SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549
                                 FORM 10-Q


X QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 28, 1999.

__  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             (IRS Employer
    of Incorporation or Organization)       Identification Number)


                 777 Gibraltar Drive, Milpitas, California 95035
             (Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code:   (408) 957-8500



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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

At June 30,  1999,  253,222,130  shares of Common Stock of the  Registrant  were
outstanding.



<PAGE>


                         SOLECTRON CORPORATION

INDEX TO FORM 10-Q


PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at
         May 31, 1999 and August 31, 1998                          3

         Condensed  Consolidated  Statements  of Income
         for the three months and nine months
         ended May 31, 1999 and 1998                               4

         Condensed Consolidated Statements of Cash Flows
         for the nine months ended May 31, 1999 and 1998         5 - 6

         Notes to Condensed Consolidated Financial
         Statements                                              7 - 11

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                    12 - 28

Item 3.  Quantitative and Qualitative Disclosures About           28
         Market Risk


PART II. OTHER INFORMATION


Item 1.  Legal Proceedings                                        29

Item 2.  Changes in Securities                                    29

Item 3.  Defaults Upon Senior Securities                          29

Item 4.  Submission of Matters to a Vote of Security Holders      29

Item 5.  Other Information                                        29

Item 6.  Exhibits and Reports on Form 8-K                         29

Signature                                                         30


                                       2
<PAGE>


ITEM 1. FINANCIAL STATEMENTS

                 SOLECTRON CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                             (In millions)
                              (Unaudited)


                                                May 31,      August 31,
                                                 1999           1998
ASSETS                                       -----------    -----------
Current assets:
  Cash, cash equivalents and
    short-term investments                    $    707.9     $    308.8
  Accounts receivable, net                         903.2          670.2
  Inventories                                      945.5          788.5
  Prepaid expenses and other
    current assets                                 130.5          120.0
                                              ----------     ----------
    Total current assets                         2,687.1        1,887.5
Net property and equipment                         607.8          448.0
Other assets                                       159.6           75.0
                                              ----------     ----------
Total assets                                  $  3,454.5     $  2,410.5
                                              ==========     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                             $     16.6     $       -
  Accounts payable                                 700.8          666.5
  Accrued employee compensation                     69.2           72.1
  Accrued expenses                                  81.9           34.9
  Other current liabilities                         31.4           67.3
                                              ----------     ----------
    Total current liabilities                      899.9          840.8
Long-term debt                                     917.7          385.5
Other long-term liabilities                         16.0            2.9
                                              ----------     ----------
    Total liabilities                            1,833.6        1,229.2
                                              ----------     ----------
Commitments

Stockholders' equity:
  Common stock                                       0.1            0.1
  Additional paid-in capital                       803.3          510.8
  Retained earnings                                882.4          677.4
  Accumulated other comprehensive income -
    cumulative translation adjustments             (64.9)          (7.0)
                                              ----------     ----------
     Total stockholders' equity                  1,620.9        1,181.3
                                              ----------     ----------
Total liabilities and
  stockholders' equity                        $  3,454.5     $  2,410.5
                                              ==========     ==========


See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>


                 SOLECTRON CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (In millions, except per share data)
                              (Unaudited)

                            Three Months Ended      Nine Months Ended
                                  May 31,                May 31,
                            ------------------     ------------------
                              1999      1998         1999      1998
                            --------  --------     --------  --------
Net sales                   $2,151.5  $1,278.1     $6,005.3  $3,601.8
Cost of sales                1,949.9   1,145.0      5,449.4   3,218.8
                            --------  --------     --------  --------
  Gross profit                 201.6     133.1        555.9     383.0
Operating expenses:
  Selling, general and
    administrative              79.2      55.3        219.4     155.3
  Research and
    development                  9.1       5.4         24.6      14.7
  Acquisition costs               -         -           2.9        -
                            --------  --------     --------  --------
      Operating income         113.3      72.4        309.0     213.0

Interest income                  9.1       6.5         18.6      19.6
Interest expense               (11.1)     (4.9)       (26.0)    (17.7)
                            --------  --------     --------   --------
Income before income taxes     111.3      74.0        301.6     214.9

