketing,
and research and development. We have manufacturing facilities in the Americas,
Europe and Asia/Pacific. This geographic presence gives our customers access to
manufacturing services in the locations close to their expanding markets for
faster product delivery.

We were originally incorporated in California in August 1977.
In February 1997, we were reincorporated in Delaware. Our principal executive
offices are located at 777 Gibraltar Drive, Milpitas, California 95035. Our
telephone number is (408) 957-8500 and Internet address is
www.solectron.com.

The information contained within this overview of the
business is qualified in its entirety by, and is subject to, the detailed
information, consolidated financial statements and notes thereto contained
elsewhere within this document under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Financial Statements and
Supplementary Data."



Industry Overview

We are well recognized for our printed circuit board
(PCB) assembly business. We continue to lead in this industry and have grown
into a global supply-chain facilitator, expanding our capabilities across the
entire product cycle to include: product design, pre-production planning, New
Product Introduction (NPI) management, manufacturing, distribution, and end-of-life product
service and support. We are benefiting from increased worldwide
market acceptance of, and reliance upon, the use of outsourcing manufacturing
services by many electronics OEMs. We expect the trend toward outsourcing
manufacturing to continue for many reasons including the following:

Faster Time to Market: Due to intense competitive pressures
in the electronics industry, OEMs are facing increasingly shorter product life-cycles and
therefore have a growing need to reduce the time required to bring a
product to market. OEMs can reduce the time to market by using our manufacturing
expertise and infrastructure. OEMs can further reduce the time to market by
partnering with us at the stages of product design and product improvement to
expedite the transition into large volume production in our manufacturing
centers.

Reduce Investment: As electronic products have become more
technologically advanced and are shipped in greater unit volumes, the necessary
investment required for internal product design, manufacturing, and end-of-life
support services by OEMs has increased significantly for working capital,
capital equipment, labor, systems and infrastructure. Solectron, a global
supply-chain facilitator, enables OEMs to gain access to our worldwide advanced
technology facilities including NPI centers, manufacturing and depot repair
facilities. As a result, OEMs can substantially reduce their overall resource
requirements.

Focus Resources: The electronics industry is experiencing
greater levels of competition and more rapid technological change. Many OEMs
increasingly are seeking to focus their resources on activities and technologies
that add the greatest value. By offering comprehensive electronics assembly and
related manufacturing services, we allow OEMs to focus on their own core
competencies such as next-generation product development, sales and
marketing.

Access to Leading Manufacturing Technology: Electronic
products and electronics manufacturing technology have become increasingly
sophisticated and complex, making it difficult for OEMs to maintain the
necessary technological expertise to manufacture products internally. OEMs are
motivated to work with us to gain access to our expertise in interconnect, test
and process technologies.

Improve Inventory Management and Purchasing Power:
Electronics industry OEMs are faced with increasing difficulties in planning,
procuring and managing their inventories efficiently due to frequent design
changes, short product life-cycles, large investments in electronic components,
component price fluctuations and the need to achieve economies of scale in
materials procurement. OEMs can reduce production costs by using our volume
procurement capabilities. In addition, our expertise in inventory management can
provide better control over inventory levels and increase the OEMs' return on
assets.

Access to Worldwide Manufacturing Capabilities: OEMs are
increasing their international activities in an effort to lower costs and access
foreign markets. With our worldwide capabilities, we offer OEMs a variety of
manufacturing location options to better address their objectives, including
cost containment, compliance with local content regulations, and the elimination
of expensive freight costs, tariffs and time-consuming customs clearances.

Strategy

Our goal is to offer our customers significant
competitive advantages of electronics outsourcing, such as access to design and
product improvement, advanced manufacturing technologies, reduced overall cost,
faster product time-to-market, effective asset utilization, and refined end-of-life product
support services. To achieve this goal, we emphasize the following
key elements:

Quality: We believe product quality is a critical success
factor in the electronics manufacturing market. We strive to continuously
improve our processes and have adopted a number of quality improvement and
measurement techniques to monitor our performance. We have received numerous
superior service and quality awards, including:

- Malcolm Baldrige National Quality Award in 1991 and again
in 1997;
- Named one of the World's Best Performers on the
Information Technology 100 Listing by Business Week June 2001;
- Ranked No.2 in Semiconductors and Other Electronic
Components on the Fortune 500 by Fortune April 2001;
- 3Com Supplier Appreciation Award;
- Cisco Supplier of the Year-Subcontractor/Distributor
Award;
- Sun Microsystems Fiscal year 2000 supplier Performance
Award In Recognition of Improving and Maintaining Overall Scorecard;
- Hewlett-Packard Outstanding Supplier;
- AFC Appreciation award for the Highest Standard of
Customer Service and Product Quality;
- Agilent-In recognition of outstanding support through
dedication to teamwork and quality service for E-module Transfer
Project;
- Intermec Key Supplier Award;
- NDS Supplier Partner Award;
- Qualcomm Key Supplier Appreciation Award.
- Other numerous awards from our customers.

All of our manufacturing facilities are certified under ISO-9000 standards,
which are international quality standards for design,
manufacturing and distribution management systems.

Partnerships: An important element of our strategy is to
establish partnerships with major and emerging OEM leaders in diverse segments
across the electronics industry. Our customer base consists of leaders in
industry segments such as networking, telecommunications, workstations, personal
computers, computer peripherals, instrumentation, semiconductor equipment and
avionics. Due to the costs inherent in supporting customer relationships, we
focus our efforts on customers with high potential for long-term business
partnerships. Our goal is to deliver a total product life cycle solution to our
customers. We offer OEMs NPI management, which includes design and layout,
concurrent engineering, test development and prototype engineering. We continue
the cycle to provide solutions in manufacturing and distribution, including
just-in-time delivery on low- to medium-volume and high-volume turn-key, price-sensitive, and
projects that require more value-added services. Additionally, we
serve OEMs that need end-of-life services such as product repair and warranty
services.

Turn-key Capabilities: Another element of our strategy is to
provide a complete range of manufacturing management and value-added services,
including materials management, board design, concurrent engineering, assembly
of complex printed circuit boards and other electronic assemblies, test
engineering, software manufacturing, accessory packaging and post-manufacturing
services. We believe that as manufacturing technologies become more complex and
as product life-cycles shorten, OEMs will increasingly contract for
manufacturing on a turn-key basis as they seek to reduce their products' time-to-market,
capital asset and inventory costs. A substantial portion of our
revenue is from our turn-key business. We believe that our ability to manage and
support large turn-key projects is a critical success factor. In addition, we
believe that due to the difficulty and long lead-time required to change
manufacturers, turn-key projects generally increase an OEM's dependence,
resulting in greater stability of our customer base and in closer working
relationships. We also have been successful in establishing sole-source
positions for certain products with many of our customers.

Advanced Manufacturing Process Technology: We intend to
continue to offer our customers the most advanced manufacturing process
technologies, including launching new designs in the NPI cycle. Our involvement
during early design stage helps to reduce time to market, and improve
manufacturing ability to quickly ramp to volume. We have developed common tools
for electrical, mechanical design and design for manufacturing applications to
reduce design cycle and maintain cost effectiveness. Our key initiatives in the
test area include standardizing on a single functional test platform for the
majority of the printed circuit assemblies we produce, and enhancing test
capability of non-contacting structural test methods. Platform standardization
enables us to develop and install test processes rapidly into manufacturing and
to transfer production around the globe quickly to meet our customers needs. We
also have developed methods for handling, processing and re-flow of high I/O
ball grid array (BGA), lead-less and chip-scale packages. In addition, we have
built effective processes for splicing of single mode, multi-mode and
polarization maintaining fibers, and connectorization. Our efforts continue in
design of optical functions that need to be incorporated into modules or at the
board level.

Diverse Geographic Operations: An additional element of our
strategy is to establish production facilities in areas of high customer density
or where manufacturing efficiencies and reduced unit costs can be achieved. We
currently have operations throughout the Americas, Europe and Asia/Pacific. We
believe that our facilities in these diverse geographic locations enable us to
better address our customers' requirements such as cost containment, compliance
with local content regulations, and the elimination of expensive freight costs,
tariffs and time-consuming customs clearances. We intend to expand our
operations continually as necessary to serve our existing customers and to
develop new business.

Global Manufacturing Capability

To achieve excellence in manufacturing, we combine
advanced manufacturing technology, such as computer-aided manufacturing and
testing, with manufacturing techniques including just-in-time manufacturing,
total quality management, statistical process control and continuous flow
manufacturing. Just-in-time manufacturing is a production technique to minimize
work-in-process inventory and manufacturing cycle time while enabling Solectron
to deliver products to customers in the quantities and time frame required.
Total quality management is a management philosophy that seeks to impart high
levels of quality in every operation of Solectron and is accomplished by setting
quality objectives for every operation, tracking performance against those
objectives, identifying work flow and policy changes required to achieve higher
quality levels and a commitment by executive management to support changes
required to deliver higher quality. Statistical process control is a set of
analytical and problem-solving techniques based on statistics and process
capability measurements through which we track process inputs and resulting
quality and determine whether a process is operating within specified limits.
The goal is to reduce variability in the process, as well as to eliminate
deviations that contribute to quality below the acceptable range of each process
performance standard.

In order to successfully implement these management
techniques, we have developed the ability to collect and utilize large amounts
of data in a timely manner. We believe this ability is critical to a successful
assembly operation and represents a significant competitive factor, especially
in large turn-key projects. To manage this data, we use sophisticated computer
systems for material resource planning, shop floor control, work-in-process
tracking and statistical process control.

To offer our customers the significant competitive advantage
of electronics outsourcing, we have production facilities in areas of high
customer density or where manufacturing efficiencies and reduced unit costs can
be achieved. In fiscal 2001, approximately 51% of our sales were from operations
outside of the United States.

Americas

North America.

Our headquarters and one of our largest manufacturing
operations are located in Silicon Valley, principally in Milpitas, California,
in the midst of one of the largest concentrations of OEM electronics
manufacturers. Our subsidiary, SMART Modular Technologies, Inc. (SMART), located
in Fremont, California designs and manufactures memory modules and memory cards,
embedded computers and I/O products. Our manufacturing facility in Everett,
Washington helps to serve our customers in the Pacific Northwest. We established
a manufacturing facility in Hillsboro, Oregon during the second quarter of
fiscal 2001 through the acquisition of Natsteel Electronics Ltd (NEL).

We believe our facility in Austin, Texas, is situated in a
geographic region with strong growth of electronics OEMs that will allow us to
better service our existing customers and to attract new ones.

Our manufacturing facility in Westborough, Massachusetts,
near Boston, in the center of a geographic region with a large concentration of
electronics OEMs, provides a full range of integrated solutions across the
entire product life cycle from pre-production planning to manufacturing. We
further expanded our manufacturing capability in the region during fiscal 2001
through the acquisition of Centennial Technologies Inc. (Centennial).

We also have operations in Charlotte, North Carolina and
Columbia, South Carolina. We believe these facilities allow us to better pursue
new business opportunities with new and existing customers, in particular,
because of Charlotte's status as a transportation hub and its relative proximity
to major Southeastern United States electronics markets. We further expanded our
manufacturing facilities by the acquisition of manufacturing assets of Nortel in
North Carolina.

We established a manufacturing facility in Calgary, Canada
through the acquisition of Nortel's manufacturing assets. This site provides a
full range of PCB assembly services to our low to mid-volume customers.

We established a manufacturing facility in Aguadilla, Puerto
Rico, through the acquisition of Alcatel's manufacturing business. This site
provides our customers with a full range of manufacturing services and high-volume PCB
assembly.

Latin America

Our site in Guadalajara, Mexico, provides a full range of
PCB assembly and systems- build manufacturing services. This site offers our
customers a low-cost, high-volume manufacturing center for PCB assembly, build-to-order and
configure-to-order systems assembly for the Americas. Our
manufacturing capacity in Mexico was expanded by the acquisition of
manufacturing assets of Nortel in Monterrey, Mexico, in fiscal 2000.

Our site in Sao Jose dos Campos, Brazil, provides a full
range of capabilities across the product life cycle, including systems-build
capabilities, PCB and flex assembly, custom packaging and distribution services,
primarily to multinational customers seeking access to the Latin American
market. This manufacturing facility in Brazil was expanded as a result of the
acquisition of IBM's manufacturing operations in Sao Paulo, Brazil.

Europe

We have manufacturing operations in Bordeaux, France;
Herrenberg, Germany; Dublin, Ireland; Timisoara, Romania; and Dunfermline,
Scotland. Each of these sites provides a full range of manufacturing
capabilities to a multinational customer base. In addition, each site is
developing an area of specific expertise to offer to all customers. The France
and German sites offer low-volume, high-mix manufacturing services. The Romania
site serves as our full-service, high-volume, low-cost manufacturing hub for our
rapidly growing European customer base. The Scotland site specializes in
building PCB assemblies, subassemblies and systems for multinational customers
in the European market.

During fiscal 2000, we expanded our European presence into
Longuenesse, France; Östersund, Sweden; and Monkstown, Northern Ireland,
through the acquisition of Nortel's manufacturing assets and of Ericsson's
manufacturing assets of telecommunications infrastructure equipment operations.
We expanded our presence in Scotland through an asset acquisition of IBM's
Netfinity server operations in Greenock, Scotland.

Asia/Pacific and Other

Our Southeast Asia manufacturing operations are located
in Penang and Johor, Malaysia. The operations in Southeast Asia were established
to better serve the needs of OEMs requiring price-sensitive, high-volume
production capabilities and to provide more efficient manufacturing services to
customers in Southeast Asia. These facilities currently provide electronics
assembly, materials management and other services to customers in Malaysia,
Singapore, Japan, the United States and other locations. Our facility in Suzhou,
China, currently provides a full range of low-cost high volume manufacturing
services.

During fiscal 2000, we expanded our manufacturing presence in
Malaysia and Australia, and established a site in India through the acquisitions
of SMART and Bluegum Group. During fiscal 2001, our low-cost high volume
manufacturing capability was further expanded in Shenzen and Shanghai China;
Singapore; Penang, Malaysia; Batam, Indonesia; Kaohsiung, Taiwan and Miyagi,
Japan through the acquisitions of NEL, and SONY Corporation's manufacturing
facilities. We offer our customers manufacturing and systems assembly
capabilities in Liverpool, New South Wales; Melbourne, Victoria; and have
program offices in Sydney and North Melbourne, Australia. We also completed our
acquisition of Singapore Shinei Sangyo Pte Ltd (Shinei) during fiscal 2001.
Shinei is an independently operated subsidiary within our newly formed Power,
Packaging and Cooling unit, and continues to market its services to other
companies separately. The acquisition of Shinei brings us a global company
providing customer-focused solutions for metal stamping, contract manufacturing
and OEM assembly with full product-design capabilities.

New Product Introduction Centers

We have NPI centers in the United States, Brazil, Puerto
Rico, France, Sweden, Germany, Northern Ireland, Scotland, Malaysia, Japan,
Singapore and Australia. These NPI centers offer a full range of electronics
product development services, including design and layout, concurrent
engineering, test development and prototype engineering. We believe our NPI
services will shorten our customers' product development cycles by offering full
design and development services to complement our customers' in-house
capabilities. We partner with our customers as early as possible in the new
product development process to optimize their products' design for volume
manufacturing.

Technology Solutions

Fine Pitch in Fremont, California provides extensive
prototype services for electronics OEMs, further enhancing our ability to
address the needs of design teams who require almost immediate availability of
highly complex prototype assemblies. Through the acquisition of NEL, Fine Pitch
recently opened another NPI center in Morgan Hill, California.

Force Computers, Inc. (Force) in San Jose, California
specializes in system design, board design and system integration for open,
scalable system and board-level embedded computer platforms for the
communications, industrial and command and control markets.

SMART Modular Technology, designs and manufactures specialty
and standard memory modules, flash memory cards, embedded computers and
input/output products to leading and emerging OEMs. During fiscal 2001, we
strengthened our technology solutions business unit through the acquisition of
Centennial.

Global Services

We offer a full range of integrated solutions from the
time a product is designed until it is removed from the market. These services
include product repair, upgrades, re-manufacturing and maintenance through
factory and fast-hub service centers located around the world; help-desk support
through customer call centers for end-users; logistics and parts management;
returns processing; warehousing; engineering change management; and end-of-life
manufacturing. These services give our customers improved speed from the service
pipeline by taking direct receipt responsibility for returns from the end user
and making sure that various buffer stock and inventory mechanisms are
established. These services also minimize shipping costs and time by handling
repairs at our various international locations. In addition, our data collection
system can provide invaluable information to analyze product design reliability.
As a result, the OEMs can focus their efforts on developing next-generation
products.

We have global service sites in the United States, Canada,
Mexico, France, Northern Ireland, Brazil, Sweden, United Kingdom and Japan. The
Memphis, Tennessee hub offers integrated call management, remote failure
diagnostics, air express dispatch, systems repair, component level repair,
configuration and upgrades, returns processing and administration, refurbishment
and redistribution services. Wireless handset repair and refurbishment and
outsourcing technical customer support services is performed in Los Angeles,
California; Louisville, Kentucky; Baltimore, Maryland; and Dallas, Texas.

We established a repair service site in Vaughan, Canada, by
acquiring repair operations of IBM's NULOGIX Technical Services (NULOGIX).
NULOGIX provides a complete range of technology repair, re-manufacturing and
refurbishment services for a large variety of electronics products. As a result
of this transaction, we are now able to provide the Canadian market a full range
of value-added support service solutions. These services include: product
repair, upgrades, re-manufacturing and maintenance through factory and fast-hub
service centers located around the world; help-desk support through customer
call-in centers for end-users; logistics and parts management; returns
processing; warehousing; engineering change management and end-of-life
manufacturing.

As part of our acquisitions of Nortel and Ericsson
manufacturing assets, global service sites were established in Calgary, Canada;
Research Triangle Park, North Carolina; Monterrey, Mexico; Cwmcarn, Wales;
Longuenesse, France; Ostersund, Sweden; and Monkstown, Northern Ireland. During
fiscal 2001, we expanded our service capability in Amsterdam, Netherlands
through the acquisition of IBM's European repair, refurbishment and asset
recovery operation.

We established a dedicated after-sales service facility in
Japan through the acquisition of MCC-Sequel, a provider of repair, recycling and
manufacturing services for electronics products.

Electronics Assembly and Other Services

Our electronics assembly activities consist primarily of
the placement and attachment of electronic and mechanical components on printed
circuit boards and flexible cables. We also assemble higher-level sub-systems
and systems incorporating printed circuit boards and complex electromechanical
components, in some cases manufacturing and packaging products for shipment
directly to our customers' distributors. In addition, we provide other
manufacturing services, including refurbishment and re-manufacturing. We
manufacture on a turn-key basis, directly procuring some or all of the
components necessary for production and on a consignment basis, where the OEM
customer supplies all or some components for assembly.

In conjunction with our assembly activities, we also provide
computer-aided testing of printed circuit boards, sub-systems and systems, which
contributes significantly to our ability to consistently deliver high-quality
products. We have developed specific strategies and routines to test board and
system-level assemblies. In-circuit tests verify that all components have been
properly inserted and that the electrical circuits are complete. Functional
tests determine if the board or system assembly is performing to customer
specifications. We either design and procure test fixtures and develop our own
test software, or we utilize our customers' test fixtures and test software. In
addition, we provide environmental stress tests of the board or system
assembly.

We provide turn-key manufacturing management to meet our
customers' requirements, including procurement and materials management and
consultation on board design and manufacturability. Individual customers may
select various services from among our full range of turn-key capabilities.

Procurement and materials management consists of the
planning, purchasing, expediting, warehousing, preparing and financing of the
components and materials required to assemble a printed circuit board or
electronic system. OEMs have increasingly used electronic manufacturing
specialists like Solectron to purchase all or some components directly from
component manufacturers or distributors and to finance and warehouse the
components. Another service we provide to our customers is assisting in
evaluating board designs for manufacturability. We evaluate the board design for
ease and quality of manufacture and, when appropriate, recommend design changes
to reduce manufacturing costs or lead times or to increase the quality of
finished assemblies. Board design services consist of the engineering and design
associated with the arrangement and interconnection of specified components on
printed circuit boards to achieve an OEM's desired level of functionality.

We also offer Application Specific Integrated Circuit (ASIC)
design services. Our ASIC product design services include the embedded computer,
memory modules and memory cards, and I/O products.

Sales and Marketing

Our sales and marketing are integrated processes
involving direct salespersons and project managers, as well as our senior
executives. Our sales resources are directed at multiple management and staff
levels within targeted accounts. We also use independent sales representatives
in certain geographic areas. We receive unsolicited inquiries resulting from
advertising and public relations activities, as well as referrals from current
customers. These opportunities are evaluated against our customer selection
criteria and are assigned to direct salespersons or independent sales
representatives, as appropriate. Historically, we have had substantial recurring
sales from existing customers.

Approximately 99% of our net sales during fiscal 2001 were
derived from customers that were also customers during the same period of fiscal
2000. Although we seek to diversify our customer base, a small number of
customers currently are responsible for a significant portion of our net
sales.

Our top ten customers accounted for approximately 70% of net
sales in fiscal 2001, 72% of net sales in fiscal 2000, and 74% of net sales in
fiscal 1999. Several customers each accounted for more than 10% of net sales
during these periods. Ericsson accounted for 14% of net sales; Cisco and Nortel
accounted for 12% of net sales in fiscal 2001. Ericsson and Cisco represented
13% and 12% of net sales, respectively, in fiscal 2000. Cisco and Compaq
represented 11% and 12% of net sales, respectively in fiscal 1999.

Backlog

Backlog consists of contracts or purchase orders with
delivery dates scheduled within the next twelve months. At August 31, 2001, our
backlog was approximately $2.2 billion. The backlog was approximately $4.9
billion at August 31, 2000. Because customers may cancel or reschedule
deliveries, backlog is not a meaningful indicator of future financial
results.

Competition

The electronic manufacturing services industry comprises
a large number of companies, several of which have achieved substantial market
share. We also face competition from current and prospective customers that
evaluate our capabilities against the merits of manufacturing products
internally. We compete with different companies depending on the type of service
or geographic area. Certain competitors may have greater manufacturing,
financial, research and development and marketing resources than Solectron. We
believe that the primary basis of competition in our targeted markets is
manufacturing technology, quality, responsiveness, the provision of value-added
services and price. To remain competitive, we must continue to provide
technologically advanced manufacturing services, maintain quality levels, offer
flexible delivery schedules, deliver finished products on a reliable basis and
compete favorably on the basis of price. We may be at a competitive disadvantage
as to price, compared with manufacturers with lower cost structures,
particularly manufacturers with facilities where labor costs are lower.

Associates

As of August 31, 2001, we employed 60,000 associates
worldwide, including 6,000 temporary associates. Our international operations
employed 43,000 associates.

Patents and Trademarks

We have a number of United States patents related to the
process and equipment used in our surface mount technology. SMART holds one
patent related to memory module technology. Force also holds a number of patents
related to Versa Module Eurocard (VME) technology. In addition, as part of our
acquisition of IBM-ECAT's manufacturing assets, we have access to a number of
IBM patents and license rights. We also have registered trademarks in the United
States and many countries throughout the world. These patents and trademarks are
considered valuable to us.

Although we do not believe that our trademarks, manufacturing
processes, SMART's and FORCE's technology or the IBM patents and license rights
to which we have access infringe on the intellectual property rights of third
parties, we cannot assure that third parties will not assert infringement claims
against us in the future. If such an assertion were to be made, it may become
necessary or useful for us to enter into licensing arrangements or to resolve
such an issue through litigation. However, we cannot assure that such license
rights would be available to us on commercially acceptable terms or that any
such litigation would be resolved favorably. Additionally, such litigation could
be lengthy and costly and could materially harm our financial condition
regardless of the outcome of such litigation.

ITEM 2: PROPERTIES

Our manufacturing facilities are located throughout the
Americas, Europe and Asia/Pacific. The table below lists the locations and
square feet for our major operations as of August 31, 2001.

|Location                        | Square Feet
|------------------------------- | -----------
|Americas:                       |            
|Milpitas, California (1)        | 1,676,000  
|San Jose, California            | 102,000    
|Westborough, Massachusetts      | 198,000    
|Wilmington, Massachusetts       | 35,000     
|Charlotte, North Carolina       | 930,000    
|Columbia, South Carolina        | 357,000    
|Louisville, Kentucky            | 47,000     
|Watterson Park, Kentucky        | 60,000     
|Hillsboro, Oregon               | 476,000    
|Austin, Texas                   | 938,000    
|Coppell, Texas                  | 38,000     
|Everett, Washington             | 179,000    
|Memphis, Tennessee              | 112,000    
|Calgary, Canada                 | 207,000    
|Ontario, Canada                 | 124,000    
|Guadalajara, Mexico             | 632,000    
|Monterrey, Mexico               | 255,000    
|Aguada, Puerto Rico             | 83,000     
|Aguadilla, Puerto Rico          | 164,000    
|Hortolandia, Brazil             | 142,000    
|Sao Jose dos Campos, Brazil     | 327,000    
|                                |            
|Europe:                         |            
|Bordeaux, France                | 458,000    
|Douarnenez, France              | 40,000     
|Pont de Buis, France            | 121,000    
|Longuenesse, France             | 180,000    
|Herrenberg, Germany             | 114,000    
|Munich, Germany                 | 168,000    
|Budapest, Hungary               | 169,000    
|Dublin, Ireland                 | 141,000    
|Carrickfergus, Northern Ireland | 48,000     
|Timisoara, Romania              | 218,000    
|Dunfermline, Scotland           | 271,000    
|East Kilbride, Scotland         | 60,000     
|Livingston, Scotland            | 12,000     
|Norrkoping, Sweden              | 66,000     
|Ostersund, Sweden               | 233,000    
|Istanbul, Turkey                | 65,000     
|Cwmcarn, United Kingdom         | 218,000    
|Wiltshire, United Kingdom       | 27,000     
|                                |            
|Asia/Pacific:                   |            
|Liverpool, Australia            | 171,000    
|Suzhou, China                   | 333,000    
|Shanghai, China                 | 278,000    
|Shenzhen, China                 | 230,000    
|Bangalore, India                | 18,000     
|Batam, Indonesia                | 170,000    
|Kanagawa, Japan                 | 20,000     
|Miyagi-ken, Japan               | 379,000    
|Tokyo, Japan                    | 13,000     
|Johor, Malaysia                 | 152,000    
|Muar, Malaysia                  | 147,000    
|Penang, Malaysia                | 1,091,000  
|Singapore                       | 485,000    
|Taipei, Taiwan                  | 6,000      

Around the world, we are subject to a variety of
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. Any failure by us
to comply with present and future regulations could subject us to future
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment or to incur other significant expenses to comply with
environmental regulations.

ITEM 3: LEGAL PROCEEDINGS

In the semiconductor, computer, telecommunications and
networking industries, companies receive notices from time to time alleging
infringement of patents, copyrights, or other intellectual property rights.
Solectron has been and may from time to time continue to be notified of claims
that it may be infringing patents, copyrights or other intellectual property
rights owned by other third parties. Any litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on
Solectron's business, financial condition and results of operations. In the
future, third parties may assert infringement claims against Solectron or its
customers. In the event of an infringement claim, Solectron may be required to
spend a significant amount of money to develop a non-infringing alternative or
to obtain licenses. Solectron may not be successful in developing such an
alternative or obtaining a license on reasonable terms, if at all. In addition,
any such litigation could be lengthy and costly and could harm Solectron's
financial condition.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

Executive Officers of Solectron

Solectron's executive officers and their ages as of September 30, 2001
are as follows:



|Name                    | Age | Position                                                                               
|----------------------- | --- | ---------------------------------------------------------------------------------------
|Koichi Nishimura, Ph.D. | 63  | President, Chief Executive
Officer and Chairman of the Board                           
|Massued Behrouzi        | 46  | Senior Vice President and
    President of Solectron North America                     
|Kevin Burns             | 37  | Executive Vice President and
    Chief Materials Officer                               
|Philip Fok              | 40  | Senior Vice President and
   Chief Administrative Officer                              
|Alejandro Gomez-Montoy  | 50  | Senior Vice President and
President of Solectron Latin America                         
|Chester Chien Lin       | 60  | Executive Vice President and
 President of Solectron Asia/Pacific                      
|David Kynaston          | 60  | Executive Vice President and
    President of Solectron Europe                         
|William Mitchell        | 57  | Executive Vice President and
    President of Solectron Global Services                
|George W. Moore         | 45  | Executive Vice President and
    President of Solectron Systems Solution               
|Daniel Perez            | 50  | Executive Vice President and
 Worldwide Account Management and Marketing               
|Kiran Patel             | 53  | Executive Vice President and
  Chief Financial Officer                                 
|Sen-Yuan (Sandy) Ro     | 44  | Senior Vice President and General Manager,
   Solectron Systems Solutions              
|Ajay Shah               | 41  | Executive Vice President and
 Chief Executive Officer of Solectron Technology Solutions
|Joe Tang                | 51  | Senior Vice President and
 Manager Director, Solectron Asia/Pacific                    
|Susan S. Wang           | 50  | Executive Vice President of
 Corporate Development, and Corporate Secretary            
|Saeed Zohouri, Ph.D.    | 50  | Executive Vice President and
    Chief Operating Officer                               

Dr. Koichi Nishimura has served as Chairman of the Board
since 1996, Chief Executive Officer since 1992 and President since 1990. He was
Co-Chief Executive Officer from 1991 to 1992 and Chief Operating Officer from
1988 to 1991. He was elected a director of the Board in 1991. From 1964 to 1988,
Dr. Nishimura was with International Business Machines Corporation in various
technology and management positions. Dr. Nishimura serves as a Director on the
Boards of OMM Inc., Investor AB, E2open, the center for Quality Management and
the Silicon Valley manufacturing Group, and serves on the board of trustees of
the Santa Fe Institute. He is the 2001 recipient of the Silicon Valley
Manufacturing Group's Lifetime Achievement Award.

Mr. Behrouzi joined Solectron in 1981, and has more than 20
years experience in operations, electronics manufacturing and management. Most
recently, Behrouzi was Corporate Vice President and President of Solectron
Americas-West Regions. Prior to Solectron, Mr. Behrouzi was a design engineer
for two years at Brentwell's Corp. in Palo Alto, California.

Mr. Kevin Burns joined Solectron in 1998 as Corporate Vice
President of Global Materials Services. Prior to joining Solectron, Mr. Burns
worked for Westinghouse Electric Corporation, where he was the Vice President
and General Manager of Operations for the Power Generation division. In a prior
role at Westinghouse, Mr. Burns was President of Westinghouse Security Systems.
Prior to Westinghouse, he was with McKinsey & Company Inc. and General
Electric Corporation.

Mr. Philip Fok joined Solectron in 1993 with extensive
experience in industrial and mechanical engineer. Prior to Solectron, Mr. Fok
worked at IBM for eight years as a manufacturing engineer. Mr Fok is currently a
member of the Institute of Industrial Engineers and the American Society of
Mechanical Engineers.

Mr. Alejandro Gomez-Montoy joined Solectron in 1996 with
extensive management experience in a variety of industries including
electronics, consulting and consumer airline. Prior to Solectron, Mr. Gomez-
Montoy was one of the founders of Aerolitoral, a company of Aeromexico, the
first regional airline company in Mexico. Mr. Gomez-Montoy has been elected as
first Executive Vice President of the American Chamber of Commerce of
Guadalajara for the period 2000-2002.

Mr. Chester Lin joined Solectron in 2001 during the company's
acquisition of NatSteel Electronics. Prior to joining Solectron, Mr. Lin was
Chief Executive Officer of NatSteel Electronics from 1993 to 2001. Previously,
Mr. Lin worked for SCI Systems, and was responsible for leading the company's
expansion into Asia. Before SCI, Mr. Lin spent six years at General Electric,
where his last position was Products Manager in 1984. Mr. Lin received the 1999
Stars of Asia Award by Business Week magazine.

Mr. David Kynaston has served as Corporate Vice President and
President of Solectron Europe since he joined Solectron in 1996. Mr. Kynaston
worked for Philips Electronics for the previous 15 years in various capacities,
including Managing Director of Philips Mullard Ltd. subsidiary, Managing
Director of the Business Communications Systems Division and most recently,
Managing Director of the Private Mobile Radio Division. Prior to joining Philips
Electronics, Mr. Kynaston held senior technical management positions at EMI
Medical Ltd. and Cambridge Scientific Instruments Ltd.

Mr. William Mitchell joined Solectron in March 1999 during
the acquisition of Sequel Inc. Prior to joining Solectron, Mr. Mitchell was
President and Chief Executive officer of Sequel Inc. Previously, Mr. Mitchell
worked in Senior Management roles for Nashua, Raychem and Exxon.

Mr. George W. Moore joined Solectron in 2000 as Corporate
Vice President and President of the Americas region. He was promoted to his
current position of Executive Vice President and President of Solectron Systems
Solution in 2001. Prior to joining Solectron, Mr. Moore spent 22 years at IBM
serving in various engineering and management positions.

Mr. Daniel Perez has served as Senior Vice President of
Worldwide Account Management and Marketing since 1999. Mr. Perez was Corporate
Vice President and Chief Administrative Officer from 1996 to 1999. Mr. Perez
joined Solectron in 1991 as Director of Materials, and was soon named Vice
President of Materials for Solectron's California facility. He became the
General Manager of Solectron's Fremont, California, printed circuit board
assembly operation in 1995. Prior to joining Solectron, Mr. Perez spent 14 years
with IBM Corporation in various management positions in corporate
administration, manufacturing, materials planning, and acquisition and control.
Most recently, he was Senior Manager for Supply and Demand at IBM's disk storage
business. Mr. Perez also serves as a director of the Tech Museum of Innovation,
the California State Center for Quality Education and Development, the Mexican
Heritage Corporation, the Center for Training and Careers in San Jose,
California, and El Teatro Campesino.

Mr. Kiran Patel joined Solectron in September 2001. Mr. Patel
came to Solectron after an extensive career with Cummins Inc., where he spent 27
years, serving in a broad range of finance positions at the operating unit and
corporate level. In 1996 he became Vice President and Chief Financial Officer of
the Company, and was promoted to Executive Vice President in 1999, and served on
the Cummins Foundation board of directors. Most recently, Mr. Patel was the
Chief Financial Officer of iMotors, an internet-based value-added retailer of
used cars.

Mr. Sen-Yuan (Sandy)Ro joined Solectron in 1984 and has
extensive engineering, materials, finance and operations experience. Most
recently, Mr. Ro was Corporate Vice President and General Manager of Solectron
California. Prior to that position, Mr. Ro was Vice President of operations of
Solectron's performance achievement and commonality (PAC) team and worldwide
capacity management. Prior to Solectron, Mr. Ro worked with the Industrial
Technology Research Institution in Taiwan.

Mr. Ajay Shah has served as President and Chief Executive
Officer of Solectron Technology Solutions since 1999. Prior to Solectron, Mr.
Shah served as the President and Chief Executive Officer at SMART Modular
Technologies, Inc. since 1988. Mr. Shah co-founded SMART Modular Technologies,
Inc. Prior to launching SMART, Mr. Shah held strategic marketing management and
product line management positions at Samsung Semiconductor, Inc., and at
Advanced Micro Devices.

Mr. Joe Tang joined Solectron in 1990 and has an extensive
background in manufacturing management in the electronics industry. Most
recently, Mr. Tang was Corporate Vice President and Managing Director of
Solectron's Southeast Asia sub- region. Prior to Solectron, Mr. Tang was a
business manager at Intel for 10 years and also worked for General
Instruments.

Ms. Susan S. Wang was appointed as Executive Vice President
of Corporate Development in September 2001. She had served as Senior Vice
President and Chief Financial Officer of Solectron since 1990 and as Secretary
since 1992. She was Vice President, Finance and Chief Financial Officer of
Solectron from 1986 to 1990 and Director of Finance of Solectron from 1984 to
1986. Prior to joining Solectron, Ms. Wang held various accounting and finance
positions with Xerox Corporation. Ms. Wang also held accounting and auditing
positions with Westvaco Corp. and Price Waterhouse & Co. She is a Certified
Public Accountant.

Dr. Saeed Zohouri has served as Senior Vice President and
Chief Operating Officer of Solectron since June 1999. He was Chief Technology
Officer from 1994 to May 1999; President of Solectron California Corporation
from March 1996 to August 1998; and President, Solectron North America since
August 1998. Dr. Zohouri joined Solectron in 1980 and held various management
positions including Director of Technology. His prior experience includes
teaching chemistry at a major international university.

There is no family relationship among any of the executive officers.



PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Common Stock Information

The following table sets forth the quarterly high and low per
share sales prices of Solectron's common stock for the two-year period ended
August 31, 2001, as quoted on the New York Stock Exchange under the symbol SLR.



|                                                                                                      | High                              | Low                            
|----------------------------------------------------------------------------------------------------- | --------------------------------- | -------------------------------
|Fiscal 2001
        First quarter
        Second quarter
        Third quarter
        Fourth quarter | 52 5/8
41 15/16
30 11/16
23 11/32 | 28
24 17/32
16 1/16
13 7/16    
|Fiscal 2000
        First quarter
        Second quarter
        Third quarter
        Fourth quarter | 45
49
49 1/2
48 3/8               | 33 1/16
30 9/32
28 1/4
30 15/16

Solectron has not paid any cash dividends since its inception
and does not intend to pay any cash dividends in the foreseeable future.
Additionally, the covenants to its financing agreements prohibit the payment of
cash dividends. As of August 31, 2001, there were approximately 10,605
stockholders of record based on data obtained from our transfer agent.



ITEM 6: SELECTED FINANCIAL DATA

The following selected historical financial information
of Solectron has been derived from the historical consolidated financial
statements and should be read in conjunction with the consolidated financial
statements and the notes included therein.

Five-Year Selected Financial Highlights

(In millions, except per share data)

`Consolidated Statements of Operations Data:
                                                     YEARS ENDED AUGUST 31,
                                  ----------------------------------------------------------
                                     2001         2000        1999         1998        1997
                                  ----------  ------------  ---------  ---------  ----------
Net Sales                        $ 18,692.3  $   14,137.5  $ 9,669.2  $ 6,102.2  $  4,408.5
Operating income (loss)               (98.6)        704.2      516.1      368.6       303.2
Income (loss) before taxes
  and cumulative effect
  of change in accounting
  principal                          (157.7)        739.5      514.5      375.5       307.5
Net income (loss)                    (123.5)        497.2      350.3      251.3       203.7
Basic net income (loss)
  per share                           (0.19)         0.83       0.65       0.49        0.42
Diluted net income (loss)
  per share                           (0.19)         0.80       0.61       0.47        0.40

Consolidated Balance Sheet Data:
                                                 YEARS ENDED AUGUST 31,
                                  ----------------------------------------------------------
                                     2001         2000        1999         1998        1997
                                  ----------  ------------  ---------  ---------  ----------
Working capital                  $  6,014.8  $    5,411.4  $ 3,162.7  $ 1,278.1  $  1,137.5
Total assets                       12,930.4      10,375.6    5,420.5    2,843.7     2,209.9
Long-term debt                      5,027.5       3,319.5      922.7      386.8       386.2
Stockholders' equity                5,150.7       3,802.1    3,166.9    1,475.4     1,150.2`



ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical facts, the statements
contained in this discussion are forward-looking statements within the meaning
of Section 27A of the Security Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the
Safe Harbor provisions created by that statute. Certain statements contained in
the following Management's Discussion and Analysis of Financial Condition and
Results of Operations, including, without limitation, statements containing the
words "believes," "anticipates," "estimates," "expects," and words of similar
import, constitute forward-looking statements that involve risks and
uncertainties. Such statements are based on current expectations and are subject
to risk, uncertainties and changes in condition, significance, value and effect,
including those discussed under the heading Risk Factors within the section of
this report entitled "Item 7", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and reports filed by Solectron
with the Securities and Exchange Commission, specifically forms 8-K, 10-Q, S-3,
S-4 and S-8. Such risks, uncertainties and changes in condition, significance,
value and effect could cause our actual results to differ materially from those
anticipated events. Although we believe that the assumptions underlying the
forward-looking statements are reasonable, any of these assumptions could prove
inaccurate, including, but not limited to, statements as to our future operating
results and business plans. We disclaim any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

RESULTS OF OPERATIONS

The electronics industry is subject to rapid
technological change, product obsolescence and price competition. These and
other factors affecting the electronics industry, or any of our major customers
in particular, could materially harm our results of operations.

RESULTS OF OPERATIONS FOR YEARS ENDED AUGUST 31, 2001,
2000 AND 1999

The following table summarizes certain items in the
Consolidated Statements of Operations as a percentage of net sales. The
financial information and the discussion below should be read in conjunction
with the consolidated financial statements and notes thereto.

`YEARS ENDED AUGUST 31,
                                      ----------------------------------------
                                          2001          2000          1999
                                      ------------  ------------  ------------
Net sales                                   100.0 %       100.0 %       100.0 %
Cost of sales                                92.0          91.0          90.3
                                      ------------  ------------  ------------
Gross profit                                  8.0           9.0           9.7
Operating expenses:
  Selling, general and
    administrative                            4.4           3.3           3.9
  Research and development                    0.4           0.4           0.4
  Goodwill amortization expense               0.7           --            --
  Acquisition costs                           0.2           0.2           --
  Restructuring and
    impairment costs                          2.8           0.1           --
                                      ------------  ------------  ------------
      Operating  income (loss)               (0.5)          5.0           5.4
Net interest income (expense)                (0.3)          0.2           --
                                      ------------  ------------  ------------

Income (loss) before income taxes            (0.8)          5.2           5.4
Income taxes (benefit)                       (0.2)          1.7           1.7
                                      ------------  ------------  ------------
     Net  income (loss)                      (0.6)%         3.5 %         3.7 %
                                      ============  ============  ============`

Net Sales

Our net sales have increased in each of the past several
years, reflecting the growing trend toward outsourcing within the electronics
industry. For the year ended August 31, 2001, net sales grew to $18.7 billion,
an increase of 32.2% over fiscal 2000. Net sales of $14.1 billion in fiscal 2000
were 46.2% greater than fiscal 1999. The sales growth in fiscal 2001 compared
with fiscal 2000 was primarily attributable to increased demand from our
personal computer, notebook and consumer automotive business sectors in the
first half of fiscal 2001, and our acquisitions during fiscal 2001. The sales
growth in fiscal 2000 over fiscal 1999 was primarily due to new program ramp-ups, strong
demand from our customers worldwide and acquisitions made during
fiscal 2000.

We are organized in three industry segments: global
manufacturing business unit, technology solutions business unit, and global
services business unit. Our core business group, global manufacturing business
unit, provided 91.9%, 87.8%, and 87.5% of net sales, respectively, for fiscal
2001, 2000 and 1999. Our technology solutions business unt, consisting of SMART,
Force and our recent acquisition of Centennial, contributed 6.4%, 10.5% and
11.7% of net sales, respectively, for fiscal 2001, 2000 and 1999. Our global
services business unit, contributed 1.7%, 1.7% and 0.8% of net sales,
respectively, in fiscal 2001, 2000 and 1999.

Global Manufacturing Business Unit

Fiscal year 2001 net sales grew to $17.2 billion, an increase
of 38.4% over fiscal year 2000. This increase was due to higher demand growth
from our customers during the first half of fiscal 2001 and the acquisitions of
NEL and Shinei as well as two Sony manufacturing plants during fiscal year 2001.
Fiscal year 2000 net sales grew to $12.4 billion, an increase of 46.8% over
fiscal 1999. The increase was primarily due to strong demand growth from our
customers and to acquisitions, including Alcatel's telecommunications
manufacturing business in Liverpool, Australia, by our subsidiary Bluegum; IBM
ECAT in Austin, Texas; Trimble of California; IBM's Netfinity server operations
in Greenock, Scotland; Ericsson's telecommunications infrastructure equipment
operations in Longuenesse, France, and Ostersund, Sweden; and Zhone Technologies
of California; as well as our acquisition of Alcatel's manufacturing business in
Aguadilla, Puerto Rico.

Within the Americas, net sales increased to $9.7 billion, a
16% increase in fiscal 2001 over 2000. The Milpitas site in California,
Guadalajara site in Mexico and Austin site in Texas were the largest
contributors to the sales increase. The increase in fiscal 2001 compared to
fiscal 2000 was primarily due to higher demand from our customers in the first
half of fiscal 2001 and to our acquisition of Nortel sites in North Carolina,
Mexico and Canada, partially offset by the decrease in customer demand in the
second half of fiscal 2001. The increase in fiscal 2000 versus 1999 was
primarily due to new programs from our customers and sales growth in the
Americas. Sales continued to grow in the Milpitas site despite our strategic
transfer of personal computer PCB programs and computer peripherals systems
assembly programs to Mexico and networking business to Penang, Malaysia.

In Europe, net sales increased to $3.3 billion, a 67.3%
increase in fiscal 2001 over fiscal 2000. The increase in net sales was
principally due to higher demand in the first half of fiscal 2001 and
acquisition of Ericsson's manufacturing assets in Ostersund, Sweden during the
third quarter of fiscal 2000. Our France and Ostersund sites were the largest
contributors to the sales increase in the region. Net sales stayed relatively
flat in fiscal 2000 versus fiscal 1999.

In Asia/Pacific, net sales grew to $4.3 billion, an 89.1%
increase in fiscal 2001 over fiscal 2000. The increase over the prior year was
primarily due to demand growth from our customers in the first half of fiscal
2001 and acquisitions during fiscal 2001, as well as the transfer of networking
business from our Milpitas site to our Penang site in Malaysia. Our Penang site
and Suzhou site as well as former NEL and Shinei sites from our acquisitions
during fiscal 2001 were the major contributors to the increase. Net sales growth
in fiscal 2000 was primarily due to demand growth in mobile phone, networking
and personal computer projects. In particular, sales growth in the Penang site
was attributable to the growth of networking business. In addition, our
subsidiary Bluegum's acquisition of Alcatel's telecommunications manufacturing
operations in Liverpool, Australia, also contributed to our sales increase in
the region.

Technology Solutions Business Unit

Our technology solutions business unit consists of SMART,
Force, and newly acquired Centennial. Our main products in the technology
solutions group are specialty and standard memory products, PC cards, embedded
computer modules and communications card products. Net sales for fiscal years
2001, 2000 and 1999 were $1.2 billion, $1.5 billion and $1.1 billion,
respectively. The decrease in fiscal 2001 of 19.2% from fiscal 2000 was
principally due to decrease in demand and declines in average selling prices of
memory components partially offset by the acquisition of Centennial. The
increase in fiscal 2000 of 31.5% over fiscal 1999 resulted from an overall
increase in standard memory products incorporated with average memory densities,
as well as an increase in embedded computer modules and communications card
products.