Income taxes                    35.6      24.8         96.5      72.0
                            --------  --------     --------  --------
     Net income             $   75.7  $   49.2     $  205.1  $  142.9
                            ========  ========     ========  ========

Net income per share:
     Basic                  $   0.30  $   0.21     $   0.85  $   0.62
                            ========  ========     ========  ========
     Diluted                $   0.29  $   0.20     $   0.80  $   0.59
                            ========  ========     ========  ========

Shares used to compute
  net income per share:
     Basic                     252.1     232.1        242.3     230.9
                            ========  ========     ========  ========

     Diluted                   263.2     253.7        261.2     252.9
                            ========  ========     ========  ========





See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>


                   SOLECTRON CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In millions)
                                (Unaudited)

                                                   Nine Months Ended
                                                        May 31,
                                                -----------------------
                                                   1999         1998
                                                ----------   ----------
Cash flows from operating activities:
  Net income                                    $    205.1   $    142.9
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
     Depreciation and amortization                   126.9         90.6
     Non-cash interest                                10.2           -
     Tax benefit associated with the
       exercise of stock options                      18.9          2.7
     Other                                           (15.8)        19.6
     Changes in operating assets and
     liabilities:
       Accounts receivable                          (244.7)      (144.0)
       Inventories                                  (139.4)      (159.8)
       Prepaid expenses and other
        current assets                               (11.7)       (19.4)
       Accounts payable                               40.6        152.8
       Accrued expenses and other
        current liabilities                           10.8          5.2
                                                ----------    ---------
     Net cash provided by operating
     activities                                        0.9         90.6
                                                ----------    ---------
Cash flows from investing activities:
  Sales and maturities of short-term
   investments                                       133.2        256.3
  Purchases of short-term investments               (367.1)      (164.9)
  Acquisitions of manufacturing locations           (108.4)       (79.4)
  Capital expenditures                              (308.0)      (186.9)
  Proceeds from sale of property and equipment        15.5         25.5
  Other                                              (12.9)        (2.1)
                                                ----------    ---------
     Net cash used in investing
     activities                                     (647.7)      (151.5)
                                                ----------    ---------


                            (continued on next page)


                                       5
<PAGE>


                  SOLECTRON CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                            (In millions)
                             (Unaudited)

                                                   Nine Months Ended
                                                        May 31,
                                               ------------------------
                                                  1999          1998
                                               ----------    ----------
Cash flows from financing activities:
  Net proceeds from short-term debt                  16.6            -
  Net proceeds from long-term debt                  732.1            -
  Repayments of long-term debt                       (0.7)         (1.6)
  Net proceeds from sale of common stock             48.2          22.2
  Other                                              15.7          (0.1)
                                               ----------    ----------
    Net cash provided by financing
    activities                                      811.9          20.5
                                               ----------    ----------
Effect of exchange rate changes on
 cash and cash equivalents                            0.1           1.0
                                                ----------    ---------
Net increase (decrease) in cash and
 cash equivalents                                   165.2         (39.4)

Cash and cash equivalents at
 beginning of period                                225.2         225.1
                                               ----------    ----------
Cash and cash equivalents at
 end of period                                 $    390.4    $    185.7
                                               ==========    ==========


SUPPLEMENTAL DISCLOSURES

Cash paid during the period:
   Income taxes                                $     71.9    $     55.5
   Interest                                    $     26.0    $     12.5

Non-cash investing and financing activities:
   Issuance of common stock upon
     conversion of long-term debt              $    230.0    $       -













See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>


SOLECTRON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Basis of Presentation

The accompanying  unaudited condensed  consolidated  balance sheet as of May 31,
1999 and August 31,  1998,  and the  related  unaudited  condensed  consolidated
statements  of income for the three- and  nine-month  periods ended May 31, 1999
and 1998, and the unaudited condensed consolidated  statements of cash flows for
the nine months ended May 31, 1999 and 1998 have been prepared on  substantially
the same  basis as the  annual  consolidated  financial  statements.  Management
believes the financial  statements  reflect all adjustments,  consisting only of
normal recurring adjustments, necessary for a fair presentation of the Company's
financial position,  operating results and cash flows for the periods presented.
The results of operations  for the three- and  nine-month  periods ended May 31,
1999 are not  necessarily  indicative  of results to be expected  for the entire
year.  These  condensed  consolidated  financial  statements  should  be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended August 31, 1998 included in the  Company's  Annual Report on the Form
10-K.