Global Services Business Unit

Our global services business unit was established through
three business acquisitions, Sequel, NULOGIX and AMERICOM, as well as a small
division of Solectron in Milpitas. Net sales were $309.6 million, $232.5 million
and $78.5 million in fiscal years 2001, 2000 and 1999, respectively. Net sales
increased 33.2% in fiscal 2001 compared to fiscal 2000. The increase in net
sales in fiscal 2001 was primarily due to stronger customer demand, acquisitions
of Nortel assets and Bluegum Group during fiscal 2000, and acquisitions of IBM
Netherlands service facilities as well as MCC-Sequel during fiscal 2001. The
increase in fiscal 2000 was due to higher customer demand and the acquisition of
AMERICOM.



International Sites

Net sales from our international sites, as a percentage of
consolidated net sales, have grown over the last three fiscal years.
International locations contributed 51% of consolidated net sales in fiscal
2001, compared with 41% in fiscal 2000 and 33% in fiscal 1999. As a result of
our international sales and facilities, our operations are subject to the risks
of doing business abroad. While these dynamics have not materially harmed our
results of operations, we cannot assure that there will not be such an impact in
the future.

Major Customers

Only four major customers accounted for more than 10% of our
net sales in fiscal 2001, 2000 and 1999, as summarized in the following
table.

`YEARS ENDED AUGUST 31,
                                 --------------------------------------------
                                      2001          2000             1999
                                 ------------  ---------------  -------------
Cisco                                   11.5%            12.0%          11.1%
Compaq                                   --               --            11.8%
Ericsson                                13.7%            13.0%           --
Nortel                                  11.9%             --             --`

Our top ten customers accounted for 70% of net sales in
fiscal 2001, 72% of net sales in fiscal 2000 and 74% of net sales in fiscal
1999. We depend on continued revenues from Ericsson, Compaq, Cisco, Nortel and
our other top ten customers. We cannot predict whether these or any other
customers will increase or decrease as a percentage of consolidated net sales
either individually or as a group. Consequently, any material decrease in sales
to these or other customers could materially harm Solectron's results of
operations.

We believe that our ability to continue growing depends on
increasing sales to existing customers for their current and future product
generations, successfully marketing to new customers and expanding
geographically. Customer contracts can be canceled and volume levels can be
changed or delayed. The timely replacement of delayed, canceled or reduced
orders with new business cannot be assured. In addition, we cannot assure that
our current customers will continue to utilize our services. Because of these
factors, we cannot assure that Solectron's historical revenue growth rate will
continue.

GROSS PROFIT

Our gross margin percentages were 8.0%, 9.0% and 9.7%
respectively, for fiscal 2001, 2000 and 1999. The decrease in gross margin in
fiscal 2001 compared to fiscal 2000 was primarily due to under-absorbed fixed
costs that could not be taken out immediately in response to the decline in our
customers' end market demand. In the second quarter of fiscal 2001, we began to
experience manufacturing inefficiencies due to higher-than-normal costs
associated with the additional manpower required in the materials management
area and under-utilization of capacity which occurred later in the second
quarter. Our gross margin was also affected by inefficiencies associated with
restructuring. We are shifting capacity to low-cost locations, and programs are
being transferred at an accelerated pace. Those transfer costs are accounted for
as operational costs versus restructuring costs, consequently they affected our
margins. The decrease in fiscal 2000 over fiscal 1999 was attributed primarily
to sales derived from lower margin mobile telecommunication equipment,
manufacturing inefficiencies due to non-linearity of material receipts, a high
level of business development activities and new site integration support
expenditures, as well as capacity ramp-up for future demand growth. Our start-up
operations also contributed to the decrease. In addition, the amortization of
intellectual property resulting from certain acquisitions reduced gross margins.

For our global manufacturing business unit, we anticipate a
larger percentage of our sales may be derived from systems-build projects that
generally yield lower profit margins than PCB assembly. We expect most of our
technology solutions sales may continue to be derived from turn-key projects,
which typically yield lower profit margins than consignment projects. In
addition, factors affecting technology solutions profit margins include the
sales mix of specialty memory modules, standard memory modules, communication
card products and embedded computer modules, as well as changes in average
memory densities used in memory products.

In the foreseeable future, our overall gross margin will
depend primarily on several factors, including but not limited to, product mix,
production efficiencies, utilization of manufacturing capacity, start-up and
integration costs of new and acquired businesses, percentage of sales derived
from systems-build and turn-key projects, pricing within the electronics
industry, component costs and delivery linearity, and the cost structure at
individual sites. Over time, gross margins at the individual sites and for
Solectron as a whole may continue to fluctuate. Increases in the systems-build
business or turn-key projects, additional costs associated with new projects,
and price erosion within the electronics industry could harm our gross
margin.

In addition, we have experienced component shortages. While
the component availability fluctuates from time to time and is subject to lead
time and other constraints, this could possibly have a negative impact on our
sales and gross margins for the foreseeable future. Therefore, we cannot assure
that our gross margin will not fluctuate or decrease in future periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In absolute dollars, our selling, general and
administrative (SG&A) expenses increased 77.2% in fiscal 2001 compared to
fiscal 2000, and 23.1% in fiscal 2000 over fiscal 1999. As a percentage of net
sales, SG&A expenses were 4.4% in fiscal 2001, 3.3% in fiscal 2000 and 3.9%
in fiscal 1999. The increases in absolute dollars and as a percentage of net
sales in fiscal 2001 compared to fiscal 2000 were due to higher human resource
costs, information systems cost, and higher SG&A resulting from our
acquisitions of NEL, Centennial, MCC-Sequel, Shinei and two Sony manufacturing
facilities. The increase in absolute dollars in fiscal 2000 compared to 1999 was
caused by an increase in head count and information systems costs to support our
sales growth and increased costs of acquisition related activities. The primary
reasons for the decrease in fiscal 2000 over 1999 in SG&A expenses as a
percentage of net sales were the significant increase in sales volume and our
continued effort to manage operating expenses, partially offset by the costs
associated with investments in our business infrastructure, information systems
and start-up costs for new sites. We anticipate SG&A expenses will continue
to increase in terms of absolute dollars in the future as we continue to develop
the infrastructure necessary to support our current and prospective
business.

RESEARCH AND DEVELOPMENT EXPENSES

With the exception of our technology solutions business
unit, our research and development (R&D) activities have been primarily
developing prototype and engineering design capabilities, developing common
tools for electrical, mechanical design, standardizing a single functional test
platform, developing methods for handling, processing and re-flow of high I/O
ball grid array, high reliability environmental stress test technology and the
implementation of environmentally friendly assembly processes such as lead-free
and no-clean. Technology solutions' R&D efforts are concentrated on new
product development and improvement of product designs through improvements in
functionality and the use of microprocessors in embedded applications.

In absolute dollars, R&D expenses increased 15.0% in
fiscal 2001 compared to fiscal 2000 and 50.1% in fiscal 2000 over fiscal 1999.
As a percentage of net sales, R&D expense was 0.4% of net sales for fiscal
2001, 2000 and 1999. The increases in absolute dollars in R&D expenses in
fiscal 2001 and 2000, were primarily due to our increased R&D effort in
SMART and Force and new R&D projects initiated at our various sites. We
expect that R&D expenses will increase in absolute dollars in the future as
SMART and Force continue to invest in their R&D efforts and additional
R&D projects are undertaken at certain sites.

GOODWILL AMORTIZATION EXPENSE

The goodwill amortization expense of $139.9 million in
fiscal 2001 primarily resulted from the NEL acquisition. During the second
quarter of fiscal 2001, we purchased all of the outstanding issued share capital
and convertible bonds of NEL for approximately $2.3 billion and $122.4 million,
respectively. The NEL acquisition was accounted for under the purchase
accounting method and, as a result, we recorded approximately $1.97 billion of
goodwill. Goodwill is amortized in equal annual amounts over a ten-year period.

ACQUISITION COSTS

During fiscal 2001, we recorded $29.7 million in
acquisition and integration costs, which were primarily related to the NEL
acquisition. A charge for acquisition costs of $26.8 million was incurred in
fiscal 2000 as a result of the acquisitions of SMART, AMERICOM and Bluegum
during fiscal 2000. Our acquisition costs consist of investment banker fees,
legal fees, accounting fees, registration fees and other direct costs.

RESTRUCTURING AND IMPAIRMENT COSTS

The current fiscal year restructuring and impairment
charge was taken in connection with our plan to review our operations in light
of the current economic downturn and our plan to undertake several measures to
restructure the company. The measures, which included reducing the workforce,
consolidating certain facilities and changing the strategic focus of a number of
sites, were largely intended to align our capacity and infrastructure to
anticipated customer demand as well as rationalize our footprint worldwide.

During fiscal 2001 and primarily in the third and fourth
quarters, total restructuring and impairment costs of $517.3 million were
charged against earnings. These restructuring and impairment charges included
employee severance and benefit costs of approximately $70.0 million, costs
related to facilities that will be abandoned and subleased of approximately
$56.4 million, costs related to equipment that will be abandoned of
approximately $117.5 million, impairment of equipment of approximately $188.2
million, impairment of facilities of approximately $37.7 million, impairment of
goodwill, intangible and other assets related to closed facilities of
approximately $42.2 million and other exit costs of approximately $5.3 million.

The employee severance and benefit costs related to the
elimination of approximately 11,800 positions worldwide. Approximately 67% of
the positions eliminated were in the Americas region, 23% were in Europe and 10%
were in Asia/Pacific. The employment reductions primarily affected employees in
manufacturing and back office support functions. Facilities and equipment
subject to restructuring were primarily located in the Americas and Europe. For
leased facilities that will be abandoned and subleased, the lease costs
represent future lease payments subsequent to abandonment less estimated
sublease income. For facilities and equipment, the impairment loss recognized
was based on the fair value less costs to sell, with fair value based on
estimates of existing market prices for similar assets. As of August 31, 2001,
all 11,800 employees have left Solectron under this plan.

We recorded restructuring costs of approximately $11.1
million in fiscal 2000 primarily related to the consolidations of certain
facilities acquired in the SMART and Sequel mergers. Approximately $4.4 million
related to lease exit costs, $3.4 million related to asset write-offs and other
incidental costs, $1.2 million related to severance costs and $2.1 million
related to other costs.

NET INTEREST INCOME (EXPENSE)

Net interest expense was $59.1 million in fiscal 2001
compared to net interest income of $35.3 million in fiscal 2000, and compared to
net interest expense of $1.6 million in fiscal 1999. The net interest expense in
fiscal 2001 primarily resulted from our 4.0% yield zero-coupon convertible
senior notes, 2.75% and 3.25% yield zero-coupon convertible senior notes and
7.38% senior notes, partially offset by interest income earned on deployed cash
and investments. The net interest income in fiscal 2000 was attributed primarily
to interest income earned on cash and investments from the proceeds of the 2.75%
zero-coupon convertible senior notes which were issued in May 2000, offset
partially with interest expense on the 4% and 2.75% yield zero-coupon
convertible senior notes as well as on the 7-3/8% senior notes. The net interest
expense in fiscal 1999 was related to interest expenses from the 4% yield zero
coupon convertible senior notes and the 6% convertible subordinated notes.

INCOME TAXES

We reported income tax benefit of $34.2 million in fiscal
2001 arising from the loss incurred in the period. Income tax expense was $238.8
million in fiscal 2000 and $164.2 million in fiscal 1999. Our effective income
tax benefit rate was 21.7% in fiscal 2001. Our effective income tax expense rate
was 32.3% in fiscal 2000 and 31.9% in fiscal 1999. Our benefit rate was lower
than our expense rate in prior years because we did not recognize some of the
income tax benefits for which future realization is uncertain.

In general, the effective income tax rate is largely a
function of the balance between income from domestic and international
operations. Our international operations, taken as a whole, have been taxed at a
lower rate than those in the United States, primarily due to tax holidays
granted to several of Solectron's overseas sites in Malaysia, Singapore, and
China. The Malaysian tax holiday is effective through July 2011, subject to some
conditions, including certain levels of research and development expenditures.
In addition, Solectron has also been granted a tax holiday for certain
operations in Singapore which is effective through March 2011, subject to
certain conditions. Solectron has also been granted various tax holidays in
China, which are effective for various terms and are subject to certain
conditions.

LIQUIDITY AND CAPITAL RESOURCES

Our net working capital was $6.0 billion at August 31,
2001 compared to $5.4 billion at August 31, 2000. Cash and cash equivalents and
short-term investments were $2.8 billion at August 31, 2001, an increase of $0.4
billion from August 31, 2000. The increase was primarily due to proceeds of
approximately $1.5 billion from 3.25% yield zero-coupon convertible senior debt
issued in November 2000 and the issuance of 35 million shares of common stock
for approximately $1.2 billion, as well as the inventory reduction of $577
million, partially offset by investing activities, including the acquisition of
NEL's shares and convertible bonds for approximately $2.4 billion, and capital
expenditures of $536.8 million.

Accounts receivable increased $297 million during fiscal
2001, inventories decreased $577 million in the same period. The increase in
accounts receivable resulted from our sales growth and the acquisitions of NEL,
Centennial, Shinei and MCC-Sequel. The decrease in inventory level was primarily
due to our customers taking back excess inventory and by our return to normal
just-in-time inventory management practices. In addition, we worked with our
customers and suppliers to revise the terms and conditions under which we
procure and return parts. Those changes will help mitigate inventory imbalances
in the future. We continuously manage our inventory levels striving to maintain
competitive lead times while balancing the risk of inventory obsolescence due to
rapidly changing technology and customer requirements.

As of August 31, 2001, we had available a $100 million
unsecured multicurrency revolving line of credit that expires on April 30, 2002.
Borrowings under the credit facility bear interest, at our option, at either the
bank's prime rate, the London interbank offering rate (LIBOR) plus a margin, or
the bank's certificate of deposit (CD) rate plus a margin. The margin under the
LIBOR or CD rate options will vary depending on our Standard & Poor's
Corporation and/or Moody's Investor Services, Inc. rating for our long-term
senior unsecured debt. This margin was 0.4% at August 31, 2001. Under the credit
agreement, we must meet certain financial covenants. There were no borrowings
outstanding under this line of credit as of August 31, 2001. In addition, we had
approximately $181 million and $591 million, respectively, in committed and
uncommitted foreign lines of credit and other bank facilities as of August 31,
2001. Borrowings were payable on demand. The interest rates ranged from the
bank's prime lending rate to the bank's prime rate plus 2.0%. As of August 31,
2001, borrowings and guaranteed amounts under committed and uncommitted foreign
lines of credit were $155 million and $135 million, respectively. The weighted-
average interest rate was 4.4% for committed and 4.7% for uncommitted foreign
lines of credit. Under these lines of credit agreements, we must meet certain
financial covenants. We were in compliance with all of the line of credit
financial covenants as of August 31, 2001.

We believe that our current cash and cash equivalents, short-
term investments, line of credit, and cash generated from operations coupled
with the anticipated proceeds from any offerings under our recently filed shelf
registration statements will satisfy our expected working capital, capital
expenditure, and investment requirements through at least the next 12 months.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2000, we adopted Statement of Financial
Accounting Standard (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 137 and No. 138. We enter into short-
term foreign currency forward contracts and borrowings to hedge only those
currency exposures associated with certain assets and liabilities denominated in
non-functional currencies.

In addition, we periodically hedge variability in cash flows
resulting from fluctuating interest rates. We entered into an interest rate swap
agreement with a notional amount of $52 million, maturing on June 3, 2002, to
hedge against varying rental payments associated with an operating lease that
requires payments based on LIBOR. This swap agreement was designated as a cash
flow hedge upon adoption of the standard and the ineffective portion of the
hedge was not significant. Accordingly, changes in the fair value of this
interest rate swap designated as a cash flow hedge are included in accumulated
other comprehensive income. These amounts are subsequently reclassified into
rent expense during the period in which the LIBOR-based lease agreement affects
earnings. Since adoption, the impact to the financial statements has not been
significant.

In July 2001, the Financial Accounting Standard Board (FASB)
issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that the purchase method of accounting
be used for all business combinations initiated or completed after June 30,
2001. SFAS No. 141 also specifies the criteria intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated lives to their estimated residual
values, and be reviewed for impairment in accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 will continue to be amortized prior to adoption of
SFAS No. 142.

In accordance with SFAS No. 141, we are accounting for all
business combinations initiated or completed after June 30, 2001 using the
purchase method of accounting. We adopted the remaining provisions of SFAS No.
141 and SFAS No. 142 effective September 1, 2001.

SFAS No. 141 requires, upon adoption of SFAS No. 142, that we
evaluate our existing intangibles assets and goodwill that were acquired in
prior purchase business combinations, and to make any necessary
reclassifications in order to conform with the new criteria in SFAS No. 141 for
recognition apart from goodwill. Upon adoption of SFAS No. 142, we are required
to reassess the useful lives and residual values of all intangible assets
acquired in purchase business combinations, and to make any necessary
amortization period adjustments by the end of the first interim period after
adoption. We are required to test the intangible assets for impairment in
accordance with the provisions of SFAS No. 142 within the first interim period.
Any impairment loss is measured as of the date of adoption and recognized as a
cumulative effect of change in accounting principle in the first interim
period.

In connection with the transitional goodwill impairment
evaluation, SFAS No. 142 requires us to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, we must identify our reporting units and determine the carrying
value of each reporting unit by assessing the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The regulation allows up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying value. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and we must perform the second step of the transitional
impairment test. In the second step, we must compare the implied fair value of
the reporting unit's goodwill, determined by allocating the reporting unit's
fair value to all its assets (recognized and unrecognized) and liabilities in a
manner similar to a purchase price allocation in accordance with SFAS No. 141,
to its carrying amount, both of which would be measured as of the date of
adoption. This second step is required to be completed as soon as possible, but
no later than the end of the year of adoption. Any transitional impairment loss
will be recognized as a cumulative effect of a change in accounting principle in
our statement of operations.

As of September 1, 2001, we had unamortized goodwill of $1.9
billion, unamortized identifiable intangible assets of approximately $500
million, all of which are subject to the transition provisions of SFAS No. 141
and 142. Amortization expense related to goodwill was $139.9 million for fiscal
2001. Because of the extensive effort required to comply with the remaining
provisions of SFAS Nos. 141 and 142, it is not practicable to reasonably
estimate the impact on our financial statements of these provisions beyond
discontinuing amortization.

The FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, in August 2001, and SFAS No.144, Accounting for the Impairment or
Disposal of Long-lived Assets, in October 2001. SFAS No. 143 requires that the
fair value of an asset retirement obligation be recorded as a liability in the
period in which it incurs the obligation. SFAS No. 144 services to clarify and
further define the provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 does
not apply to goodwill and other intangible assets that are not amortized. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002 and SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. We expect
to adopt both effective September 1, 2002. The effect of the adopting these
statements is not expected to have a material effect on the Company's
consolidated financial position or results of operations.

RECENT DEVELOPMENTS

On July 2, 2001, we announced the filing of a
registration statement with the Securities and Exchange Commission pursuant to
Rule 415 under the Securities Act of 1933, as amended. We may, from time to
time, offer our debt securities, shares of our common stock and preferred stock,
warrants, stock purchase contracts, stock purchase units and guarantees of
preferred securities, which together have an aggregate initial public offering
price of up to $3 billion. The Securities may be offered, separately or
together, in separate series, in amounts, at prices and on terms to be set forth
in the prospectus contained in the registration statement, and in one or more
supplements to that prospectus, and may only be offered pursuant thereto.

On June 29, 2001, our board of directors approved the
adoption of a stockholder rights plan. Under the plan, we issued a dividend of
one right for each share of our common stock, par value of $0.001 per share,
held by stockholders of record at the close of business on July 30, 2001.

On August 9, 2001, we announced that we have signed a
definitive agreement under which Solectron and C-MAC will combine to create a
diversified designer and manufacturer of integrated electronic manufacturing
solutions. The combination with C-MAC is expected to enhance Solectron's
systems-solution offerings and expand its portfolio. Under the terms of the
agreement, Solectron will issue 1.755 shares of Solectron common stock in
exchange for each C-MAC common share outstanding. As of the announcement date,
the transaction was valued at approximately $2.6 billion. The transaction will
be accounted for using the purchase method. The transaction is expected to be
completed by the end of calendar 2001. The arrangement is subject to merger
notification requirements pursuant to the antitrust laws of the United States,
Canada, the European Union and Brazil and subject to review under the Investment
Canada Act. As of October 31, 2001, we had received regulatory antitrust
approval from the United states, Canada, the European Union and Brazil. The
approval under the Investment Canada Act was still pending.

On September 17, 2001, our Board of Directors authorized a
$200 million stock repurchase program. Under the program, we may repurchase our
common shares in the open market beginning the first day that the New York Stock
Exchange resumed. As of October 31, 2001, we had purchased 442,200 shares,
approximately, $4.5 million under this program.

On October 16, 2001, we announced that we completed our
acquisition of Iphotonics, Inc., a provider of core optical manufacturing
services. The acquisition increases our optical services capabilities, and
enhances our total systems-solutions offering.

On October 26, 2001, we announced that we completed our
acquisition of Stream International Inc., a global customer relationship
management outsourcing and support services provider for leading technology
companies. The acquisition increases the capabilities of Solectron's global
services business unit and enhances our total service offerings.

At various dates through October 25, 2001, Solectron
repurchased certain zero coupon convertible senior notes due 2019, with face
value of $312 million, and a fair value of $156 million.





RISK FACTORS



WE ARE EXPOSED TO GENERAL ECONOMIC CONDITIONS, WHICH COULD
HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION.

As a result of recent unfavorable economic conditions and
reduced capital spending, our sales have declined in the second half of fiscal
2001 compared to the first half of fiscal 2001. In particular, sales to OEMs in
the telecommunications, workstation and server equipment manufacturing industry
worldwide were impacted during the second half of fiscal 2001. If the economic
conditions in the United States worsen we may experience a material adverse
impact on our business, operating results and financial condition.

WE HAVE SIGNIFICANT DEBT LEVERAGE AND DEBT SERVICE
OBLIGATIONS; IF WE ARE UNABLE TO SERVICE THESE DEBT OBLIGATIONS, OUR BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY
IMPACTED.

Our ratio of earnings to fixed charges for fiscal 2001
was 0.23x as compared to 8.38x for fiscal 2000. This decline in the ratio is
primarily due to interest expense growing at a greater rate than income during
fiscal 2001. The degree to which we may be leveraged could materially and
adversely affect our ability to obtain financing for working capital,
acquisitions or other purposes and could make us more vulnerable to industry
downturns and competitive pressures. Our ability to meet our debt service
obligations will be dependent upon our future performance, which will be subject
to financial, business and other factors affecting our operations, many of which
are beyond our control.

We will require substantial amounts of cash to fund scheduled
payments of principal and interest on our outstanding indebtedness, as well as
future capital expenditures and any increased working capital requirements. If
we are unable to meet our cash requirements out of cash flow from operations,
there can be no assurance that we will be able to obtain alternative financing,
that any such financing would be on favorable terms, or that we will be
permitted to do so under the terms of our existing financing arrangements, or
our financing arrangements in effect in the future. In the absence of such
financing, our ability to respond to changing business and economic conditions,
to make future acquisitions, to experience adverse operating results or to fund
required capital expenditures or increased working capital requirements may be
adversely affected.

MOST OF OUR NET SALES COMES FROM A SMALL NUMBER OF
CUSTOMERS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR NET SALES COULD DECLINE
SIGNIFICANTLY.

Most of our annual net sales comes from a small number of
our customers. Our ten largest customers accounted for approximately 70% of net
sales in fiscal 2001 and approximately 72% and 74%, of net sales in fiscal 2000
and 1999, respectively. Since we are dependent upon continued net sales from our
ten largest customers, any material delay, cancellation or reduction of orders
from these or other major customers could cause our net sales to decline
significantly. Some of these customers individually account for more than ten
percent of our annual net sales. We cannot guarantee that we will be able to
retain any of our ten largest customers or any other accounts. In addition, our
customers may materially reduce the level of services ordered from us at any
time. This could cause a significant decline in our net sales and we may not be
able to reduce the accompanying expenses at the same time. Moreover, our
business, financial condition and results of operations will continue to depend
in significant part on our ability to obtain orders from new customers, as well
as on the financial condition and success of our customers. Therefore, any
adverse factors affecting any of our customers or their customers could have a
material adverse effect on our business, financial condition and results of
operations.

OUR LONG-TERM CONTRACTS DO NOT INCLUDE MINIMUM PURCHASE
REQUIREMENTS.

Although we have long-term contracts with a few of our
top ten customers, including Ericsson, IBM and Nortel under which these
customers are obligated to obtain services from us, only Nortel is obligated to
purchase any minimum amount of services. As a result, we cannot guarantee that
we will receive any net sales from these contracts. In addition, these customers
with whom we have long-term contracts may materially reduce the level of
services ordered at any time. This could cause a significant decline in our net
sales, and we may not be able to reduce our accompanying expenses at the same
time.

POSSIBLE FLUCTUATION OF OPERATING RESULTS FROM QUARTER TO
QUARTER COULD AFFECT THE MARKET PRICE OF OUR SECURITIES.

Our quarterly earnings may fluctuate in the future due to
a number of factors including the following:

- Differences in the profitability of the types of
manufacturing services we provide. For example, high velocity and low complexity
PCB and systems assembly services have lower gross margins than low
volume/complex PCB and systems assembly services;
- Our ability to maximize the hours of use of our equipment
and facilities is dependent on the duration of the production run time for each
job and customer;
- The amount of automation that we can use in the
manufacturing process for cost reduction varies, depending upon the complexity
of the product being made;
- Our ability to optimize the ordering of inventory as to
timing and amount to avoid holding inventory in excess of immediate production
needs;
- Fluctuations in demand for our services or the products
being manufactured;
- Fluctuations in the availability and pricing of
components;
- Timing of expenditures in anticipation of increased
sales;
- Cyclicality in our target markets; and
- Expenses associated with acquisitions.

Therefore, our operating results in the future could be below
the expectations of securities analysts and investors. If this occurs, the
market price of our common stock could be harmed.

WE DEPEND UPON THE ELECTRONICS INDUSTRY, WHICH CONTINUALLY
PRODUCES TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES; OUR INABILITY
TO CONTINUALLY MANUFACTURE SUCH PRODUCTS IN A COST EFFECTIVE MANNER WOULD HARM
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Most of our net sales are to companies in the electronics
industry, which is subject to rapid technological change and product
obsolescence. If our customers are unable to create products that keep pace with
the changing technological environment, our customers' products could become
obsolete and the demand for our services could decline significantly. If we are
unable to offer technologically advanced, cost effective, quick response
manufacturing services to customers, demand for our services will also decline.
In addition, a substantial portion of our net sales is derived from our ability
to offer complete service solutions for our customers. For example, if we fail
to maintain high-quality design and engineering services, our net sales would
significantly decline.

For our technology solutions business, we have experienced,
and may in the future experience, delays from time to time in the development
and introduction of new products. Moreover, we cannot assure that we will be
successful in selecting, developing, manufacturing and marketing new products or
enhancements. We cannot assure that defects or errors will not be found in our
products after commencement of commercial shipments, which could result in the
delay in market acceptance of such products. The inability to introduce new
products or enhancements could harm our business, financial condition and
results of operations.

WE DEPEND ON A LIMITED OR SOLE SOURCE OF SUPPLIERS FOR
CRITICAL COMPONENTS. THE INABILITY TO OBTAIN SUFFICIENT COMPONENTS AS REQUIRED
WOULD CAUSE HARM TO OUR BUSINESS.

We are dependent on certain suppliers, including limited
and sole source suppliers, to provide key components used in our products. We
have experienced and may continue to experience delays in component deliveries,
which could cause delays in product shipments and require the redesign of
certain products. Also for our technology solutions business, we are dependent
upon certain limited or sole source suppliers for critical components used for
our memory module, communications card and embedded computer products. The
electronics industry has experienced in the past, and may experience in the
future, shortages in semiconductor devices, including DRAM, SRAM, Flash memory,
tantalum capacitors and other commodities that may be caused by such conditions
as overall market demand surges or supplier production capacity constraints.
Except for certain commodity parts, we generally have no written agreements with
our suppliers. We cannot give any assurance that we will receive adequate
component supplies on a timely basis in the future. The inability to continue to
obtain sufficient components as required, or to develop alternative sources as
required, could cause delays, disruptions or reductions in product shipments or
require product redesigns which could damage relationships with current or
prospective customers, thereby causing harm to our business.

WE POTENTIALLY BEAR THE RISK OF PRICE INCREASES ASSOCIATED
WITH POTENTIAL SHORTAGES IN THE AVAILABILITY OF ELECTRONICS COMPONENTS.

At various times, there have been shortages of components
in the electronics industry. One of the services that we perform for many
customers is purchasing electronics components used in the manufacturing of the
customers' products. As a result of this service, we potentially bear the risk
of price increases for these components because we are unable to purchase
components at the pricing level anticipated to support the margins assumed in
our agreements with our customers.

OUR NET SALES COULD DECLINE IF OUR COMPETITORS PROVIDE
COMPARABLE MANUFACTURING SERVICES AND IMPROVED PRODUCTS AT A LOWER COST.

We compete with different contract manufacturers,
depending on the type of service we provide or the geographic locale of our
operations. The memory module, communications card and embedded computer
subsystem industries are also intensely competitive. These competitors may have
greater manufacturing, financial, R&D and/or marketing resources than we
have. In addition, we may not be able to offer prices as low as some of our
competitors because those competitors may have lower cost structures as a result
of their geographic location or the services they provide. Our inability to
provide comparable or better manufacturing services at a lower cost than our
competitors could cause our net sales to decline. We also expect our competitors
to continue to improve the performance of their current products or services, to
reduce their current products or service sales prices and to introduce new
products or services that may offer greater performance and improved pricing.
Any of these could cause a decline in sales, loss of market acceptance of our
products or services, or profit margin compression.

WE DEPEND ON THE MEMORY MODULE PRODUCT MARKET.

Most of our technology solutions net sales is derived
from memory modular products. The market for these products is characterized by
frequent transitions in which products rapidly incorporate new features and
performance standards. A failure to develop products with required feature sets
or performance standards or a delay as short as a few months in bringing a new
product to market could reduce our net sales which may have a material adverse
effect on our business, financial condition and results of operations. In
addition, the market for semiconductor memory devices has been cyclical. The
industry has experienced significant economic downturns at various times,
characterized by diminished product demand, accelerated erosion of average
selling prices and excess production. In the past, there have been significant
declines in the prices for DRAM, SRAM and flash memory. Similar occurrences will
reduce our profit.

WE DEPEND ON THE CONTINUING TREND OF OEMS TO OUTSOUCE.

A substantial factor in our revenue growth is
attributable to the transfer of manufacturing and supply base management
activities from our OEM customers. Future growth is partially dependent on new
outsourcing opportunities. To the extent that these opportunities are not
available, our future growth would be unfavorably impacted. These outsourcing
opportunities may include the transfer of assets such as facilities, equipment
and inventory.

IF WE ARE UNABLE TO MANAGE OUR RAPID GROWTH AND COST
EFFECTIVELY ASSIMILATE NEW OPERATIONS, OUR PROFITABILITY COULD DECLINE.

We have experienced rapid growth over many years. Our
historical growth may not continue. In recent years we have established
operations in different locations throughout the world. For example, in fiscal
1998, we opened offices in Taipei, Taiwan; Tel Aviv, Israel; Norrkoping and
Stockholm, Sweden; and commenced manufacturing operations in Guadalajara,
Mexico; Suzhou, China; and Timisoara, Romania. Also in fiscal 1998, we acquired
foreign facilities in Sao Paulo, Brazil and Dublin, Ireland. Furthermore,
through acquisitions in fiscal 1998 and 1999, we acquired facilities in Duluth,
Georgia; Columbia, South Carolina; Memphis, Tennessee; and enhanced our
capabilities in Charlotte, North Carolina; Austin, Texas; and Milpitas,
California.

In fiscal 2000, we completed acquisitions of AMERICOM, SMART,
and Bluegum. Through additional acquisitions, we also acquired foreign
facilities in Aguadilla, Puerto Rico; Monterrey, Mexico; Calgary, Canada;
Longuenesse, France; Ostersund, Sweden; Cwmcarn, Wales; Pont de Buis and
Douarnenez, France; Monkstown, Northern Ireland; Liverpool, New South Wales;
Wangaratta and Melbourne, Victoria; and Sydney and North Melbourne, Australia.
During fiscal 2001, we completed acquisitions of NEL, Shinei, Centennial, MCC-
Sequel, and Sony's manufacturing facilities in Japan and Taiwan as well as IBM's
repair center in the Netherlands.

Our expansion and growth places a heavy strain on our
personnel and management, manufacturing and other resources. Our ability to
manage the expansion to date, as well as any future expansion, will require
progressive increases in manufacturing infrastructure, as well as enhancements
or upgrades of accounting and other internal management systems and the
implementation of a variety of procedures and controls. We cannot assure that
significant problems in these areas will not occur. Any failure to enhance or
expand these systems and implement such procedures and controls in an efficient
manner and at a pace consistent with our business activities could harm our
financial condition and results of operations. Also, in order to achieve
anticipated revenue and other financial performance targets, we must manage our
assets and operations efficiently. In addition, should we continue to expand
geographically, we may experience certain inefficiencies from the management of
geographically dispersed facilities.

As we manage and continue to expand new operations, we may
incur substantial infrastructure and working capital costs. If we do not achieve
sufficient growth to offset increased expenses associated with rapid expansion,
our profitability will decline.

THE ACQUISITION OF C-MAC MAY NOT OCCUR

On August 9, 2001, we announced that we and C-MAC signed
a definitive agreement under which we and C-MAC will combine to create a
diversified designer and manufacturer of integrated electronic manufacturing
solutions. The transaction is expected to be completed by the end of calendar
2001.

The arrangement is subject to merger notification
requirements pursuant to the antitrust laws of the United States, Canada, the
European Union and Brazil and subject to review and approval under the
Investment Canada Act. The arrangement may be subject to additional foreign
antitrust laws to be determined. We may not be able to obtain the necessary
approval.

The combined company may be required to agree to various
operating restrictions or other conditions, before or after receipt of
shareholder approvals in order to obtain the necessary approvals of the
arrangement under Canada's investment review laws. No additional shareholder
approval is expected to be required or sought for any decision by Solectron or
C-MAC, after the C-MAC and Solectron special meetings which are both scheduled
for November 28, 2001, to agree to any terms and conditions necessary to resolve
any foreign regulatory objections to the transaction, and shareholder approval
will not be sought unless such shareholder approval is required to approve such
terms and conditions under applicable foreign law.

Operating restrictions or other conditions required to secure
regulatory approval may include the imposition of a material limitation on the
ability of any of these parties to conduct their businesses or to own or
exercise control of such assets, properties and stock. Any of these operating
restrictions or conditions could have a material adverse effect on our ability
to economically operate the combined company.

In addition to regulatory approvals, the proposed arrangement
under the Canada Business Corporations Act requires approval by the Superior
Court of Justice (Québec). Prior to the filing of this document, C-MAC
obtained an interim order providing for the calling and holding of the C-MAC
special meeting and other procedural matters. Subject to the approval of the C-
MAC arrangement resolution at the C-MAC meeting and the approval of the
Solectron shares issuance at the Solectron special meeting, we may not be able
to obtain the approval from our shareholders.

WE NEED TO SUCCESSFULLY INTEGRATE OUR ACQUISITIONS TO
MAINTAIN PROFITABILITY.

As we expand our operations through acquisitions and
continue to evaluate acquisition opportunities and may pursue additional
acquisitions over time. These acquisitions involve risks, including:

- Integration and management of the operations;
- Retention of key personnel;
- Integration of purchasing operations and information
systems;
- Retention of the customer base of acquired
businesses;
- Management of an increasingly larger and more
geographically disparate business; and
- Diversion of management's attention from other ongoing
business concerns.

Our profitability will suffer if we are unable to
successfully integrate and manage recent acquisitions and pending acquisitions
including, in particular, the NEL, Shinei, MCC-Sequel, Centennial, and C-MAC
transactions, as well as any future acquisitions that we might pursue, or if we
do not achieve sufficient revenue to offset the increased expenses associated
with these acquisitions.

OUR NON-U.S. LOCATIONS REPRESENT A SIGNIFICANT AND GROWING
PORTION OF OUR NET SALES; WE ARE INCREASINGLY EXPOSED TO RISKS ASSOCIATED WITH
OPERATING INTERNATIONALLY.

In fiscal 2001, approximately 51% of net sales came from
sites outside the United States, while approximately 41% of net sales came from
sites outside the United States in fiscal 2000. As a result of our foreign sales
and facilities, our operations are subject to a variety of risks that are unique
to international operations, including the following:

- Adverse movement of foreign currencies against the U.S.
dollar in which our results are reported;
- Import and export duties, and value added taxes;
- Import and export regulation changes that could erode our
profit margins or restrict exports;
- Potential restrictions on the transfer of funds;
- Inflexible employee contracts in the event of business
downturns; and
- The burden and cost of compliance with foreign
laws.

In addition, we have operations in several locations in
emerging or developing economies that have a potential for higher risk. The
risks associated with these economies include but are not limited to currency
volatility, and other economic or political risks. In the future, these factors
may harm our results of operations. Solectron locations in emerging or
developing economies include Mexico, Brazil, China, Malaysia, Hungary and
Romania. As of August 31, 2001, we recorded $259.4 million in cumulative foreign
exchange translation losses on our balance sheet which was primarily due to the
devaluation of the Brazilian real. While, to date, these factors have not had a
significant adverse impact on our results of operations, we cannot give any
assurance that there will not be such an impact. Furthermore, while we may adopt
measures to reduce the impact of losses resulting from volatile currencies and
other risks of doing business abroad, we cannot assure that such measures will
be adequate.

The Malaysian government adopted currency exchange controls,
including controls on its currency, the ringgit, held outside Malaysia, and
established a fixed exchange rate for the ringgit against the U.S. dollar. The
fixed exchange rate provides a stable rate environment when applied to local
expenses denominated in ringgit. The long-term impact of such controls is not
predictable due to dynamic economic conditions that also affect or are affected
by other regional or global economies.

We have been granted a tax holiday which is effective through
2011, subject to some conditions, for our Malaysian and Singapore sites. We have
also been granted various tax holidays in China. These tax holidays are
effective for various terms and are subject to some conditions. It is possible
that the current tax holidays will be terminated or modified or that future tax
holidays that we may seek will not be granted. If the current tax holidays are
terminated or modified, or if additional tax holidays are not granted in the
future, our effective income tax rate would likely increase.

WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY
EXCHANGE RATES.

We do not use derivative financial instruments for
speculative purposes. Our policy is to hedge our foreign currency denominated
transactions in a manner that substantially offsets the effects of changes in
foreign currency exchange rates. Presently, we use foreign currency borrowings
and foreign currency forward contracts to hedge only those currency exposures
associated with certain assets and liabilities denominated in non-functional
currencies. Corresponding gains and losses on the underlying transaction
generally offset the gains and losses on these foreign currency hedges.

As of August 31, 2001, the majority of the foreign currency
hedging contracts were scheduled to mature in less than three months and there
were no material deferred gains or losses. In addition, our international
operations in some instances act as a natural hedge because both operating
expenses and a portion of sales are denominated in local currency. In these
instances, including our current experience involving the devaluation of the
Brazilian real, although an unfavorable change in the exchange rate of a foreign
currency against the U.S. dollar will result in lower sales when translated to
U.S. dollars, operating expenses will also be lower in these circumstances.
Also, since less than 13% of our net sales in fiscal 2001 were denominated in
currencies other than U.S. dollar, we do not believe our total exposure to be
significant.

We have currency exposures arising from both sales and
purchases denominated in currencies other than the functional currency of our
sites. Fluctuations in the rate of exchange between the currency of the exposure
and the functional currency of our site could seriously harm our business,
operating results and financial condition. For example, if there is an increase
in the rate at which a foreign currency is exchanged for U.S. dollars, it will
require more of the foreign currency to equal a specified amount of U.S. dollars
than before the rate increase. In such cases, and if we price our products and
services in the foreign currency, we will receive less in U.S. dollars than we
did before the rate increase went into effect. If we price our products and
services in U.S. dollars and competitors price their products in local currency,
an increase in the relative strength of the U.S. dollar could result in our
prices being uncompetitive in markets where business is transacted in the local
currency.

WE ARE EXPOSED TO INTEREST RATE FLUCTUATIONS.

The primary objective of our investment activities is to
preserve principal, while at the same time, maximize yields without
significantly increasing risk. To achieve this objective, we maintain our
portfolio of cash equivalents and short-term investments in a variety of
securities, including both government and corporate obligations, certificates of
deposit and money market funds. As of August 31, 2001, approximately 97% of our
total portfolio is scheduled to mature in less than six months. In addition, our
investments are diversified and of relatively short maturity. A hypothetical 10%
increase in interest rates would not have a material effect on our investment
portfolios.

The following table presents the amounts of our cash
equivalents and short-term investments that are subject to interest rate risk by
calendar year of expected maturity and weighted average interest rates as of
August 31, 2001:

|                                            | 2001                  | 2002   | 2003  | Total  | Fair Value
|------------------------------------------- | --------------------- | ------ | ----- | ------ | ----------
|                                            | (amounts in millions)
|Cash equivalents and short-term investments | $649.0                | $135.1 | $21.8 | $805.9 | $805.9    
|Average interest rate                       | 3.98%                 | 3.98%  | 6.30% |        |           

We have entered into an interest rate swap
transaction under which we pay a fixed rate of interest hedging against the
variable interest rates implicit in the rent charged by the lessor for the
facility lease at Milpitas, California. The interest rate swap expires June 3,
2002, which coincides with the maturity date of the lease term. As we intend to
hold the interest rate swap until the maturity date, we are not subject to
market risk. In substance, such interest rate swap has fixed the interest rate
for the facility lease, thus reducing interest rate risk.

Our long-term debt instruments are subject to fixed interest
rates. In addition, the amount of principal to be repaid at maturity is also
fixed. In the case of the convertible notes, such notes are based on fixed
conversion ratios into common stock. Therefore, we are not exposed to variable
interest rates related to our long-term debt instruments.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR
INTELLECTUAL PROPERTY RIGHTS; AND WE COULD BECOME INVOLVED IN INTELLECTUAL
PROPERTY DISPUTES.

Our ability to effectively compete may be affected by our
ability to protect our proprietary information. We hold a number of patents and
other license rights. These patent and license rights may not provide meaningful
protection for our manufacturing processes and equipment innovations. In the
future, third parties may assert infringement claims against us or our
customers. In the event of an infringement claim, we may be required to spend a
significant amount of money to develop a non-infringing alternative or to obtain
licenses. We may not be successful in developing such an alternative or
obtaining a license on reasonable terms, if at all. In addition, any such
litigation could be lengthy and costly and could harm our financial
condition.

FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD
HARM OUR BUSINESS.

As a company in the electronics manufacturing services
industry, we are subject to a variety of environmental regulations relating to
the use, storage, discharge and disposal of hazardous chemicals used during our
manufacturing process. Although we have never sustained any significant loss as
a result of non-compliance with such regulations, any failure by us to comply
with environmental laws and regulations could result in liabilities or the
suspension of production. In addition, these laws and regulations could restrict
our ability to expand our facilities or require us to acquire costly equipment
or incur other significant costs to comply with regulations.

OUR ADMINISTRATIVE FACILITIES AND PRINCIPAL BUSINESS
OPERATIONS ARE LOCATED IN CALIFORNIA, AND ANY DISTRUPTION IN THE AVAILABLE POWER
SUPPLY IN CALIFORNIA COULD DISRUPT OUR OPERATIONS, REDUCE OUR REVENUES, AND
INCREASE OUR EXPENSE.

A substantial portion of our operating activities and
facilities, including our headquarters and principal administrative facilities,
as well as certain of our third party service providers are located in
California. During acute power shortages, California has implemented, and may in
the future continue to implement, rolling blackouts throughout the state. The
rolling blackouts that have occurred to date have not materially disrupted the
operations of our facilities. Should these blackouts continue or increase in
severity, however, they could materially disrupt the operations of one or more
of our facilities. Although Solectron currently does not have backup generator
or long-term alternate sources of power in the event of a blackout, Solectron
does have some flexibility to shift some manufacturing volume to other
manufacturing sites around the world. If blackouts interrupt our power supply,
we would be temporarily unable to continue operations at our affected
facilities. Our current insurance does not provide coverage for any damages our
customers or we may suffer as a result of any interruption in our power supply.
Consequently, any interruption in our ability to continue operations at our
facilities could damage our reputation, harm our ability to retain existing
customers and to obtain new customers, and could result in lost revenue, any of
which would substantially harm our business and results of operations.

In addition, the utility deregulation program instituted in
1996 by the California government deregulated wholesale prices while continuing
to regulate the retail prices charged by the electrical utilities. While
wholesale prices have increased dramatically, retail prices have, until
recently, not increased at a comparable rate. Our business is substantially
dependent on the availability and price of electricity. If retail electricity
prices rise dramatically, we would expect our expenses to increase, our
operating results to be harmed, and the possible decline of our stock price.

OUR STOCK PRICE MAY BE VOLATILE DUE TO FACTORS OUTSIDE OF
OUR CONTROL.

Our stock price could fluctuate due to the following
factors, among others:

- Announcements of operating results and business  conditions by our customers;
- Announcements by our competitors relating to new  customers or technological innovation or
new services;
- Economic developments in the electronics industry as a  whole;
- Political and economic developments in countries in which  we have operations; and
- General market conditions.

OUR LOW STOCK PRICE MAY REDUCE OUR DILUTED EARNINGS PER
SHARE.

On January 27, 2002, we may become obligated to purchase,
at the option of the holders, all or a portion of the outstanding 4.0% LYONs at
a price of $510.03 per note ("Purchase Price"). We have the option to pay the
purchase price of LYONs in cash or common stock or any combination thereof. If
we elect to pay the purchase price, in whole or part, in shares of our common
stock, the number of shares of common stock to be delivered shall equal the
purchase price divided by the average of the sale prices of the common stock for
the five trading day period ending on the third business day prior to January
27, 2002. The LYONs are convertible into common stock at a price of $34.13 per
share or 14.944 shares per LYON. In the event that our stock price remains below
$34.13 per share at January 27, 2002, we may have to issue additional shares to
the holders. Accordingly, our earnings per share may be reduced.

FAILURE TO RETAIN KEY PERSONNEL AND SKILLED ASSOCIATES
COULD HURT OUR OPERATIONS.