For clarity of presentation, the Company has indicated its third fiscal quarters
as ending on May 31,  and its  fiscal  year as ending on August  31,  whereas in
fact,  the  Company's  third  quarter of fiscal 1999 ended on May 28, 1999,  its
third  quarter of fiscal  1998 ended on May 29,  1998 and its 1998  fiscal  year
ended on August 28, 1998.

NOTE 2 - Inventories

Inventories consisted of (in millions):

                                    May 31,           August 31,
                                     1999               1998
                                 -----------        -----------
          Raw materials          $     682.0        $     577.8
          Work-in-process              188.5              167.8
          Finished goods                75.0               42.9
                                 -----------        -----------
          Total                  $     945.5        $     788.5
                                 ===========        ===========

NOTE 3 - 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  the  Company's  outstanding  convertible
subordinated  notes.  Approximately 12.4 million shares issuable upon conversion
of the Company's  convertible  senior notes were not included in the calculation
because  the  effect  would have been  antidilutive.  Share and  per-share  data
presented reflect the two-for-one  stock split effective  February 24, 1999. The
following  table sets forth the  computation of basic and diluted net income per
share for the three- and nine-month periods ended May 31, 1999 and 1998.

                                       7
<PAGE>


                                 Three Months Ended    Nine Months Ended
                                       May 31,              May 31,
                                 ------------------   ------------------
                                   1999       1998      1999       1998
                                 -------    -------   -------    -------
                                   (in millions, except per share data)

Net income - basic               $  75.7    $  49.2   $ 205.1    $ 142.9

 Interest expense from
   convertible subordinated
     notes, net of taxes              -         2.4       5.0        7.2
                                 -------    -------   -------    -------
Net income - diluted             $  75.7    $  51.6   $ 210.1    $ 150.1
                                 =======    =======   =======    =======

Weighted average shares - basic    252.1      232.1     242.3      230.9

  Common shares issuable upon
    stock options exercised         10.6        8.0       9.6        8.4
  Common shares issuable upon
    assumed conversion of
    convertible subordinated
    notes                            0.5       13.6       9.3       13.6
                                 -------    -------   -------    -------

Weighted average shares - diluted  263.2      253.7     261.2      252.9
                                 =======    =======   =======    =======

Net income per share - basic     $  0.30    $  0.21   $  0.85    $  0.62
                                 =======    =======   =======    =======

Net income per share - diluted   $  0.29    $  0.20   $  0.80    $  0.59
                                 =======    =======   =======    =======

For the three- and  nine-month  periods ended May 31, 1999,  options to purchase
310,000 and 1.7 million  shares,  respectively,  of common  stock with  exercise
prices greater than the average fair market value of the Company's stock for the
period of $50.08 and $39.38, respectively,  were not included in the calculation
because the effect would have been  antidilutive.  For the three- and nine-month
periods  ended May 31, 1998,  options to purchase  3.4 million  shares of common
stock with  exercise  prices  greater  than the average fair market value of the
Company's  stock for the period of $21.26  and  $20.70,  respectively,  were not
included in the calculation because the effect would have been antidilutive.