Our continued success depends to a large extent upon the
efforts and abilities of key managerial and technical associates. Losing the
services of key personnel could harm us. Our business also depends upon our
ability to continue to attract and retain senior managers and skilled
associates. Failure to do so could harm our operations.

OUR ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL
ACQUIRORS AND MAY DEPRESS OUR STOCK PRICE.

Our certificate of incorporation bylaws and stockholder
rights plan contain provisions that could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of Solectron. These provisions allow us to issue
preferred stock with rights senior to those of our common stock and impose
various procedural and other requirements that could make it more difficult for
our stockholders to effect certain corporate actions

ITEM 7A: QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

See Management's Discussion and analysis of Financial
Condition and Results of Operations for factors related to fluctuations in the
exchange rates of foreign currency and fluctuations in interest rates under
"Risk Factors".

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by item 8 of Form 10-K is presented here in the
following order:



|                                                                                                                                                                                                                                                                  | Page        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------
|Unaudited Quarterly Financial Information                                                                                                                                                                                                                         | 40          
|Consolidated Balance Sheets
   Consolidated Statements of Operations
   Consolidated Statements of Stockholders' Equity
   Consolidated Statements of Comprehensive Income
   Consolidated Statements of Cash Flows
   Notes to Consolidated Financial Statements | 414243444547
|Independent Auditors' Report                                                                                                                                                                                                                                      | 72          

---

Unaudited Quarterly Financial Information

For each fiscal quarter during the two fiscal years ended
August 31, 2001 (in millions, except percentages and per share data):

`First       Second     Third       Fourth
                                                 Quarter      Quarter    Quarter    Quarter
                                              ------------  ---------  ---------  ----------
                     2001
                   -------
Net sales                                    $    5,695.5  $ 5,418.5  $ 3,983.4  $  3,594.9
Gross profit                                        484.7      488.2      305.7       207.5
Gross margin                                          8.5 %      9.0 %      7.7 %       5.8 %
Operating income                                    276.4      192.5     (254.5)     (313.0)
Operating margin                                      4.9 %      3.6 %     (6.4)%      (8.7)%
                                              ------------  ---------  ---------  ----------
Net income (Loss)                            $      190.6  $   121.9  $  (185.7) $   (250.3)
                                              ============  =========  =========  ==========

Basic net income (loss) per share:           $       0.31  $    0.19  $   (0.28) $    (0.38)
                                              ============  =========  =========  ==========

Diluted net income (loss) per share:         $       0.29  $    0.18  $   (0.28) $    (0.38)
                                              ============  =========  =========  ==========


                     2000
                   -------
Net sales                                    $    2,834.6  $ 2,921.7  $ 3,645.0  $  4,736.2
Gross profit                                        277.0      279.9      305.5       412.9
Gross margin                                          9.8 %      9.6 %      8.4 %       8.7 %
Operating income                                    155.3      135.7      170.2       243.0
Operating margin                                      5.5 %      4.6 %      4.7 %       5.1 %
Income before cummulative effect of
   change in accounting principle                   113.3       96.7      119.7       171.0
Cumulative effect of change in accounting
   priniple, net of income tax benefit               (3.5)       --         --          --
                                              ------------  ---------  ---------  ----------
Net income                                   $      109.8  $    96.7  $   119.7  $    171.0
                                              ============  =========  =========  ==========
Basic net income per share: (1)
Income before cummulative effect of
   change in accounting principle                    0.19       0.16       0.20        0.28
Cumulative effect of change in accounting
   priniple                                         (0.01)       --         --          --
                                              ------------  ---------  ---------  ----------
Net Income                                   $       0.18  $    0.16  $    0.20  $     0.28
                                              ============  =========  =========  ==========

Diluted net income per share (1)
  per share
Income before cummulative effect of
   change in accounting principle                    0.18       0.16       0.19        0.27
Cumulative effect of change in accounting
   priniple                                         (0.01)        --        --          --
                                              ------------  ---------  ---------  ----------
Net Income                                   $       0.17  $    0.16  $    0.19  $     0.27
                                              ============  =========  =========  ==========`

(1) Adjusted to reflect two-for-one stock splits through March 8, 2000.

---

SOLECTRON CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED BALANCE SHEETS
                  (in millions)

`August 31,     August 31,
                                                           2001          2000
                                                       ------------  ------------

ASSETS
Current assets:
  Cash and cash equivalents                           $    2,482.3  $    1,475.5
  Short-Term investments                                     307.8         958.6
  Accounts receivable, less allowances of
   $40.8 and $8.6, respectively                            2,443.6       2,146.3
  Inventories                                              3,209.9       3,787.3
  Prepaid expenses and other current assets                  260.5         260.5
                                                       ------------  ------------
   Total current assets                                    8,704.1       8,628.2
Net property and equipment                                 1,304.7       1,080.4
Other assets                                                 934.4         627.4
Goodwill, net of accumulated amortization of $145.7
   and $5.8, respectively                                  1,987.2          39.6
                                                       ------------  ------------
Total assets                                          $   12,930.4  $   10,375.6
                                                       ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                                     $      306.2  $       69.2
  Accounts payable                                         1,786.1       2,694.1
  Accrued employee compensation                              166.5         179.8
  Accrued expenses                                           363.7         262.5
  Other current liabilities                                   66.8          11.2
                                                       ------------  ------------
    Total current liabilities                              2,689.3       3,216.8
Long-term debt                                             5,027.5       3,319.5
Other long-term liabilities                                   62.9          37.2
                                                       ------------  ------------
    Total liabilities                                      7,779.7       6,573.5

Stockholders' equity:
  Preferred stock, $.0001 par value; 1.2 shares
    authorized; no shares issued                               --            --
  Common stock, $ .001 par value; 1,600.0 shares
    authorized;  658.2 and 605.0 shares issued and
    outstanding respectively, adjusted for stock split         0.7           0.6
  Additional paid-in capital                               3,877.6       2,259.1
  Retained earnings                                        1,531.6       1,656.8
  Accumulated other comprehensive losses                    (259.2)       (114.4)
                                                       ------------  ------------
     Total stockholders' equity                            5,150.7       3,802.1
                                                       ------------  ------------
Total liabilities and stockholders' equity            $   12,930.4  $   10,375.6
                                                       ============  ============`

See accompanying notes to consolidated financial statements.

---

SOLECTRON CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in millions, except per share data)

`YEARS ENDED AUGUST 31,
                                      ----------------------------------------
                                          2001          2000          1999
                                      ------------  ------------  ------------
Net sales                            $   18,692.3  $   14,137.5  $    9,669.2
Cost of sales                            17,206.2      12,862.2       8,732.9
                                      ------------  ------------  ------------
Gross profit                              1,486.1       1,275.3         936.3
Operating expenses:
  Selling, general and
    administrative                          827.9         467.1         379.2
  Research and development                   69.9          60.8          40.5
  Goodwill amortization expense             139.9           5.3           0.5
  Acquisition costs                          29.7          26.8           --
  Restructuring and
    impairment costs                        517.3          11.1           --
                                      ------------  ------------  ------------
      Operating  income (loss)              (98.6)        704.2         516.1
Interest income                             116.9         106.9          36.7
Interest expense                           (176.0)        (71.6)        (38.3)
                                      ------------  ------------  ------------
Income (loss) before income taxes
  and cumulative effect of
  change in accounting principle           (157.7)        739.5         514.5
Income taxes (benefit)                      (34.2)        238.8         164.2
                                      ------------  ------------  ------------
Income (loss) before cumulative
  effect of change in
  accounting principle                     (123.5)        500.7         350.3
Cumulative effect of change
  in accounting principle
  for start-up costs, net of
  $1.6 income tax benefit                     --           (3.5)          --
                                      ------------  ------------  ------------
     Net  income (loss)              $     (123.5) $      497.2  $      350.3
                                      ============  ============  ============
Basic net income (loss) per share:
 Income (loss) before cumulative
  effect of change in
  accounting principle               $      (0.19) $       0.84  $       0.65
 Cumulative effect of change
  in accounting principle                     --          (0.01)          --
                                      ------------  ------------  ------------
                                     $      (0.19) $       0.83  $       0.65
                                      ============  ============  ============
 Diluted net income (loss) per share:
  Income (loss) before cumulative
   effect of change in
   accounting principle              $      (0.19) $       0.80  $       0.61
  Cumulative effect of change
   in accounting principle                     --           --            --
                                      ------------  ------------  ------------
                                     $      (0.19) $       0.80  $       0.61
                                      ============  ============  ============
Shares used to compute net
 Income (loss) per share:
     Basic                                  641.8         599.4         542.6
                                      ============  ============  ============

     Diluted                                641.8         623.5         579.0
                                      ============  ============  ============`

See accompanying notes to consolidated financial statements.

---

SOLECTRON CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (in millions)

`Accumulated
                                                                                     Other
                                           Common Stock   Additional              Comprehensive    Total
                                          -------------    Paid-In     Retained      Income     Stockholders'
                                          Shares  Amount   Capital     Earnings     (losses)       Equity
                                          ------  -----  ------------  ---------  ------------  -------------
Balances as of August 31, 1998            519.9  $ 0.6  $      658.6  $   824.4  $       (8.2) $     1,475.4
Net income                                                                350.3                        350.3
Foreign currency translation                                                            (78.6)         (78.6)
Unrealized loss on investments                                                           (1.1)          (1.1)
Stock issued under stock option and
   employee purchase plans                 12.7                 81.5                                    81.5
Conversion of long-term debt, net          27.2                225.3                                   225.3
Issuance of common stock, net of
   issuance costs of $32.5                 34.2              1,069.9                                 1,069.9
Stock issued in business combinations       0.5                 17.8                                    17.8
Dividends                                                                  (1.9)                        (1.9)
Repurchase of common stock                 (0.4)                (7.1)                                   (7.1)
Tax benefit associated with exercise of
   stock options                                                35.4                                    35.4
                                          ------  -----  ------------  ---------  ------------  -------------
Balances as of August 31, 1999            594.1    0.6       2,081.4    1,172.8         (87.9)       3,166.9
Net income                                                                497.2                        497.2
Adjustment to conform fiscal year ends
   of pooled acquisitions                                                 (11.8)                       (11.8)
Foreign currency translation                                                            (32.8)         (32.8)
Unrealized gain on investments                                                            6.3            6.3
Stock issued under stock option and
   employee purchase plans                 10.3                109.0                                   109.0
Stock issued in business combinations       0.2                  6.4                                     6.4
Cancellation of shares                                          (9.0)                                   (9.0)
Issuance of common stock                    0.4                 11.2                                    11.2
Dividends                                                                  (1.4)                        (1.4)
Tax benefit associated with exercise of
   stock options                                                60.1                                    60.1
                                          ------  -----  ------------  ---------  ------------  -------------
Balances as of August 31, 2000            605.0    0.6       2,259.1    1,656.8        (114.4)        3802.1

Net loss                                                                 (123.5)                      (123.5)
Adjustment to conform Texas site year end                                  (1.7)                        (1.7)
Foreign currency translation                                                           (139.8)        (139.8)
Unrealized loss  on investments                                                          (5.0)          (5.0)
Stock issued under stock option and
   employee purchase plans                  8.6                 97.7                                    97.7
Stock issued in business combinations       2.5                 69.8                                    69.8
Issuance of common stock                   42.1    0.1       1,410.5                                 1,410.6
Tax benefit associated with exercise of
   stock options                                                40.5                                    40.5
                                          ------  -----  ------------  ---------  ------------  -------------
Balances as of August 31, 2001            658.2  $ 0.7  $    3,877.6  $ 1,531.6  $     (259.2) $     5,150.7
                                          ======  =====  ============  =========  ============  =============`

See accompanying notes to consolidated financial statements.

---

SOLECTRON CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)
                  (in millions)

`Years Ended August 31,
                                               ----------------------------------
                                                  2001        2000        1999
                                               ----------  ----------  ----------
Net income (loss)                             $   (123.5) $    497.2  $    350.3
Other comprehensive income (loss):
 Foreign currency translation
  adjustments, net of income
  tax expense of $13.5 in 2001,
  income tax benefit of $15.9 in 2000
  and income tax  benefit of $ 0.4 in 1999        (139.8)      (32.8)      (78.6)

 Unrealized loss on investments,
  net of income tax benefit of $3.1 in 2001,
  income tax expense of $3.8 in 2000
  and income tax benefit of $0.6 in 1999            (5.0)        6.3        (1.1)
                                               ----------  ----------  ----------
Comprehensive  income (loss)                  $   (268.3) $    470.7  $    270.6
                                               ==========  ==========  ==========`

Accumulated foreign currency translation losses were $259.4
million at August 31, 2001, $119.6 million at August 31, 2000, and $86.8 million
at August 31, 1999. For fiscal year 2001, the foreign currency translation loss
primarily resulted from unrealized losses on dollar-denominated debt held by the
Company's Brazilian subsidiary. Most of Solectron's remaining foreign currency
translation adjustment amounts relate to investments which are permanent in
nature. To the extent that such amounts relate to investments which are
permanent in nature, no adjustment for income taxes is made. Accumulated
unrealized gain on investments was $0.2 million at August 31, 2001 and $5.2
million at August 31, 2000 and $1.1 million at August 31, 1999.

See accompanying notes to consolidated financial statements.

---

SOLECTRON CORPORATION AND SUBSIDIARIES
                  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOW
                  (in millions)

`Twelve Months Ended
                                                                           August 31,
                                                               ---------------------------------
                                                                  2001        2000       1999
                                                               ----------- ---------- ----------
Cash flows from operating activities:
  Net income (loss)                                           $   (123.5) $    497.2 $    350.3
  Adjustments to reconcile net income to net cash
   used in operating activities:
     Depreciation and amortization                                 536.1       251.4      200.4
     Impairment of fixed assets and other long-term assets         268.1         --         --
     Amortization of debt issuance costs and
       accretion of discount on notes payable                      146.5        52.5       18.5
     Tax benefit associated with the exercise of stock options      40.5        60.1       35.4
     Cumulative effect of change in accounting principle
       for start-up cost                                             --          3.5        --
     Adjustment to conform fiscal year ends                         (1.7)      (11.8)       --
     Loss (gain)on disposal of property and equipment              (10.0)       (8.7)      (4.6)
     Other                                                          74.2        20.9        5.5
     Changes in operating assets and liabilities:
       Accounts receivable, net of allowance                        52.4      (934.1)    (505.2)
       Inventories                                               1,024.1    (2,096.0)    (329.7)
       Prepaid expenses and other current assets                   (81.0)     (102.9)      16.2
       Accounts payable                                         (1,287.7)    1,710.7      294.8
       Accrued expenses and other
        current liabilities                                        (10.4)      214.5       15.0
                                                               ----------  ---------- ----------
     Net cash provided by ( used in )
       operating activities                                        627.6      (342.7)      96.6
                                                               ----------  ---------- ----------
Cash flows from investing activities:
  Sales of short-term investments                                1,354.3       982.0      327.8
  Purchases of short-term investments                             (702.0)   (1,498.6)    (598.0)
  Acquisition of business, net of cash acquired                 (2,458.7)      (83.7)     (39.5)
  Acquisition of manufacturing assets and locations                (84.0)   (1,014.2)    (124.7)
  Capital expenditures                                            (536.8)     (506.0)    (449.4)
  Proceeds from sale of property and equipment                      98.7        88.9       41.7
  Other                                                           (149.9)      (35.1)     (32.0)
                                                               ----------  ---------- ----------
     Net cash used in investing
      activities                                                (2,478.4)   (2,066.7)    (874.1)
                                                               ----------  ---------- ----------
Cash flows from financing activities:
  Net proceeds (repayment) from bank lines of credit               (52.3)       16.9       22.1
  Net proceeds from long-term debt                               1,540.7     2,296.3      729.4
  Principal payments on long-term debt                             (18.3)       (0.8)       --
  Repurchase of common stock                                         --          --        (7.1)
  Net proceeds from stock issued under
   option and employee purchase plans                               97.7       121.9       81.5
  Net proceeds from issuance of common stock                     1,381.4        11.2    1,069.9
  Dividends                                                          --         (1.4)      (1.4)
  Other                                                             20.6        29.9       (0.4)
                                                               ----------  ---------- ----------
    Net cash provided by financing
    activities                                                   2,969.8     2,474.0    1,894.0
                                                               ----------  ---------- ----------
Effect of exchange rate changes on
 cash and cash equivalents                                        (112.1)       (6.5)       5.2
                                                               ----------  ---------- ----------
Net increase in cash and cash equivalents                        1,006.9        58.1    1,121.7
Cash and cash equivalents at beginning of period                 1,475.5     1,417.4      306.4
                                                               ----------  ---------- ----------
Cash and cash equivalents at
 end of period                                                $  2,482.4  $  1,475.5 $  1,428.1
                                                               ==========  ========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period:
   Income taxes                                               $    151.4  $    135.7 $    114.5
   Interest                                                   $     11.0  $     17.6 $     27.7
Non-cash investing activities:
   Issuance of common stock for business
     combination, net of cash acquired                        $     61.7  $      6.4 $     14.7
   Issuance of common stock upon
     conversion of long-term debt, net                               --          --       225.4`

See accompanying notes to consolidated financial statements.

---

SOLECTRON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation: The accompanying consolidated
financial statements include the accounts of Solectron Corporation and its
subsidiaries after elimination of intercompany accounts and transactions.

On November 30, 1999, Solectron completed its acquisition of
SMART Modular Technologies (SMART). Under the terms of the agreement, each share
of SMART common stock was exchanged for 0.51 of a share of Solectron common
stock. Solectron issued approximately 47.6 million shares of Solectron common
stock for the outstanding common stock of SMART and assumed all stock options
held by SMART employees. The acquisition was accounted for as a pooling of
interests. Accordingly, the Company's historical financial statements have been
restated retroactively to include the financial results of SMART. SMART's
results of operations for the fiscal year ended October 31, 1999 have been
combined with Solectron's results of operations for the year ended August 31,
1999. In addition, SMART's balance sheet as of October 31, 1999 has been
combined with Solectron's balance sheet as of August 31, 1999. Since the results
of operations for the two month period ended October 31, 1999 for SMART have
been included in the fiscal 1999 and fiscal 2000 consolidated statements of
income, such results have been adjusted for in retained earnings. SMART changed
its fiscal year end to coincide with Solectron's beginning in fiscal 2000.

On April 28, 2000, Solectron completed its acquisition of
AMERICOM Wireless Services (AMERICOM), a privately held corporation. Solectron
issued approximately 1.8 million shares of its common stock in exchange for all
outstanding common stock of AMERICOM and to extinguish obligations under the
stock appreciation rights plan of AMERICOM. On July 14, 2000, Solectron
completed the acquisition of Bluegum Group (Bluegum), an electronics contract
manufacturer in Australia. Solectron issued approximately 2.3 million shares of
its common stock in exchange for all outstanding common shares and stock options
of Bluegum. Both transactions were accounted for as a pooling of interests.
Accordingly, Solectron's historical financial statements have been restated
retroactively to include the financial results of AMERICOM and Bluegum. Both
AMERICOM and Bluegum had fiscal years different than Solectron's. AMERICOM's
fiscal year was from January 1 to December 31 and Bluegum's was from July 1 to
June 30. AMERICOM's results of operations for the year ended December 31, 1999
together with Bluegum's results of operations for the year ended June 30, 1999
have been combined with Solectron's results of operations for the year ended
August 31, 1999. AMERICOM's balance sheet as of December 31, 1999 together with
Bluegum's balance sheet as of June 30, 1999 have been combined with Solectron's
balance sheet as of August 31, 1999. Both AMERICOM and Bluegum changed their
fiscal year ends to coincide with Solectron's beginning in fiscal 2000. Retained
earnings has been adjusted to conform their year ends with Solectron's.

Restated financial information includes certain adjustments
for the elimination of net sales and cost of sales related to shipments by
Solectron to Bluegum, shipments by SMART to Solectron, as well as for certain
reclassifications made to SMART's, AMERICOM's and Bluegum's financial statements
to conform with Solectron's financial statement presentation. There were no
adjustments necessary to conform the accounting policies of the combining
companies.

The results of operations previously reported by the separate
enterprises and the combined amounts presented in the accompanying consolidated
financial statements are summarized below (in millions):

`Years Ended August 31,
                                        ----------------------
                                           2000        1999
                                        ----------  ----------
Net Sales
  Solectron                            $ 13,786.5  $  8,391.4
  SMART *                                   280.4       995.9
  AMERICOM *                                 53.5        63.7
  Bluegum *                                 156.1       247.2
  Eliminations                             (139.0)      (29.0)
                                        ----------  ----------
                                       $ 14,137.5  $  9,669.2
                                        ==========  ==========

Net income
  Solectron                            $    497.0  $    294.0
  SMART *                                    12.2        53.5
  AMERICOM *                                 (2.8)        2.8
  Bluegum *                                  (8.4)        --
  Eliminations                               (0.8)        --
                                        ----------  ----------
                                       $    497.2  $    350.3
                                        ==========  ==========`

* Represents the net sales and net income for each of the
separate companies prior to the consummation of the acquisitions. The
acquisitions were consummated as follows: SMART on November 30, 1999, AMERICOM
on April 28, 2000 and Bluegum on July 14, 2000. Results subsequent to the
acquisition were included with Solectron.

No adjustments were necessary to conform accounting policies of the combined
entities.

Use of Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash Equivalents and Short-Term Investments: Cash equivalents
are highly liquid investments purchased with a maturity at the date of purchase
of less than three months. Short-term investments are investment grade short-term debt
instruments with remaining maturities greater than three months.

Investments: Investments in debt securities are classified as
available-for-sale securities. Such investments are recorded at fair value as
determined from quoted market prices, and the cost of securities sold is
determined based on the specific identification method. If material, unrealized
gains or losses are reported as a component of comprehensive income or loss, net
of related tax effect.

Inventories: Inventories are stated at the lower of weighted
average cost or market.

Property and Equipment: Property and equipment are recorded
at cost. Depreciation and amortization are computed based on the shorter of the
estimated useful lives or the related lease terms, using the straight-line
method. Estimated useful lives are presented below.





|Machinery and equipment | 2 - 5 years
|----------------------- | -----------
|Furniture and fixtures  | 3 - 5 years
|Leasehold improvements  | Lease term 
|Buildings               | 15-50 years



Certain depreciation lives were changed from four to five
years beginning March 2, 2001. Consequently, the pre-tax depreciation charges on
these assets were $19.8 million lower in fiscal 2001 than it would have been
using a four year life.

Other Assets: Other assets consist of intangible assets
including intellectual property rights, goodwill and debt issuance costs.
Intangible assets are amortized using the straight-line method, over the
expected life of the asset - ten years for intellectual property rights and
goodwill. Debt issuance costs related to the zero-coupon convertible senior
notes are amortized using the effective interest method over twenty years. Debt
issuance costs related to the 7 3/8% senior notes are amortized using the
straight-line method, which does not differ materially from the effective
interest method, over the debt term of ten years.

Impairment of Long-Lived Assets: Solectron reviews property
and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An asset
is considered impaired if its carrying amount (including the unamortized portion
of goodwill allocated to the asset) exceeds the future net cash flow the asset
is expected to generate. If such asset is considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the asset, including the allocated goodwill, if any, exceeds its fair
market value. Solectron assesses the recoverability of enterprise-level goodwill
by determining whether the unamortized goodwill balance can be recovered through
undiscounted future net cash flows of the acquired operation. The amount of
enterprise-level goodwill impairment, if any, is measured based on projected
discounted future net cash flows using a discount rate reflecting the Company's
average cost of funds.

Income Taxes: Solectron uses the asset and liability method
of accounting for income taxes. Deferred tax assets and liabilities are
recognized for the future consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. When necessary, a valuation allowance is recorded to
reduce tax assets to an amount for which realization is more likely than not.
The effect of changes in tax rates is recognized in the period in which the rate
change occurs.

Net Income Per Share: Basic net income per share is
calculated using the weighted-average number of common shares outstanding during
the period. Diluted net income per share is calculated using the weighted-average number of
common shares plus dilutive potential common shares
outstanding during the period. Potential common shares consist of stock options
that are computed using the treasury stock method and shares issuable upon
conversion of Solectron's outstanding convertible notes computed using the as-if-converted
method. Share and per-share data presented reflect the two-for-one
stock splits effective through March 8, 2000.

Revenue Recognition: Solectron recognizes revenue upon
shipment of product to its customers.

Reclassifications: Certain prior-year amounts have been reclassified to
conform with the current-year presentation.

Employee Stock Plans: Solectron accounts for its stock option
plans and its Employee Stock Purchase Plan using the intrinsic value method.

Foreign Currency: For foreign subsidiaries using the local
currency as their functional currency, assets and liabilities are translated at
exchange rates in effect at the balance sheet date and income and expenses are
translated at average exchange rates. The effects of these translation
adjustments are reported in other comprehensive income. Exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved and remeasurement adjustments for
foreign operations where the U.S. dollar is the functional currency are included
in income. To date, the effect of such amounts on net income has not been
material.

Year End: Solectron's financial reporting year ends on the
last Friday in August. Fiscal years 2001 contained 53 weeks while 2000 and 1999
each contained 52 weeks. For purposes of presentation in the accompanying
financial statements and notes, Solectron has indicated its accounting years as
ending on August 31.

Solectron's subsidiary, Solectron Brasil, Ltda. (Brazil),
reports its results one month in arrears. Solectron's consolidated financial
position as of August 31, 2001 and 2000, include the financial position of
Brazil operation as of July 31, 2001 and 2000. Similarly, Solectron's
consolidated results of operations and cash flows for the years ended August 31,
2001, 2000 and 1999, include the results of operations and cash flows of the
Brazil operation for the twelve-month periods ended July 31, 2001, 2000 and
1999.

Solectron's subsidiary in Austin, Texas reported its results
one month in arrears during fiscal 2000 and 1999. Solectron's consolidated
financial position as of August 31, 2000 included the financial position of
Austin as of July 31, 2000. Similarly, Solectron's consolidated results of
operations and cash flows for the years ended August 31, 2000 and 1999 include
the results of operations and cash flows of the Austin subsidiary for the years
ended July 31, 2000 and 1999. The Austin subsidiary changed its fiscal year end
to conform to the consolidated company beginning in 2001. Retained earnings has
been adjusted to reflect this change.

Recent Accounting Pronouncements: Solectron adopted the
American Institute of Certified Public Accountants' Statement of Position No.
98-5, Reporting on the Costs of Start-up Activities, on September 1, 1999. This
statement required that costs of start-up activities and organizational costs be
expensed as incurred. The cumulative effect of this accounting change on years
prior to fiscal 2000 was a charge of $3.5 million (net of $1.6 million income
tax effect), or $.01 per common share, that was reflected in the first quarter
of fiscal 2000. Pro forma information is not presented as the change did not
have a material impact on any individual year prior to fiscal 2000.

In September 2000, Solectron adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 137 and No. 138. Solectron enters
into short-term foreign currency forward contracts and borrowings to hedge only
those currency exposures associated with certain assets and liabilities
denominated in non-functional currencies. In addition, the Company periodically
hedges variability in cash flows resulting from fluctuating interest rates.
Solectron entered into an interest rate swap agreement with a notional amount of
$52 million, maturing on June 3, 2002, to hedge against varying rental payments
associated with an operating lease that requires payments based on LIBOR. This
swap agreement was designated as a cash flow hedge upon adoption of the standard
and the ineffective portion of the hedge was not material. Accordingly, changes
in the fair value of this interest rate swap designated as a cash flow hedge are
included in accumulated other comprehensive income. These amounts are
subsequently reclassified into rent expense during the period in which the
LIBOR-based lease agreement affect earnings. Since adoption, the impact to the
financial statements has not been significant.

In July 2001, the FASB issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 141 also specifies the
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that
intangible assets with definite useful lives are amortized over their respective
estimated lives to their estimated residual values, and reviewed for impairment
in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. Goodwill and intangible
assets acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to adoption of SFAS No. 142.

In accordance with SFAS No. 141, Solectron is accounting for
all business combinations initiated or completed after June 30, 2001 using the
purchase method of accounting. Solectron adopted the remaining provisions of
SFAS No. 141 and SFAS No. 142 effective September 1, 2001.

SFAS No. 141 requires, upon adoption of SFAS No. 142, that
Solectron evaluate its existing intangibles assets and goodwill that were
acquired in prior purchase business combinations, and to make any necessary
reclassifications in order to conform with the new criteria in SFAS No. 141 for
recognition apart from goodwill. Upon adoption of SFAS No. 142, Solectron is
required to reassess the useful lives and residual values of all intangible
assets acquired in purchase business combinations, and to make any necessary
amortization period adjustments by the end of the first interim period after
adoption. Solectron is required to test the intangible asset for impairment in
accordance with the provisions of SFAS No. 142 within the first interim period.
Any impairment loss is measured as of the date of adoption and recognized as a
cumulative effect of accounting principle in the first interim period.

In connection with the transitional goodwill impairment
evaluation, SFAS No. 142 requires Solectron to perform an assessment of whether
there is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, Solectron must identify its reporting units and determine the
carrying value of each reporting unit by assessing the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. Solectron then has up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying value. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and Solectron must perform the second step of the
transitional impairment test. In the second step, Solectron must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all its assets (recognized and unrecognized)
and liabilities in a manner similar to a purchase price allocation in accordance
with SFAS No. 141, to its carrying amount, both of which would be measured as of
the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as a cumulative effect of a change in
accounting principle in our statement of operations.

As of September 1, 2001, Solectron had unamortized goodwill
of $1.9 billion, unamortized identifiable intangible assets of approximately
$500 million, all of which are subject to the transition provisions of SFAS No.
141 and 142. Amortization expense related to goodwill was $139.9 million for
fiscal 2001. Because of the extensive effort required to comply with the
remaining provisions of SFAS Nos. 141 and 142, Solectron cannot reasonably
estimate the impact on their financial statements of these provisions beyond
discontinuing amortization.

The FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, in August 2001, and SFAS No.144, Accounting for the Impairment or
Disposal of Long-lived Assets, in October 2001. SFAS No. 143 requires that the
fair value of an asset retirement obligation be recorded as a liability in the
period in which it incurs the obligation. SFAS No. 144 services to clarify and
further define the provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 does
not apply to goodwill and other intangible assets that are not amortized. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002 and SFAS No.
144 is effective for fiscal years beginning after December 15, 2001. The Company
expects to adopt both effective September 1, 2002. The effect of the adopting
these statements is not expected to have a material effect on the Company's
consolidated financial position or results of operations.

NOTE 2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash, cash equivalents and short-term investments as of
August 31, 2001, and 2000, consisted of the following:

`Cash and
                                           Cash     Short-Term
                                        Equivalents Investments
                                        ----------  ----------
                                             (in millions)
                 2001
                ------
Cash                                   $  2,244.7  $      --
Money market funds                          174.4         --
Certificates of deposit                      63.2         2.5
Market auction securities                     --        181.6
U.S. government securities                    --          4.6
Corporate obligations                         --        102.2
Other                                         --         16.9
                                        ----------  ----------
   Total                               $  2,482.3  $    307.8
                                        ==========  ==========

                 2000
                ------
Cash                                   $    439.6  $      --
Money market funds                          428.0         --
Certificates of deposit                      19.7        60.4
Market auction securities                     --         15.5
U.S. government securities                   26.3       158.7
Corporate obligations                       485.0       697.9
Other                                        76.9        26.1
                                        ----------  ----------
   Total                               $  1,475.5  $    958.6
                                        ==========  ==========`

Short-term investments are carried at fair market value,
which approximates cost. Realized and unrealized gains and losses for the fiscal
years ended August 31, 2001 and 2000 were not material. As of August 31, 2001,
approximately 97% of Solectron's portfolio matures in one year or less, with the
remainder maturing in less than two years.

NOTE 3. INVENTORIES

Inventories as of August 31, 2001 and 2000, consisted of:

`2001       2000
                                                            ---------  ---------
                                                                  (in millions)



  Raw materials                                            $ 2,503.5  $ 3,043.0
  Work-in-process                                              331.0      558.9
  Finished goods                                               375.4      185.4
                                                            ---------  ---------
  Total                                                    $ 3,209.9  $ 3,787.3
                                                            =========  =========`

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment as of August 31, 2001 and 2000,
consisted of:

`2001       2000
                                                            ---------  ---------
                                                                 (in millions)

   Land                                                    $    62.2  $    40.3
   Building and improvements                                   341.1      243.0
   Leasehold improvements                                      133.8      102.2
   Factory equipment                                         1,292.2    1,033.4
   Computer equipment and software                             337.1      195.5
   Furniture, fixture, and other                               274.3      109.6
   Construction-in-process                                      71.1      125.8
                                                            ---------  ---------
                                                             2,511.8    1,849.8
   Less accumulated depreciation
    and amortization                                         1,207.1      769.4
                                                            ---------  ---------
   Net property and equipment                              $ 1,304.7  $ 1,080.4
                                                            =========  =========`

NOTE 5. LINES OF CREDIT

Solectron has available a $100 million unsecured
multicurrency revolving line of credit that expires April 30, 2002. Borrowings
under the credit facility bear interest, at Solectron's option, at either the
bank's prime rate, the London interbank offering rate (LIBOR) plus a margin, or
the bank's certificate of deposit (CD) rate plus a margin. The margin under the
LIBOR or CD rate options will vary depending on Solectron's Standard &
Poor's Corporation and/or Moody's Investor Services, Inc. rating for its long-term senior
unsecured debt. This margin was 0.4% at August 31, 2001. Under the
credit agreement, the Company must meet certain financial covenants. As of
August 31, 2001 and 2000, there were no borrowings outstanding under this line
of credit.

As of August 31, 2001 Solectron also had
approximately $181 million and $591 million, respectively, in committed and
uncommitted foreign lines of credit and other bank facilities. Borrowings were
payable on demand. The interest rates ranged from the bank's prime lending rate
to the bank's prime rate plus 2.0%. As of August 31, 2001, borrowings and
guaranteed amounts under committed and uncommitted foreign lines of credit were
$155 million and $135 million, respectively. The weighted-average interest rate
was 4.4% for committed and 4.7% for uncommitted foreign lines of credit. Under
these lines of credit agreements, the Company must meet certain financial
covenants. As of August 31, 2001, Solectron was in compliance with all of its
line of credit financial covenants.

NOTE 6. LONG-TERM DEBT

Long-term debt at August 31, 2001 and 2000, consisted of:

`2001           2000
                                            ------------  -------------
                                                          (in millions)
Zero coupon convertible senior notes
  Due 2020, face value $4,025.0,
  Fair value of $2,047.5 in 2001,
  and $2,648.9 in 2000                     $    2,416.1  $     2,350.5
Zero coupon convertible senior notes
  Due 2020, face value $2,900.0,
  Fair value of $1,212.8 in 2001                1,560.5            --
Zero coupon convertible senior notes
  Due 2019, face value $1,656.0,
  Fair value of $817.9 in 2001
  and $1,195.8 in 2000                           831.3          798.5
7 3/8% senior notes due 2006, face value
  $150.0, fair value of $150.3 in 2001
  and $146.9 in 2000                             149.8          149.8
Other, fair value of $69.8 in 2001 and
  $20.7 in 2000                                   69.8           20.7
                                            ------------  -------------
 Total long-term debt                      $    5,027.5  $     3,319.5
                                            ============  =============`

In November 2000, Solectron issued 2,900,000
zero-coupon convertible senior notes at an issue price of $524.78 per note,
which resulted in gross proceeds to Solectron of approximately $1.5 billion.
These notes are unsecured and unsubordinated indebtedness of Solectron with a
maturity value aggregating $2.9 billion. Solectron will pay no interest prior to
maturity. Each note has a yield of 3.25% with a maturity value of $1,000 on
November 20, 2020. Solectron is amortizing the issue discount using the
effective interest method over the term of the notes. Each note is convertible
at any time by the holder at a conversion rate of 11.7862 shares per note.
Holders may require Solectron to purchase all or a portion of their notes on May
20, 2004, November 20, 2005 and November 20, 2010, at a price of $587.46,
$616.57 and $724.42 per note, respectively, payable in cash or common stock at
the option of Solectron. Also, each holder may require Solectron to repurchase
all or a portion of such holder's notes if a change in control of the Company
occurs on or before May 20, 2004. Solectron, at its option, may redeem all or a
portion of the notes at any time on or after May 20, 2004.

In May 2000, Solectron issued 4,025,000 zero-coupon
convertible senior notes at an issue price of $579.12 per note, which resulted
in gross proceeds to Solectron of approximately $2.3 billion. These notes are
unsecured and unsubordinated indebtedness of Solectron with a maturity value
aggregating $4.025 billion. There will be no interest payment by Solectron prior
to maturity. Each note has a yield of 2.75% with a maturity value of $1,000 on
May 8, 2020. Solectron is amortizing the issue discount using the effective
interest method over the term of the notes. Each note is convertible at any time
by the holder at a conversion rate of 12.3309 shares per note. Holders may
require Solectron to purchase all or a portion of their notes on May 8, 2003 and
May 8, 2010, at a price of $628.57 and $761.00 per note, respectively. Also,
each holder may require Solectron to repurchase all or a portion of such
holder's notes upon a change in control of the Company occurring on or before
May 8, 2003. Solectron, at its option, may redeem all or a portion of the notes
at any time on or after May 8, 2003.

In January 1999, Solectron issued 1,656,000 zero coupon
convertible senior notes to qualified institutional investors in a private
placement at an issue price of $452.89 per note which resulted in gross proceeds
of approximately $750 million. These notes are unsecured and unsubordinated
indebtedness with a maturity value aggregating $1.656 billion. There will be no
interest payment prior to maturity. Each note has a yield of 4% with a maturity
value of $1,000 on January 27, 2019. Solectron is amortizing the issue discount
using the effective interest method over the term of the notes. Each note is
convertible at any time by the holder at a conversion rate of 14.944 shares per
note, adjusted for the two-for-one stock splits effective through March 8, 2000.
Holders may require Solectron to purchase all or a portion of their notes on
January 27, 2002, and January 27, 2009, at a price of $510.03 and $672.97 per
note, respectively. Also, each holder may require Solectron to repurchase all or
a portion of such holder's notes upon a change in control of Solectron occurring
on or before January 27, 2002. Solectron, at its option, may redeem all or a
portion of the notes at any time on or after January 27, 2003. In addition,
Solectron filed with the Securities Exchange Commission a registration statement
for resales of the notes and the common stock issuable upon conversion. Such
registration statement was declared effective in June 1999.

In March 1996, Solectron issued $150 million aggregate
principal amount of senior notes. These notes are in denominations of and have a
maturity value of $1,000 each and are due on March 1, 2006. Interest is payable
semiannually at a rate of 7-3/8% per annum. The notes may not be redeemed prior
to maturity.

NOTE 7. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The fair value of Solectron's cash, cash equivalents,
accounts receivable and accounts payable approximates the carrying amount due to
the relatively short maturity of these items. The fair value of Solectron's
short-term investments (see Note 2) is determined based on quoted market prices.
The fair value of Solectron's long-term debt (see Note 6) is determined based on
broker trading prices.

Derivatives

Solectron enters into forward exchange contracts to hedge
foreign currency exposures on a continuing basis for periods consistent with its
committed exposures. These transactions generally do not expose Solectron to
risk of accounting loss because gains and losses on these contracts offset
losses and gains on the assets and liabilities being hedged. The counterparties
to these contracts expose Solectron to credit related losses in the event of
nonperformance. However, the counterparties to these contracts are substantial
and creditworthy multinational commercial banks. The risk of counterparty
nonperformance associated with these contracts is remote. Since these contracts
generally have maturities of less than three months and were entered into near
year-end, the amounts of unrealized gains and losses are immaterial. Foreign
currency forward exchange contracts outstanding totaled $284.1 million at the
end of fiscal year 2001 and $187.3 million at the end of fiscal year 2000. These
contracts were originated by Solectron's international subsidiaries primarily
for the purchase and sale of European currencies, U.S. dollar, and Japanese yen
to mitigate foreign currency exposures

Business and Credit Concentrations

Financial instruments that potentially subject Solectron
to concentrations of credit risk consist of cash, cash equivalents, short-term
investments and trade accounts receivable. Solectron's cash, cash equivalents
and short-term investments are managed by recognized financial institutions
which follow the Company's investment policy. Such investment policy limits the
amount of credit exposure in any one issue and the maturity date of the
investment securities that typically comprise investment grade short-term debt
instruments. Concentrations of credit risk in accounts receivable resulting from
sales to major customers are discussed in Note 13. Solectron generally does not
require collateral for sales on credit. However, for customers that have smaller
financial resources, Solectron requires coverage for this risk. The Company also
closely monitors extensions of credit.



NOTE 8. COMMITMENTS AND CONTINGENCIES

Solectron leases various facilities under operating lease
agreements. The facility leases outstanding as of August 31, 2001 expire at
various dates through 2004. All such leases require Solectron to pay property
taxes, insurance and normal maintenance costs. Payments of some leases are
periodically adjusted based on LIBOR rates. Certain leases for Solectron's
facilities, including Fremont, Milpitas and San Jose, California; Everett,
Washington; Suwanee, Georgia; and Columbia, South Carolina, provide Solectron
with an option at the end of the lease term of either acquiring the property at
its original cost or arranging for the property to be acquired. For these
leases, Solectron is contingently liable under a first loss clause for a decline
in market value of such leased facilities up to 85% of the original costs, or
approximately $203.8 million in total as of August 31, 2001, in the event
Solectron does not purchase the properties or reach an agreement with the lessor
to extend the lease at the end of the respective lease terms. Under such
agreements, the Company must also maintain compliance with financial covenants
similar to its credit facilities. As of August 31, 2001, Solectron was in
compliance with all of its lease facility financial covenants.

In addition, Solectron periodically enters into lease
arrangements with third-party leasing companies under which it sells fixed
assets and leases them back from the leasing companies. Solectron is accounting
for these leases as operating leases.

Future minimum payments related to lease obligations,
including the $203.8 million contingent liability discussed above, are $156.2
million, $120.0 million, $189.4 million $21.5 million and $16.7 million in each
of the years in the five-year period ending August 31, 2006, and $27.5 million
for periods after that date. Rent expense was $94.5 million, $98.9 million and
$89.3 million for the years ended August 31, 2001, 2000 and 1999, respectively.

NOTE 9. RETIREMENT PLANS

Solectron has various retirement plans that cover a
significant number of its eligible worldwide employees. The Company sponsors a
401(k) Plan to provide retirement benefits for its United States employees. This
Plan provides for tax-deferred salary deductions for eligible employees.
Employees may contribute between 1% to 15% of their annual compensation to this
Plan, limited by an annual maximum amount as determined by the Internal Revenue
Service. The Company also makes discretionary matching contributions, which vest
immediately, as periodically determined by its Board of Directors. The Company's
matching contributions to this Plan totaled $13.2 million, $10.7 million and
$8.3 million in fiscal 2001, 2000 and 1999, respectively. In addition, certain
of the Company's non-United

NOTE 10. INCOME TAXES

The components of income taxes (benefit) for the fiscal
years ended August 31, 2001, 2000 and 1999, were as follows (in millions):

`2001         2000        1999
                                  ----------  ------------  ---------
Current:                                      (in millions)

          Federal                $     11.9  $      151.3  $   114.4
          State                         2.6          28.2       17.8
          Foreign                      39.2          48.6       29.7
                                  ----------  ------------  ---------
                                       53.7         228.1      161.9

Deferred:
          Federal                     (78.9)        (10.6)      (3.1)
          State                       (14.3)         (0.7)       1.4
          Foreign                       5.3          22.0        4.0
                                  ----------  ------------  ---------
                                      (87.9)         10.7        2.3
                                  ----------  ------------  ---------
          Total                  $    (34.2) $      238.8  $   164.2
                                  ==========  ============  =========`



The overall effective income tax rate (expressed as a percentage of financial
statement income before income taxes) varied from the United States statutory
income tax rate for the fiscal years ended August 31, 2001, 2000 and 1999, as
follows:

`2001         2000         1999
                                  ----------  ------------  ---------

Federal tax rate                       35.0  %       35.0 %     35.0 %
State income tax, net of
  federal tax benefit                   4.8           2.4        2.4
Income of international
  subsidiaries taxed at
  different rates                     (32.9)          0.1        0.1
Tax holiday                            41.6          (7.4)      (5.9)
Tax credits                               -          (0.5)      (0.1)
Tax exempt interest income              2.8          (0.1)      (0.3)
FSC benefit                               -          (0.1)      (0.1)
Nondeductible goodwill
  and acquisition costs                (7.9)          1.1          -

Loss for which no benefit
  is realized                         (17.8)            -          -
Intercompany interest charges          (3.4)          0.3        0.2
Other                                  (0.5)          1.5        0.6
                                  ----------  ------------  ---------
Effective income tax rate              21.7  %       32.3 %     31.9 %
                                  ==========  ============  =========`

The tax effects of temporary differences that gave rise to
significant portions of deferred tax assets and liabilities as of August 31,
2001 and 2000, were as follows (in millions):

`2001        2000
                                              ------------  ---------
                                                   (in millions)

Deferred tax assets:
  Accruals, allowances and reserves          $      103.9  $    19.3
  State income tax                                   18.8        9.2
  Acquired intangible assets                         39.3        5.9
  Net undistributed profits of
    subsidiaries                                        -        3.8
  Net operating loss carryover                      133.1       83.6
  Restructuring reserves                             77.3          -
  Other                                               1.9          -
                                              ------------  ---------
Deferred tax assets                                 374.3      121.8
Valuation allowance                                 (71.6)         -
                                              ------------  ---------
Total deferred tax assets                    $      302.7  $   121.8
                                              ------------  ---------
Deferred tax liabilities:
  Foreign inventories expenses for tax              (81.9)     (55.6)
  Depreciation                                      (29.8)      (4.0)
  Realized translation gains                        (30.8)     (12.1)
  Foreign import incentives                          (3.1)      (7.0)
  Other                                              (0.1)      (2.7)
                                              ------------  ---------
Total deferred tax liabilities                     (145.7)     (81.4)
                                              ------------  ---------
Net deferred tax assets                      $      157.0  $    40.4
                                              ============  =========`

The Company has U.S. federal net operating losses in its U.S.
Robotics subsidiary of approximately $52.4 million. These amounts are not
currently available to offset U.S. taxable income of the Company (other than
income generated by U.S. Robotics) under U.S. consolidated tax return rules and
reserved for in the valuation allowance. These net operating losses, if not
utilized, will expire in 2021.

The Company also has acquired U.S. federal net operating
losses from U.S. subsidiaries of NatSteel Electronics of approximately $15
million, which will expire if not utilized beginning in 2011 through 2019.