NOTE 4 - Comprehensive income

Effective in the first quarter of fiscal 1999, the Company adopted  Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting  Comprehensive
Income,"  which requires the Company to report and display  certain  information
related to comprehensive  income.  Comprehensive  income includes net income and
other comprehensive  income. Other comprehensive income is classified separately
into  foreign  currency  items,  minimum  pension  liability  adjustments,   and
unrealized  gains  and  losses  on  certain   investments  in  debt  and  equity
securities.  Solectron's  other  comprehensive  income  is  comprised  solely of
foreign currency translation adjustments. The components of comprehensive income
were as follows:

                                       8
<PAGE>


                                 Three Months Ended    Nine Months Ended
                                       May 31,              May 31,
                                 ------------------   ------------------
                                   1999       1998      1999       1998
                                 -------    -------   -------    -------
                                              (in millions)

Net income                       $  75.7    $  49.2   $ 205.1    $ 142.9

Other comprehensive income (loss)
  foreign currency translation
  adjustments                       12.8        0.8     (57.9)       1.8
                                 -------    -------   -------    -------

Comprehensive income             $  88.5    $  50.0   $ 147.2    $ 144.7
                                 =======    =======   =======    =======


For  the  nine-month  period  of  fiscal  1999,  the  loss in  foreign  currency
translation  resulted  primarily  from the recent  devaluation  of the Brazilian
Real.  In  addition,  the  foreign  currency  translation  adjustments  are  not
currently  adjusted for income taxes since they relate to investments  which are
permanent in nature.

NOTE 5 - Asset Securitization

The  Company  has an asset  securitization  arrangement  with a bank group under
which it may sell up to $220  million of eligible  accounts  receivable  without
recourse.  The  arrangement  expires  in August  1999 and is  subject to certain
financial covenants and management representations.

NOTE 6 - Commitments

The Company leases various  facilities  under  operating lease  agreements.  The
facility  leases expire at various dates through 2006.  All such leases  require
the Company 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 Milpitas and San Jose,  California;
Everett, Washington; Suwanee, Georgia; and Columbia, South Carolina, provide the
Company  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, the Company 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 $145 million in total,  in the event the Company does not purchase the
properties  at the end of the  respective  lease  terms.  The Company  must also
maintain compliance with financial covenants similar to its credit facilities.

In fiscal  1998,  Solectron  entered into  notional  lease  arrangements  with a
third-party  leasing  company  under which the Company  sold fixed assets with a
carrying  value of $31.3 million and leased them back from the leasing  company.
The Company is accounting for these leases as operating leases.

Future minimum  payments related to lease  obligations are $39.5 million,  $29.8
million,  $20.9 million, $65.1 million and $44.9 million in each of the years in
the five-year  period  ending August 31, 2003 and an aggregate  $2.6 million for
periods after that date.

                                       9
<PAGE>

NOTE 7 - Convertible Debt

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  to  the  Company  of
approximately  $750  million.  These  notes  are  unsecured  and  unsubordinated
indebtedness  of the Company with a maturity value  aggregating  $1.656 billion.
There will be no interest  payment by the Company  prior to maturity.  Each note
has a yield of 4% with a  maturity  value of $1,000 on  January  27,  2019.  The
Company 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 7.472 shares per note,  adjusted  for the  two-for-one
stock split  effective  February  24,  1999.  Holders may require the Company 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 the Company to  repurchase  all or a portion of such holder's
notes upon a change in control of the Company occurring on or before January 27,
2002.  The Company,  at its option,  may redeem all or a portion of the notes at
any time on or after January 27, 2003.  In addition,  the Company 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 February  1996,  the Company  issued  convertible  subordinated  notes for an
aggregate  principal amount of $230 million.  The notes were in denominations of
and had a maturity value of $1,000 each, payable on March 1, 2006.  Interest was
payable semi-annually at 6%. Each note was convertible at any time by the holder
into  shares  of  common  stock at a  conversion  price of  $16.90  per share as
adjusted for the two-for-one stock split effective  February 24, 1999. The notes
were redeemable at the option of the Company  beginning on March 3, 1999. During
February  and  March  1999,  all  of the  convertible  subordinated  notes  were
voluntarily converted into 13,609,428 shares of common stock.