The Company also has acquired U.S. federal net operating
losses from its acquisition of Sequel Corporation of approximately $11 million,
which will expire if not utilized beginning in 2011 through 2018. The annual
utilization of these net operating losses is limited under the "ownership
change" provisions of the U.S. Internal Revenue Code.

The Company also has acquired U.S. federal net operating
losses from its acquisition of Centennial Technologies of approximately $16
million, which will expire if not utilized beginning in 2011 through 2018. The
annual utilization of these net operating losses is limited under the "ownership
change" provisions of the U.S. Internal Revenue Code.

The Company also has North Carolina investment tax credit of
$4.8 million which if not utilized will expire beginning in 2002 through
2007.

The Company has net operating loss carryforwards in various
foreign jurisdictions. A summary of significant foreign net operating loss
carryforwards follows (amounts in millions):

`Jurisdiction      Amount                 Expiration
           ----------------   --------- --------------------------------------

           Australia        $     22.6                   N/A
           Brazil                 77.4                   N/A
           Canada                 18.2                  2008
           Indonesia               9.1                  2006
           Ireland                25.3                   N/A
           Malaysia               19.7                   N/A
           Mexico                 76.0               2007 - 2011
           Romania                44.4               2003 - 2006
           Turkey                  5.6                  2004
           United Kingdom          4.0                   N/A`

Management has determined that a valuation allowance in the amount of $71.6
million is required with respect to deferred tax assets. Management believes it
is more likely than not that the remaining deferred tax assets will be realized.
In the event the tax benefits relating to the valuation allowance are realized,
$34.4 million of such benefits would reduce goodwill and $11.8 million would be
credited to other comprehensive income.

Worldwide income (loss) before income taxes for the fiscal
years ended August 31, 2001, 2000 and 1999, consisted of the following (in
millions):

`2001         2000        1999
                                  ----------  ------------  ---------

                       U.S.      $   (287.2) $      392.1  $   349.7
                       Non-U.S.       129.5         347.4      164.8
                                  ----------  ------------  ---------
                       Total     $   (157.7) $      739.5  $   514.5
                                  ==========  ============  =========`

Cumulative undistributed earnings of the international
subsidiaries amounted to $963.4 million as of August 31, 2001, all of which is
intended to be permanently reinvested. The amount of income tax liability that
would result had such earnings been repatriated is estimated to be approximately
$204.6 million.

Solectron has been granted a tax holiday for its Malaysian
sites which is effective through July 2011, subject to certain conditions. In
addition, Solectron has been granted a tax holiday for certain manufacturing
operations in Singapore which is effective through March 2011, subject to
certain conditions. Solectron has also been granted various tax holidays in
China, which are effective for various terms and are subject to certain
conditions.

NOTE 11. STOCKHOLDERS' EQUITY

Issuance of Common Stock

In August 1999, Solectron sold, through an underwritten
public offering, 34.1 million shares of common stock which generated net
proceeds of approximately $1.1 billion.

In November 2000, Solectron sold through, an underwriter
public offering, 35 million shares of common stock which generated net proceeds
of approximately $1.2 billion.

Stock Repurchase

During fiscal 1999, SMART repurchased approximately 454,000
shares of its common stock in the open market at an average purchase price of
$15.75 per share and a total cost of approximately $7.1 million. As of August
31, 1999, all shares repurchased by SMART had been reissued pursuant to the
exercise of stock options previously granted to employees from its various stock
plans.

Stock Split

Effective February 24, 1999 and March 8, 2000, Solectron
completed two-for-one stock splits effected as stock dividends. All references
to share and per share data have been retroactively adjusted to reflect the
stock splits.

Pro Forma Fair Value Disclosures

Solectron accounts for its employee stock plans, which
consist of fixed stock option plans and an Employee Stock Purchase Plan, using
the intrinsic value method under APB Opinion No. 25. No compensation expense
related to these plans has been recognized in the Company's financial
statements. The table below sets out the pro forma amounts of net income and net
income (loss) per share that would have resulted for the fiscal years ended
August 31, 2001, 2000 and 1999, if Solectron accounted for its employee stock
plans under the fair value recognition provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation."

`2001       2000        1999
                                                            ---------  ---------  ----------
                                                         (in millions, except per share daata)
Net income (loss):                            As reported   ($123.50)   $497.20     $350.30
                                              Pro forma     ($209.90)   $444.00     $314.30

Net income (loss) per share:
Basic                                         As reported     ($0.19)     $0.83       $0.65
                                              Pro forma       ($0.33)     $0.74       $0.58
Diluted                                       As reported     ($0.19)     $0.80       $0.61
                                              Pro forma       ($0.33)     $0.71       $0.55`

For purposes of computing pro forma net income (loss), the
fair value of each option grant and Employee Stock Purchase Plan purchase right
is estimated on the date of grant using the Black-Scholes option pricing model.
The assumptions used to value the option grants and purchase rights are stated
below.

`2001         2000         1999
                                              ------------  -----------  -----------

Expected life of Options                       3.5 years     3.5 years    3.5 years
Expected life of purchase rights                6 months      3 months     3 months
Volatility                                        65%           52%          44%
Risk-free interest rate                       3.4% to 6.34% 4.8% to 6.8% 4.5% to 5.8%
Dividend yield                                    zero         zero         zero`

Stock Option Plans

Solectron's stock option plans provide for grants of options
to associates to purchase common stock at the fair market value of such shares
on the grant date. The options vest over a four-year period beginning generally
on the grant date. The term of the options is five years for options granted
prior to November 17, 1993, and seven years for options granted thereafter. In
connection with the acquisition of Force in November 1996, Solectron assumed all
options outstanding under the Force option plan. Options under the Force plan
generally vest over a four-year period beginning on the grant date and have a
term of ten years. No further options may be granted under the Force plan.

In connection with the merger with SMART in November 1999,
Solectron assumed all options outstanding under the SMART plans. The options
vest over a three to five year period beginning generally on the grant date. The
term of the options is five years for 10% shareholders (participants who own
stock possessing more than 10% of the voting power of all classes of SMART's
outstanding capital stock) and ten years for all other options. In October 1995,
the Board of Directors suspended the issuance of further grants under the 1989
Stock Plan. No further options may be granted under the SMART plans.

In connection with the merger with Bluegum in July 2000,
Solectron assumed all options outstanding under the Bluegum plan. The options
vested immediately on the date of grant and the term of the options is five
years. No further options may be granted under the Bluegum plan.

In connection with the merger with Centennial Technologies,
Inc in April 2001, Solectron assumed all options outstanding under the
Centennial plan. The options vesting period range from immediately to three
years. The term of the options range from two to ten years. No further options
may be granted under the Centennial plan.

A summary of stock option activity under the plans for the
fiscal years ended August 31, 2001, 2000 and 1999, follows (in millions, except
per share data):

`2001                  2000                  1999
                               ---------------------  --------------------  --------------------
                                           Weighted              Weighted              Weighted
                                Number      Average    Number     Average    Number     Average
                                   of      Exercise      of      Exercise      of      Exercise
                                 Shares      Price     Shares      Price     Shares      Price
Oustanding,                    ----------  ---------  ---------  ---------  ---------  ---------
   beginning of year                44.1  $   17.72       45.9  $   11.29       45.5  $    7.37
Granted                             14.4  $   32.98       13.4  $   34.21       15.6  $   18.04
Exercised                           (7.0) $    8.77      (10.8) $    8.18      (11.5) $    5.69
Canceled                            (3.6) $   30.23       (4.4) $   21.94       (3.7) $    8.39
                               ----------             ---------             ---------
Outstanding,
  end of year                       47.9  $   22.61       44.1  $   17.72       45.9  $   11.29
                               ==========             =========             =========
Exercisable
  end of year                       27.0  $   16.53       23.6  $   11.23       22.2  $    7.61
                               ==========             =========             =========

Weighted-average
   fair value of options
   granted during the year                $   17.91             $   15.92             $    7.07`

Information regarding the stock options outstanding at August
31, 2001, is summarized in the table below (in millions, except number of years
and per share data).

`Outstanding                     Exercisable
                       -------------------------------------  -----------------------
                                     Weighted
                                     Average      Weighted                 Weighted
                                   Remaining       Average                  Average
Range of               Number of   Contractual    Exercise     Number of    Exercise
Exercise Prices          Shares        Life         Price       Shares       Price
---------------------- ----------  ------------  -----------  -----------  ----------
$0.33 - $5.98             5.8       1.60 years        $5.22          5.8       $5.21
$6.13 - $10.95            6.6       3.15 years        $9.34          6.5       $9.32
$11.08 - $12.69           2.8       4.56 years       $11.95          2.1      $11.86
$13.27 - $13.30           4.7       4.26 years       $13.30          3.3      $13.30
$13.44 - $18.13           5.4       6.48 years       $16.96          1.2      $16.18
$18.23 - $31.00           7.7       5.78 years       $25.01          3.6      $23.91
$32.29 - $35.31           5.5       5.40 years       $35.07          2.1      $34.97
$36.09 - $46.13           8.3       5.85 years       $44.03          2.2      $43.60
$46.94 - $51.67           1.0       6.15 years       $46.99          0.2      $47.17
                       ----------                             -----------
$0.33  - $51.67          47.9       4.75 years       $22.61         27.0      $16.53
                       ==========                             ===========`

A total of 74.6 million shares of common stock remain
reserved for issuance under the plans as of August 31, 2001.

On December 1, of each year, each independent member of
Solectron's Board of Directors is granted an option to purchase 6,000 shares of
common stock at the fair market value on such date. These options vest over one
year and have a term of five years.

Employee Stock Purchase Plan

Under Solectron's Employee Stock Purchase Plans (the Purchase
Plans), associates meeting specific employment qualifications are eligible to
participate and can purchase shares quarterly through payroll deductions at the
lower of 85% of the fair market value of the stock at the commencement or end of
the offering period. The Purchase Plans permit eligible associates to purchase
common stock through payroll deductions for up to 15% of qualified compensation.
As of August 31, 2001, 4.7 million shares remain available for issuance under
the Purchase Plans.

The weighted average fair value of the purchase rights
granted by Solectron in fiscal 2001, 2000 and 1999 was $12.90, $16.11 and $9.67,
respectively. The weighted-average fair value of the purchase rights granted by
SMART in fiscal 1999 and 1998 was $5.69 and $5.86, respectively.

NOTE 12. SEGMENT AND GEOGRAPHIC INFORMATION

Solectron provides integrated supply chain solutions that
span the entire product life cycle, including technology, manufacturing and
services. The Company has 54 manufacturing facilities in the Americas, Europe
and Asia/Pacific to serve these similar customers. Solectron is operated and
managed by industry segment, and the industry segments are further managed
geographically. Each industry segment has its own president and support staff.
Solectron's management uses an internal management reporting system, which
provides important financial data to evaluate performance and allocate
Solectron's resources on an industry segment and geographic basis. Intersegment
adjustments are related primarily to intersegment sales that are generally
recorded at prices that approximate arm's length transactions. Certain corporate
expenses are allocated to these operating segments and are included for
performance evaluation. Some amortization expenses are also allocated to these
operating segments, but the related intangible assets are not allocated. The
accounting policies for the segments are the same as for Solectron taken as a
whole. Solectron has three reportable operating segments: global manufacturing
business unit, global services business unit and technology solutions business
unit. Information about the operating segments for the fiscal years ended August
31, 2001, 2000 and 1999, was as follows:

`----------------------------------
                                                   2001        2000        1999
                                                ----------  ----------  ----------
                                                          (in millions)
Net sales:
 Manufacturing and operations                  $ 17,181.6  $ 12,418.5  $  8,460.3
 Technology solutions                             1,201.1     1,486.5     1,130.4
 Global services                                    309.6       232.5        78.5
                                                ----------  ----------  ----------
                                               $ 18,692.3  $ 14,137.5  $  9,669.2
                                                ==========  ==========  ==========
Depreciation and amortization:
 Manufacturing and operations                  $    450.8  $    194.1  $    167.8
 Technology solutions                                22.1        26.1        21.5
 Global services                                     10.0        12.8         2.2
 Corporate                                           53.2        18.4         8.9
                                                ----------  ----------  ----------
                                               $    536.1  $    251.4  $    200.4
                                                ==========  ==========  ==========

Interest income:
 Manufacturing and operations                  $     18.8  $      8.6  $      8.0
 Technology solutions                                 1.9         5.7         7.2
 Global services                                      0.1         0.2         --
 Corporate                                           96.1        92.4        21.5
                                                ----------  ----------  ----------
                                               $    116.9  $    106.9  $     36.7
                                                ==========  ==========  ==========

Interest expense:
 Manufacturing and operations                  $     19.7  $      6.9  $      3.4
 Technology solutions.                                0.8         1.1         0.7
 Global services                                     (0.1)        0.9         --
 Corporate                                          155.6        62.7        34.2
                                                ----------  ----------  ----------
                                               $    176.0  $     71.6  $     38.3
                                                ==========  ==========  ==========
Income before income taxes and cumulative
 effect of change in accounting principle:
 Manufacturing and operations                  $    (42.8) $    668.7  $    484.0
 Technology solutions                                20.4        78.4        82.6
 Global services                                     38.8         2.6         9.6
 Corporate                                         (174.1)      (10.2)      (61.7)
                                                ----------  ----------  ----------
                                               $   (157.7) $    739.5  $    514.5
                                                ==========  ==========  ==========


Capital expenditures:
 Manufacturing and operations                  $    454.3  $    432.3  $    392.0
 Technology solutions                                22.7        29.0        24.1
 Global services                                     12.3        15.7         3.8
 Corporate                                           47.5        29.0        29.5
                                                ----------  ----------  ----------
                                               $    536.8  $    506.0  $    449.4
                                                ==========  ==========  ==========

Total Assets:
 Manufacturing and operations                  $  9,752.4  $  5,303.4  $  2,712.7
 Technology solutions                               587.5       500.2       451.5
 Global services                                    184.9       222.2        52.6
 Corporate                                        2,405.6     4,349.8     2,203.7
                                                ----------  ----------  ----------

                                               $ 12,930.4  $ 10,375.6  $  5,420.5
                                                ==========  ==========  ==========`



The following enterprise wide information is provided in
accordance with SFAS No. 131. Geographic net sales information reflects the
destination of the product shipped. Long-lived assets information is based on
the physical location of the asset. No country, other than the United States,
accounted for more than 10% of total sales or total assets in the periods
presented. For major customer information, the Company's operating segments
contributed various percentages aggregating up to 10% or more of consolidated
net sales for such customers identified in Note 13.

`2001        2000        1999
                                                ----------  ----------  ----------
                                                         (in millions)
Net sales derived from:
 PCB assembly                                  $ 13,738.3  $  9,940.5  $  6,502.0
 Systems build                                    3,434.6     2,516.1     2,058.6
 Technology solutions prodcuts                    1,207.9     1,501.1     1,108.6
 Global services                                    311.5       179.5         --
                                                ----------  ----------  ----------
                                               $ 18,692.3  $ 14,137.2  $  9,669.2
                                                ==========  ==========  ==========
Geographic net sales:
 United States                                 $  9,205.3  $  8,328.9  $  6,491.2
 Europe                                           3,398.8     3,440.9     1,952.4
 Asia/Pacific and other                           6,088.2     2,367.7     1,225.6
                                                ----------  ----------  ----------
                                               $ 18,692.3  $ 14,137.5  $  9,669.2
                                                ==========  ==========  ==========
Long-lived assets (physical location):
 United States                                 $  1,592.8  $    837.8  $    523.2
 Europe                                             378.1       607.2       100.1
 Asia/Pacific and other                           2,255.4       302.4       314.8
                                                ----------  ----------  ----------
                                               $  4,226.3  $  1,747.4  $    938.1
                                                ==========  ==========  ==========`

NOTE 13. MAJOR CUSTOMERS

Net sales to major customers as a percentage of
consolidated net sales were as follows:

`YEARS ENDED AUGUST 31,
                                 --------------------------------------------
                                     2001          2000             1999
                                 ------------  ---------------  -------------
Cisco                                   11.5%            12.0%          11.1%
Compaq                                   --               --            11.8%
Ericsson                                13.7%            13.0%           --
Nortel                                  11.9%             --             --`

Solectron has concentrations of credit risk due to sales to
these and other of Solectron's significant customers. In particular, Nortel and
Ericsson account for approximately 17%, 11% of total accounts receivable,
respectively, at August 31, 2001. The concentration of credit risk is
intensified because the majority of Solectron's customers are in the same
industry. The Company considers its concentrations of credit risk in
establishing the reserves for bad debt and believes that such reserves are
adequate.

NOTE 14. PURCHASE OF ASSETS

During the first quarter of fiscal 1999, Solectron
acquired the wireless telephone manufacturing assets, primarily inventory and
fixed assets, of Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular
Mobile Telephone (CMT) division in Braselton, Georgia. MCEA was a subsidiary of
Mitsubishi Electric Corporation. The purchase price of approximately $25 million
was allocated to the assets acquired based on their relative fair values at the
date of acquisition. Under the terms of the agreement, the Company will provide
MCEA-CMT with a full range of manufacturing services for five years, including
NPI management, PCB assembly and full systems assembly for MCEA's branded and
private-label cellular products sold in North America.

During the second quarter of fiscal 1999, Solectron acquired
IBM's Electronic Card Assembly and Test (ECAT) manufacturing assets, primarily
inventory, in Austin, Texas. Additionally, Solectron acquired the non-exclusive
rights to use certain IBM intellectual property for approximately $53 million.
The total purchase price for the manufacturing assets and intellectual property
rights was approximately $83 million. The purchase price was allocated to the
assets acquired based on the relative fair values of the assets at the date of
acquisition. Under the terms of the agreements, Solectron provides assembly for
motherboards used in IBM's mobile computer products manufactured worldwide for
three years. Solectron also provides IBM's worldwide design teams a full range
of integrated NPI services.

During the fourth quarter of fiscal 1999, Solectron acquired
the manufacturing assets, primarily inventory, of Trimble Navigation Limited
(Trimble) in Sunnyvale, California, and assumed full manufacturing
responsibility of Trimble's Global Positioning System (GPS) and related radio
frequency (RF) technology products for three years. Additionally, Solectron
acquired certain intellectual property rights related to RF technology for
approximately $11 million. The total purchase price for the transaction was
approximately $27 million. The purchase price was allocated to the acquired
assets based on the relative fair values of the assets at the date of
acquisition.

During the first quarter of fiscal 2000, Solectron acquired
the manufacturing assets, primarily inventory and equipment, of IBM's Netfinity
server operations in Greenock, Scotland in several phases for approximately
$19.2 million. In addition, Solectron acquired certain IBM intellectual property
rights included in the design and manufacture of PC server motherboards for
$19.6 million. Solectron provides to IBM for three years fully integrated PCB
assembly services including early prototyping, new product launch, assembly and
test, volume production, end-of-life support and life cycle management.

During the second quarter of fiscal 2000, Solectron completed
the acquisition of the complex systems manufacturing assets of Ericsson Telecom
AB's telecommunications infrastructure equipment operations in Longuenesse,
France, and Östersund, Sweden. The total purchase price for the
manufacturing assets and intangible assets was approximately $162.2 million. The
purchase price was allocated to the assets acquired based on the relative fair
values of the assets at the date of acquisition. As part of the agreement,
Solectron provides a complete range of integrated supply-chain solutions to
Ericsson Telecom AB.

During the third quarter of fiscal 2000, Solectron completed
the acquisition of the manufacturing assets of Premisys Communications, Inc., a
wholly owned subsidiary of Zhone Technologies, Inc. The total purchase price for
the manufacturing assets and intangible assets was approximately $15.5 million.
The purchase price was allocated to the assets acquired based on the relative
fair values of the assets at the date of acquisition. Zhone is a communications
equipment provider integrating expertise in voice, video and data
communications. Under the agreement, Solectron became Zhone's virtual supply-chain partner and
signed a five-year commitment with Zhone to provide product
life cycle management services, including NPI through repair and end-of-life
services.

During the third quarter of fiscal 2000, Solectron acquired
the manufacturing assets of several Nortel manufacturing facilities including
Calgary, Canada; Research Triangle Park, North Carolina; Monterrey, Mexico; and
Cwmcarn, Wales. Solectron provides prototyping, PCB assembly, small sub-assembly
and repair services to Nortel in these locations. Also in June 2000, Solectron
completed the purchase of manufacturing assets at two Nortel Networks
manufacturing and repair facilities located in Pont de Buis and Douarnenez,
France, and Monkstown, Northern Ireland for which Solectron will offer
prototyping, PCB assembly, small sub-assembly and repair services to Nortel
Networks. The aggregate purchase price of the Nortel assets was approximately
$900 million, subject to certain conditions. Solectron also entered into a
multi-year supply agreement with Nortel with revenues in excess of $10 billion,
with the option to renew.

During the second quarter of fiscal 2001, Solectron acquired
IBM's European Repair Center in Amsterdam, Netherlands for approximately $10
million in cash. In addition, Solectron assumed responsibility for IBM's
European repair, refurbishment and asset recovery services provided by Amsterdam
operations. The purchase price was allocated to the assets acquired based on the
relative fair values of the assets at the date of acquisition.

During the second quarter of fiscal 2001, Solectron completed
the acquisition of Sony's manufacturing facilities in Miyagi, Japan, and
Kaohsiung, Taiwan for approximately $75 million in cash. The new sites provide a
range of electronics manufacturing services to Sony and other customers. The
purchase price was allocated to the assets acquired based on the relative fair
values of the assets at the date of acquisition.

NOTE 15. BUSINESS COMBINATIONS

During the first quarter of fiscal 1999, Bluegum acquired
Alcatel's telecommunications manufacturing operations in New South Wales,
Australia. This transaction was accounted for under the purchase method of
accounting, and the purchase price of approximately $23.3 million was allocated
to the assets acquired based on the relative fair values of the assets at the
date of acquisition. Pro forma results of operations are not presented because
the effect of this acquisition is not significant.

During the fourth quarter of fiscal 1999, Solectron issued
approximately 520,000 shares of common stock to acquire all of the outstanding
capital stock of Sequel. It was a privately held corporation specializing in
notebook computer and liquid crystal display repair service and support. This
transaction was accounted for under the purchase method of accounting. The
consolidated financial statements include the operating results of Sequel from
the date of acquisition. The total purchase price was approximately $17.8
million. The acquisition was accounted for as a purchase of a business resulting
in goodwill of approximately $4 million. Pro forma results of operations are not
presented because the effect of this acquisition is not significant.

During the fourth quarter of fiscal 1999, SMART acquired
Compaq's embedded and real time product line and business in Fremont, California
and Scotland. Pursuant to the agreement, SMART acquired certain assets with a
fair value totaling $1.2 million. The acquisition was accounted for under the
purchase method of accounting, and the purchase price of approximately $16.2
million was allocated to the assets acquired based on the relative fair values
of the assets at the date of acquisition. Pro forma results of operations are
not presented because the effect of this acquisition is not significant.

During the first quarter of fiscal 2000, Solectron acquired
NULOGIX Technical Services, Inc. (NULOGIX), a wholly owned subsidiary of IBM
Canada, in its entirety. NULOGIX is located in Vaughn, Canada, and specializes
in repair, manufacturing and refurbishment. The purchase price was approximately
$4.0 million. The acquisition was accounted for as a purchase of a business
resulting in goodwill of approximately $1.4 million. Pro forma results of
operations are not presented because the effect of this acquisition is not
significant.