NOTE 8 - Pending Acquisitions of Manufacturing Assets

On April 13, 1999,  Solectron announced that it had signed a letter of intent to
acquire the manufacturing  assets of Trimble  Navigation  Limited  ("Trimble")in
Sunnyvale, California and to assume full manufacturing responsibility for all of
Trimble's   global   positioning   system  (GPS)  and  related  radio  frequency
(RF)technology products. Trimble is a world leader in RF products enabled by GPS
technology.  It is expected that the acquisition will enhance  Solectron's reach
into the  rapidly  growing  GPS market and  significantly  expand the  Company's
global RF design and manufacturing expertise. As part of the proposed agreement,
Solectron intends to provide Trimble a full range of integrated  services across
the entire product life cycle including design  consultation,  prototyping,  New
Product  Introduction  management and volume  printed  circuit board and systems
assembly for the next three years.  The Company  intends to offer  employment to
approximately  250  manufacturing,  engineering and related  support  associates
currently working at the Trimble facility in Sunnyvale.

On April 21,  1999,  Solectron  announced  a plan to  acquire  the RF design and
manufacturing  assets of Glenayre  Technologies,  Inc.  ("Glenayre")  in Quincy,
Illinois, and to assume full manufacturing  responsibility for all of Glenayre's
one- and two-way paging infrastructure  equipment.  Glenayre is the world leader
in  paging  and  wireless  data  technologies.  Solectron  anticipates  that the
acquisition will enable the Company to

                                       10

<PAGE>

strengthen its rapidly growing RF design and manufacturing  services  portfolio,
and expand its presence in the Midwest. Under the proposed multi-year agreement,
Solectron will provide  Glenayre a full range of integrated  services across the
entire  product  life  cycle   including   design,   prototyping,   New  Product
Introduction  management,  volume  printed  circuit board and systems  assembly,
repair and end-of-product life support.  The Company intends to offer employment
to  approximately  350  RF   manufacturing,   engineering  and  related  support
associates currently working at the Glenayre facility in Quincy.

On May 20,  1999,  Solectron  announced  the  signing  of a letter  of intent to
acquire all of the outstanding capital stock of Sequel, Inc. ("Sequel").  Sequel
is a privately held  corporation  specializing  in notebook  computer and liquid
crystal   display   repair   service  and  support.   The  Company  will  assume
responsibility  for  Sequel's  business  operations  in  San  Jose,  California;
Memphis,  Tennessee;  and Reading,  United  Kingdom.  Solectron will also assume
Sequel's  ownership  in joint  venture  operations  in  Japan  and  Taiwan.  The
acquisition  is  expected  to enable  Solectron  to expand  its  global  support
services capabilities by adding quick-turn service operations,  customer service
centers,  and help-desk support for the end users of  Solectron-built  products.
The Company  intends to offer  employment to  approximately  550  manufacturing,
engineering, customer service and related support associates.

All three pending acquisitions are expected to be completed in the fourth fiscal
quarter  of 1999.  Completion  of the  transactions  is  subject  to  applicable
government approvals and various conditions of closing.


                                       11
<PAGE>


ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

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  which involve risks and  uncertainties.  Solectron's  actual results
could  differ  materially  from  those  anticipated  in  these  forward  looking
statements  as a result of certain  factors,  including  those factors set forth
under "Trends and Uncertainties" below.

General

Solectron  provides  electronics  manufacturing  services to original  equipment
manufacturers who design and sell networking equipment,  workstations,  personal
and notebook computers,  computer peripherals,  telecommunications  equipment or
other electronic equipment,  including  Hewlett-Packard  Company, Cisco Systems,
Inc.,  International Business Machines Corporation,  and Sun Microsystems,  Inc.
These companies contract with Solectron to build their products for them.

Our range of services includes:

- product design,
- 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 a complete  system  such as mobile
  telephone and testing it to ensure functionality),
- distribution,
- product repair, and
- warranty services.

Our performance of these services allows our customers to remain  competitive by
focusing  on their  core  competencies  of sales,  marketing  and  research  and
development.  Solectron  has  manufacturing  sites in North and  South  America,
Europe and Asia,  giving our customers access to  manufacturing  services in the
regions  where they sell product.  Our  subsidiaries,  Force  Computers and Fine
Pitch  Technologies,  are both  headquartered in San Jose,  California.  Force's
European headquarters and a significant portion of its operations are located in
Munich,  Germany.  In addition to its headquarters'  locations,  Force has sales
support offices in various locations in the United States and internationally. A
discussion  of  some of the  potential  fluctuations  in  operating  results  is
included under "Trends and Uncertainties."