During the third quarter of fiscal 2000, Solectron completed
the acquisition of Alcatel's manufacturing business in Aguadilla, Puerto Rico.
The purchase price was approximately $47.2 million. The acquisition was
accounted for as a purchase of a business resulting in goodwill of approximately
$13.3 million. Alcatel is a world leader in building next-generation networks
and end-to-end data voice solutions. As part of the acquisition of Alcatel's
manufacturing business in Aguadilla, Solectron assumed full manufacturing
responsibility for Alcatel's PCB products focused on the networking and
telecommunication industries. Additionally, Solectron provides a full range of
manufacturing services to Alcatel for three years including prototyping and
high-volume PCB assembly. Pro forma results of operations are not presented
because the effect of this acquisition is not significant.

During the fourth quarter of fiscal 2000, Solectron completed
the acquisition of IBM's manufacturing operations in Hortolandia, Sao Paulo
state, Brazil. Solectron assumes responsibility for the systems configuration
and assembly of IBM's Personal Systems Group, Retail Systems Solutions Group,
and Enterprise Systems Group products sold into the Brazilian, Murcosul and
Andean markets. As part of the multi-year agreement, Solectron provides IBM with
an extensive range of integrated services including NPI support, PCB and systems
assembly, product configuration services, repair and end-of-life product
support. Pro forma results of operations are not presented because the effect of
this acquisition is not significant.

During the second quarter of 2001, Solectron completed the
acquisition of NEL. Solectron purchased all of the outstanding issued share
capital and convertible bonds for $2.3 billion and $122.4 million, respectively.
The acquisition was accounted for using the purchase method and resulted in
goodwill of approximately $2.0 billion. As part of the acquisition, Solectron
gained manufacturing sites in China, Hungary, Indonesia, Malaysia, Mexico,
Singapore and United States.

The NEL Purchase price was allocated as follows:

`Asset acquired                            $1,172.6
Goodwill                                   1,974.9
Liabilities assumed                         (692.8)
                                      -------------
   Total purchase price                   $2,454.7
                                      =============`

The following unaudited pro forma financial information
presents the combined results of operations of Solectron and NEL as if the
acquisition had occurred as of the beginning of fiscal 2001 and 2000, after
giving effect to certain adjustments, including amortization of goodwill,
increased interest expense on debt related to the acquisition, and related
income tax effects. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred had Solectron and NEL
constituted a single entity during such periods.

`2001            2000
                                     ---------------  ------------------
                                    (in millions, except per share data)

Net Sales                                $19,734.7       $16,258.8

Net income (loss)                          ($210.1)         $536.1

Basic income (loss) per share               ($0.33)          $0.85

Diluted income (loss) per share             ($0.33)          $0.81`

During the third quarter of fiscal year 2001, Solectron
issued approximately 2.2 million shares of common stock to acquire all of the
outstanding capital stock of Centennial. The acquisition, valued at
approximately $64.5 million, was accounted for using the purchase method and
resulted in goodwill of approximately $45.8 million. As a result of the
transaction, Solectron gained all of Centennial's design, manufacturing and
marketing capabilities, which include memory module and memory card solutions
based on SRAM and flash technologies for OEMs and end-users in markets such as
telecommunications, data communications, mobile computing and medical. Pro forma
results of operations are not presented because the effect of this acquisition
is not significant.

During the fourth quarter of fiscal 2001, Solectron completed
the acquisition of Shinei, a privately held manufacturer and designer of
enclosures for electronics products. The acquisition, valued at approximately
$72.9 million, was accounted for using the purchase method and resulted in
goodwill of approximately $63.3 million. Pro forma results of operations are not
presented because the effect of this acquisition is not significant.

During the fourth quarter of fiscal 2001, Solectron completed
the acquisition of MCC-Sequel Limited. The acquisition was accounted for using
the purchase method. Pro forma results of operations are not presented because
the effect of this acquisition is not significant.

NOTE 16 - Restructuring and Impairment

Beginning in the second quarter of fiscal 2001, Solectron
began undertaking several measures to restructure the Company's operations in
light of the current economic downturn. The measures, which included reducing
the workforce, consolidating some facilities and changing the strategic focus of
a number of sites, was largely intended to align its capacity and infrastructure
to anticipated customer demand as well as rationalize its footprint worldwide.

During fiscal 2001, (approximately $25 million, $285 million
and $207 million in the second, third, and fourth quarters, respectively), total
restructuring and impairment costs of $517.3 million were charged against
earnings. These restructuring and impairment charges included employee severance
and benefit costs of approximately $70.0 million, costs related to facilities
that will be abandoned and subleased of approximately $56.4 million, costs
related to equipment that will be abandoned of approximately $117.5 million,
impairment of equipment of approximately $188.2 million, impairment of
facilities of approximately $37.7 million, impairment of goodwill, intangible
and other assets related to closed facilities of approximately $42.2 million and
other exit costs of approximately $5.3 million.

The employee severance and benefit costs related to the
elimination of approximately 11,800 positions worldwide. Approximately 67% of
the positions eliminated were in the Americas region, 23% were in Europe and 10%
were in Asia/Pacific. The employment reductions primarily affected employees in
manufacturing and back office support functions. Facilities and equipment
subject to restructuring were primarily located in the Americas and Europe. For
leased facilities that will be abandoned and subleased, the lease costs
represent future lease payments subsequent to abandonment less estimated
sublease income. For facilities and equipment, the impairment loss recognized
was based on the fair value less costs to sell with fair value based on
estimates of existing market prices for similar assets. As of August 31, 2001,
all 11,800 employees have left the Company under this plan.

Below are tables summarizing restructuring activity excluding
impairment in fiscal 2001:

`Severance    Lease Payments   Lease Payments
                                  and Benefits  on Facilities   on Equipment      Other         Total
                                 ------------  ---------------  -------------  ------------  -----------
Begining balance                $        --   $           --   $         --   $        --   $       --
Current year provision                  70.0             56.4          117.5           5.3        249.2
Cash payments                          (70.0)            (5.5)          (5.0)         (0.9)       (81.4)
                                 ------------  ---------------  -------------  ------------  -----------
Balance at August 31, 2001      $        --   $          50.9  $       112.5  $        4.4  $     167.8
                                 ============  ===============  =============  ============  ===========`

The Lease payments on facilities and equipment, resulting
from restructuring activities are expected to be paid over the respective lease
terms through fiscal 2014. The company expects to substantially complete
implementation of its restructuring program during the first quarter of fiscal
2002.

Solectron recorded restructuring costs of approximately $11.1
million in fiscal 2000 primarily related to the consolidation of certain
facilities acquired in the SMART and Sequel mergers. Approximately $4.4 million
related to lease exit costs, $3.4 million related to asset write-offs and other
incidental costs, $1.2 million related to severance costs and $2.1 million
related to other costs.

NOTE 17. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net
income per share.

`Years Ended August 31,
                                        --------------------------------------

                                            2001         2000          1999
                                        ------------  -----------  -----------
                                         (in millions, except per share data)

Net income (loss) before cumulative
  effect of change in accounting
  principle, net of taxes              $     (123.5) $     500.7 $      350.3
Cumulative effect of change
  in accounting principle,
  net of taxes                                  --         (3.50)         --
                                        ------------  -----------  -----------
Net  income (loss) - basic             $     (123.5) $     497.2 $      350.3

Interest expense from convertible
  subordinated notes, net of taxes                -            -          5.0
                                        ------------  -----------  -----------
Net  income (loss) - diluted           $     (123.5) $     497.2 $      355.3
                                        ============  ===========  ===========


Weighted average shares - basic               641.8        599.4        542.6
Common shares issuable upon
  exercise of stock options                       -         24.1         22.6
Common shares issuable upon conversion
  of convertible subordinated notes               -            -         13.8
                                        ------------  -----------  -----------
Weighted average shares
  diluted                                     641.8        623.5        579.0
                                        ============  ===========  ===========

Basic net  income (loss) per share:
 Income (loss) before cumulative
   effect of change in
   accounting principle                $      (0.19) $      0.84 $       0.65
 Cumulative effect of change
   in accounting principle                      --         (0.01)         --
                                        ------------  -----------  -----------
    Net  income (loss) per share       $      (0.19) $      0.83 $       0.65
                                        ============  ===========  ===========

Diluted net income (loss) per share:
 Income (loss) before cumulative
   effect of change in
   accounting principle                $      (0.19) $      0.80 $       0.61
 Cumulative effect of change
   in accounting principle                      --           --           --
                                        ------------  -----------  -----------
     Net  income (loss) per share      $      (0.19) $      0.80 $       0.61
                                        ============  ===========  ===========`

Stock options with exercise prices greater than the average
fair market price for a period, which are defined as antidilutive, are not
included in the diluted earnings per share calculations because of their
antidilutive effect.

During fiscal 2001, common shares issuable upon exercise of
stock options were excluded from the diluted calculation because the effect was
anti-dilutive. During fiscal 2000 and 1999, the exercise price for 3.1 million
and 3.9 million options, respectively, were greater than the average fair market
value of the Company's common stock and consequently were excluded from the
diluted calculation.

In addition, the calculations for the years ended August 31,
2001 and 2000 did not include 100.5 and 39.7 million common shares,
respectively, issuable upon conversion of the zero coupon senior notes as they
would have been antidilutive.

NOTE 18. SUBSEQUENT EVENTS (Unaudited)

On August 9, 2001. Solectron entered into a definitive
agreement with C-MAC to combine the two companies. The combination will create a
diversified provider of integrated electronic manufacturing solutions. On the
announcement date, the value of the deal was estimated at $2.6 billion based on
the issuance of an estimated 151 million shares of Solectron. The purchase
method will be used to account for the transaction. On September 10, 2001,
Solectron filed an S-4 regarding the combination.

On September 17, 2001, Solectron's Board of Directors
authorized a $200 million stock repurchase program. Under the program, the
Company may repurchase its common shares in the open market beginning the first
day of that the New York Stock Exchange resumes following the tragic events of
September 11, 2001, and from time to time thereafter. As of October 31, 2001,
the Company had purchased 442,200 shares, approximately $4.5 million under this
program.

On October 16, 2001, Solectron announced that it has
completed the acquisition of Iphotonics, Inc., a provider of core optical
manufacturing services. The acquisition increases our optical services
capabilities.

On October 26, 2001, Solectron announced that it completed
its acquisition of Stream International Inc., a global customer relationship
management outsourcing and support services provider for leading technology
companies. The acquisition increases the capabilities of Solectron's Global
Services business unit and enhances the company's total service offerings.

At various dates through October 25, 2001, Solectron
repurchased certain zero coupon convertible senior notes, with face value of
$312 million, and a fair value of $156 million.

---

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
                   Solectron Corporation:

We have audited the accompanying consolidated balance sheets
of Solectron Corporation and subsidiaries as of August 31, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity,
comprehensive income (loss), and cash flows for each of the years in the three-
year period ended August 31, 2001. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly in all material respects, the financial
position of Solectron Corporation and subsidiaries as of August 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
years in the three-year period ended August 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. Also
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for start-up costs.



KPMG LLP

Mountain View, California
   September 17, 2001



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
  AND FINANCIAL DISCLOSURE

Not applicable.

PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The information required by Item 10 regarding our
directors is incorporated by reference from the information under the caption
"Election of Directors" in Solectron's definitive Proxy Statement. The
information required by Item 10 regarding our executive officers appears
immediately following Item 4 under Part I of this Report.

ITEM 11: EXECUTIVE COMPENSATION

The information required by item 11 of Form 10-K is
incorporated by reference to the information contained in the section captioned
"Executive Officer Compensation" of Solectron's definitive Proxy Statement
(Notice of Annual Meeting of Stockholders) for the fiscal year ended August 31,
2001 to be held on January 23, 2002 which we will file with the Securities and
Exchange Commission within 120 days after the end of the fiscal year covered by
this report.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Information regarding this item is incorporated herein by
reference from the section entitled "Security Ownership of Certain Beneficial
Owners and Management" in Solectron's definitive Proxy Statement (Notice of
Annual Meeting of Stockholders) for the fiscal year ended August 31, 2001.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

Information with respect to this item is incorporated
herein by reference from the section entitled "Certain Relationships and Related
Transactions" in Solectron's definitive Proxy Statement (Notice of Annual
Meeting of Stockholders) for the fiscal year ended August 31, 2001.

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS
ON

FORM 8-K

(a) 1. Financial Statements. The financial statements
listed in

Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,
above are

filed as part of this Annual Report on Form 10-K,
beginning on

page 38.

2. Financial Statement Schedule. The financial statement

Schedule II - VALUATION AND QUALIFYING ACCOUNTS is filed
as

part of this annual report on Form 10-K, at page 77.

3. Exhibits. The exhibits listed in the accompanying Index to

Exhibits are filed as part of this Annual Report on Form
10-K.

(b) Reports on Form 8-K.

1. On July 3, 2001, Solectron filed a Current Report on Form
8-K (i) announcing that on June 29, 2001, the Board of Directors of Solectron
Corporation approved the adoption of a Stockholder Rights Plan and (ii)
announcing its fiscal third quarter results and outlook for its fiscal fourth-quarter.
2. On August 14, 2001 Solectron filed a Current Report on
Form 8-K regarding a definitive agreement under which Solectron and C-MAC will
combine to create a leading diversified designer and manufacturer of integrated
electronic manufacturing solutions. Under the terms of the agreement, holders of
common shares of C-MAC will be entitled to receive either 1.755 shares of
Solectron common stock for each common share of C-MAC held by them. Based on
Solectron's August 8, 2001 closing price of $17,20, the transaction is valued at
$30, 19 per share of C-MAC common stock, or about $2.7 billion, including the
assumption of debt.
3. On August 17, 2001, Solectron filed a Current Report on
Form 8-K/A announcing that it had entered into a Combination Agreement (the
"Combination Agreement") dated as of August 8, 2001 by and between Solectron,
3924548 Canada Inc., an indirect wholly-owned subsidiary of Solectron, and C-
MAC.
4. On August 31, 2001, Solectron filed a Current Report on
Form 8-K regarding its appointment of new Chief Financial Officer and Senior
Vice President Kiran Patel.

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                                                             
| | ------------------------------------------------------------
| | SOLECTRON CORPORATION
                          (Registrant)

Date: November 14, 2001



| |     |                      
| | --- | ---------------------
| | By: | /s/  Koichi Nishimura

| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                      
| | Koichi Nishimura, President,
                                           Chief Executive Officer and
                                           Chairman of the Board)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.



|Name                                               | Title                                                                                          | Date             
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------- | -----------------
|/s/ Koichi Nishimura
Koichi Nishimura, Ph.D.       | President, Chief
Executive Officer,
and Chairman of the Board                                  | November 14, 2001
|/S/ Kiran Patel
Kiran Patel                        | Chief Financial
Officer (Principal
Financial and
Accounting Officer),
Executive Vice President | November 14, 2001
|/S/ Winston H. Chen
Winston H. Chen, Ph.D          | Director                                                                                       | November 14, 2001
|/S/ Richard A. D'Amore
Richard A. D'Amore          | Director                                                                                       | November 14, 2001
|/S/ Charles A. Dickinson
Charles A. Dickinson      | Director                                                                                       | November 14, 2001
|/S/ Heinz Fridrich
Heinz Fridrich                  | Director                                                                                       | November 14, 2001
|/S/ William A. Hasler
William A. Hasler            | Director                                                                                       | November 14, 2001
|/S/ Kenneth E. Haughton
Kenneth E. Haughton, Ph.D. | Director                                                                                       | November 14, 2001
|/S/ Paul R. Low
Paul R. Low, Ph.D.                 | Director                                                                                       | November 14, 2001
|/S/ Osamu Yamada
Osamu Yamada                      | Director                                                                                       | November 14, 2001

---



FINANCIAL STATEMENT SCHEDULE

The financial statement Schedule II - VALUATION AND
QUALIFYING ACCOUNTS is filed as part of this Form 10-K.

SOLECTRON CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(in millions)



|Description                 | Balance at
Beginning
of Period | Amounts
Charged
To
Operations | (Deductions)       | Balance at
End
Of Period
|--------------------------- | ------------------------------ | ----------------------------- | ------------------ | ------------------------
|Year ended August 31, 2001: |                                |                               |                    |                         
|Allowance for doubtful      |                                |                               |                    |                         
|accounts receivable         | $	8.6                          | $	33.6                        | $            (1.4) | $           40.8        
|Year ended August 31, 2000: |                                |                               |                    |                         
|Allowance for doubtful      |                                |                               |                    |                         
|accounts receivable         | $	6.4                          | $	5.1                         | $	(2.9)            | $	8.6                   
|Year ended August 31, 1999: |                                |                               |                    |                         
|Allowance for doubtful      |                                |                               |                    |                         
|accounts receivable         | $	4.7                          | $	2.5                         | $	(0.8)            | $	6.4                   

---

INDEX TO EXHIBITS

|Exhibit Number | Description                                                                                                                                                                                                 
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1 [B]        | Agreement and Plan of Reorganization, by and among the Company,
Force Acq. Corp. and Force Computers, Inc. as amended.                                                                                      
|3.1 [I]        | Certificate of Incorporation of the Company.                                                                                                                                                                
|3.2 [I]        | Bylaws of the Company.                                                                                                                                                                                      
|3.3            | Certificate of Designation Rights, preferences and privileges of
Series A Participating preferred stock of Solectron Corporation A statement of
the rights, preferences, privileges and restrictions granted
|3.4            | Form of Amended specimen stock Certificate                                                                                                                                                                  
|10.1 [A]       | Preferred Stock Purchase Agreement dated September 29, 1983,
together with amendments thereto dated February 28, 1984 and June 23,
1988.                                                                    
|10.2 [H]       | Form of Indemnification Agreement between the Company and its
officers, directors and certain other key employees.                                                                                          
|10.3 [D]       | 1983 Incentive Stock Option Plan, as amended August 13,
1991.                                                                                                                                               
|10.4 [E]       | 1988 Employee Stock Purchase Plan, as amended October
1992.                                                                                                                                                 
|10.5 [C]       | Amended and Restated 1992 Stock Option Plan.                                                                                                                                                                
|10.6 [F]       | Stock Acquisition Agreement dated August 28, 1993, between the
Company and Solectron California Corporation.                                                                                                
|10.7 [G]       | Lease Agreement between BNP Leasing Corporation, as Landlord,
and the Company, as Tenant, Effective September 6, 1994.                                                                                      
|10.8 [G]       | Purchase Agreement, by and between the Company and BNP Leasing
Corporation, dated September 6, 1994.                                                                                                        
|10.9 [G]       | Pledge and Security Agreement, by and between the Company, as
Debtor, and BNP Leasing Corporation, as Secured Party, dated September 6,
1994.                                                               
|10.10 [G]      | Assignment and Assumption Agreement between the Company and
Solectron California Corporation, dated November 9, 1994.                                                                                       
|10.11 [G]      | Custodial Agreement by and between the Company, Banque Nationale
De Paris and BNP Leasing Corporation, dated September 6, 1994.                                                                             
|10.12 [H]      | Modification Agreement (First Amendment to Purchase Agreement
and Second Amendment to Lease Agreement) by and between the Company and BNP
Leasing Corporation, dated May 1, 1997.                           
|10.13 [H]      | Credit Agreement between the Company and Bank of America
National Trust and Savings Association, as Agent and Issuing Bank, dated April
30, 1997.                                                           
|10.14a [I]     | Amended and Restated Lease Agreement between BNP Leasing
Corporation and Solectron Washington, Inc., dated July 1, 1998.                                                                                    
|10.14b [I]     | Amended and Restated Purchase Agreement between BNP Leasing
Corporation and Solectron Washington, Inc., dated July 1, 1998.                                                                                 
|10.14c [I]     | Amended and Restated Guaranty from Solectron Corporation in
favor of BNP Leasing Corporation, effective as of July 1, 1998.                                                                                 
|10.15a [I]     | Amended and Restated Lease Agreement between BNP Leasing
Corporation and Force Computers, Inc., dated July 16, 1998.                                                                                        
|10.15b [I]     | Amended and Restated Purchase Agreement between BNP Leasing
Corporation and Force Computers, Inc., dated July 16, 1998.                                                                                     
|10.15c [I]     | Amended and Restated Guaranty from Solectron Corporation in
favor of BNP Leasing Corporation, effective as of July 16, 1998.                                                                                
|10.16a [I]     | Lease Agreement between BNP Leasing Corporation and Solectron
Georgia Corporation, dated October 20, 1998.                                                                                                  
|10.16b [I]     | Purchase Agreement between BNP Leasing Corporation and Solectron
Georgia Corporation, dated October 20, 1998.                                                                                               
|10.16c [I]     | Guaranty from Solectron Corporation in favor of BNP Leasing
Corporation, effective as of October 20, 1998.                                                                                                  
|10.17 [J]      | Agreement and Plan of Reorganization, dated as of September 13,
1999, by and among Solectron Corporation, SM Acquisition Corporation and SMART
Modular Technologies, Inc.                                   
|10.18 [J]      | Stock Option Agreement, dated as of September 13, 1999, by and
between Solectron Corporation and SMART Modular Technologies.                                                                                
|10.19 [K]      | Purchase Agreement dated May 2, 2000 between the Registrant and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.                                                                                         
|10.20 [L]      | Purchase Agreement dated November 14, 2000 between Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.                                                                                       
|10.21 [L]      | Purchase Agreement dated November 14, 2000 between Registrant
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.                                                                                       
|10.22 [K]      | Supplemental Indenture dated May 8, 2000 between the Registrant
and State Street bank and Trust Company of California N.A. as
Trustee.                                                                      
|10.23 [L]      | Supplemental Indenture dated November 20, 2000 between the
Registrant and State Street bank and Trust Company of California N.A. as
Trustee.                                                                
|10.24 [M]      | Combination Agreement by and among Solectron Corporation,
3924548 Canada Inc. and C-MAC Industries dated August 8, 2001, as
amended.                                                                        
|21.1           | Subsidiaries of the Registrant.                                                                                                                                                                             
|23.1           | Consent of Independent Auditors.                                                                                                                                                                            

Footnotes:

|[A] | Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-1 (File No. 33-22840).                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|[B] | Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-4 as amended, filed November 20, 1996. (File
No. 333-15893).
|[C] | Incorporated by reference to the Exhibits to Company's
Registration Statement on Form S-8 filed April 7, 1999 (File No. 333-
75813).                    
|[D] | Incorporated by reference to the Exhibits to Company's
Registration Statement on Form S-8 (File No. 33-46686).                                          
|[E] | Incorporated by reference to the Exhibits to Company's Form 10-K
for the year ended August 31, 1992.                                                    
|[F] | Incorporated by reference to the Exhibits to Company's Form 10-K
for the year ended August 31, 1993.                                                    
|[G] | Incorporated by reference to the Exhibits to Company's Form 10-K
for the year ended August 31, 1994.                                                    
|[H] | Incorporated by reference to the Exhibits to Company's Form 10-K
for the year ended August 31, 1997.                                                    
|[I] | Incorporated by reference to the Exhibits to the Company's Form
10-Q for the quarter ended February 26, 1999.                                           
|[J] | Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-4 filed October 14, 1999.                                   
|[K] | Incorporated by reference to the Exhibits to the current report
on Form 8-K filed May 16, 2000.                                                         
|[L] | Incorporated by reference to the Exhibits to the current report
on Form 8-K filed November, 2000.                                                       
|[M] | Incorporatd by reference to the Exhibits to the Company's
Registration Statement on Form S-4 filed September 10, 2001 , and all amendments
thereto.     

---