During 1997, Solectron established a strategic, global manufacturing partnership
with Ericsson Telecom AB's Business Area Infocom Systems (Ericsson). We set up a
New Product  Introduction center in Sweden, and production from certain Ericsson
plants worldwide was transferred to our manufacturing sites around the world. In
October 1997, we acquired certain assets,  primarily equipment and inventory, of
Ericsson's  printed  circuit  board  assembly  operation  located  in Sao Paulo,
Brazil. In addition, our subsidiary, Solectron Brasil Ltda., hired approximately
370 associates formerly employed by Ericsson Telecomunicacoes S.A. in Brazil.

                                       12
<PAGE>


In April 1998, we acquired NCR Corporation's (NCR) manufacturing assets in three
cities for a purchase price of  approximately  $91 million.  The acquisition was
accounted  for as a purchase of assets and 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  agreement,  NCR will  outsource  the
manufacturing  of certain  computer  components  to Solectron  for at least five
years. We also hired  approximately  1,200 NCR manufacturing and related support
associates.

In June 1998, we acquired  International  Business Machines  Corporation's (IBM)
Electronic  Card  Assembly and Test (ECAT)  manufacturing  assets in  Charlotte,
North Carolina and non-exclusive rights to certain IBM intellectual property for
a purchase price of approximately $96 million. The acquisition was accounted for
as a  purchase  of assets and the  purchase  price was  allocated  to the assets
acquired,  including the intellectual  property rights,  based on their relative
fair values at the date of  acquisition.  Under the terms of the  agreement,  we
hired  approximately 700 IBM manufacturing and related support associates and we
will provide printed circuit board assembly services to IBM in North America for
the next three years.  In  addition,  IBM has made  available  to Solectron  115
patents and 51  disclosures  (collectively  the  intellectual  property  rights)
covering a wide spectrum of technologies and capabilities. IBM will also provide
to Solectron failure analysis and characterization tools for process development
and manufacturing, including fault detection and isolation.

In October  1998,  we acquired the wireless  telephone  manufacturing  assets of
Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular Mobile Telephone
(CMT)  division  in  Braselton,  Georgia.  MCEA is a  subsidiary  of  Mitsubishi
Electric  Corporation  (Mitsubishi).  The  acquisition  was  accounted  for as a
purchase  of assets and the  purchase  price of  approximately  $25  million was
allocated to the acquired assets based on their relative fair values at the date
of acquisition.  Under the terms of the agreement, we will provide MCEA-CMT with
a full range of  manufacturing  services for five years,  including  New Product
Introduction  management,  printed  circuit  board  assembly  and  full  systems
assembly for MCEA's  branded and  private-label  cellular  products  sold within
North America. In addition,  we hired  approximately 400 MCEA-CMT  manufacturing
and support associates.

Also in October  1998, we signed a definitive  agreement  with Ingram Micro Inc.
under  which the two  companies  entered  into a  strategic  alliance to provide
global  build-to-order  and  configure-to-order  assembly  services for personal
computers,  servers and related products in the United States,  Canada,  Europe,
Asia and Latin America.  The alliance is managed by both companies under a joint
management matrix that includes a sales and marketing staff, program management,
materials  management,  information  technology  resources  and test and process
engineers  and,  in  most  part,  utilizes  existing  facilities,   systems  and
personnel. Shipments to customers under the arrangement started in April 1999.

On February 1, 1999, we acquired IBM's  Electronic Card Assembly and Test (ECAT)
manufacturing  assets in Austin,  Texas and non-exclusive  rights to certain IBM
intellectual  property for a purchase price of  approximately  $83 million.  The
transaction  was accounted for as a purchase of assets,  and 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  agreement,  we will
provide  printed  circuit board (PCB)  assembly for  motherboards  used in IBM's
mobile products  manufactured  worldwide for the next three years. This includes
physical design,  early prototyping,  new product launch, PCB assembly and test,
volume

                                       13
<PAGE>

production,   end-of-life   support,   field  return   services  and  life-cycle
management.  We will also provide IBM's  worldwide  design teams a full range of
integrated   New   Product    Introduction    (NPI)   services   which   involve
pre-manufacturing  support, such as design and layout,  component and concurrent
engineering, test development, prototype, procurement and assembly. In addition,
we hired approximately 1,300 IBM design, test, and manufacturing associates.

On April 13, 1999, we announced that we had signed a letter of intent to acquire
Trimble's  manufacturing  assets in  Sunnyvale,  California  and to assume  full
manufacturing  responsibility  for all of Trimble's  global  positioning  system
(GPS) and related radio frequency (RF) technology  products.  Trimble is a world
leader  in RF  products  enabled  by GPS  technology.  It is  expected  that the
acquisition will enhance  Solectron's  reach into the rapidly growing GPS market
and  significantly  expand  the  Company's  global RF design  and  manufacturing
expertise.  As part of the proposed  agreement,  we intend to provide  Trimble a
full range of integrated services across the entire product life cycle including
design consultation, prototyping, New Product Introduction management and volume
printed  circuit board and systems  assembly for the next three years. We intend
to offer employment to approximately 250 manufacturing,  engineering and related
support  associates  currently  working at the Trimble  facility  in  Sunnyvale.
Completion of the  transaction is expected in the fourth quarter of fiscal 1999,
subject to applicable government approvals and various conditions of closing.

On April 21,  1999,  we  announced  a plan to acquire  Glenayre's  RF design and
manufacturing  assets in  Quincy,  Illinois,  and to assume  full  manufacturing
responsibility  for all of  Glenayre's  one- and two-way  paging  infrastructure
equipment.   Glenayre  is  the  world  leader  in  paging  and   wireless   data
technologies. The acquisition is expected to enable us to strengthen the rapidly
growing RF design and manufacturing services portfolio,  and expand our presence
in the  Midwest.  Under  the  proposed  multi-year  agreement,  we will  provide
Glenayre a full range of  integrated  services  across the entire  product  life
cycle including design, prototyping, New Product Introduction management, volume
printed  circuit  board and systems  assembly,  repair and  end-of-product  life
support.  We intend to offer employment to approximately  350 RF  manufacturing,
engineering and related  support  associates  currently  working at the Glenayre
facility  in Quincy.  Completion  of the  transaction  is expected in the fourth
quarter of fiscal 1999, subject to applicable  government  approvals and various
conditions of closing.

On May 20, 1999,  we announced  the signing a letter of intent to acquire all of
the outstanding capital stock of Sequel.  Sequel is a privately held corporation
specializing in notebook  computer and liquid crystal display repair service and
support.  We will assume  responsibility for Sequel's business operations in San
Jose, California;  Memphis, Tennessee; and Reading, United Kingdom. We will also
assume Sequel's  ownership in joint venture  operations in Japan and Taiwan. The
acquisition  is  expected  to enable us to expand  our global  support  services
capabilities by adding quick-turn service operations,  customer service centers,
and help-desk support for the end users of Solectron-built  products.  We intend
to offer employment to approximately 550  manufacturing,  engineering,  customer
service  and  related  support  associates.  Completion  of the  transaction  is
expected in the fourth quarter of fiscal 1999, subject to applicable  government
approvals and various conditions of closing.

                                       14
<PAGE>


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 Solectron's major customers in particular, could
have an  adverse  material  effect on  Solectron's  results of  operations.  See
"Trends and Uncertainties"  for further discussion of potential  fluctuations in
operating results.

The following table sets forth, for the periods indicated,  certain items in the
Condensed  Consolidated  Statements of Income as a percentage of net sales.  The
financial  information  and the  discussion  below should be read in conjunction
with the Condensed Consolidated Financial Statements and Notes thereto.

                               Three Months Ended      Nine Months Ended
                                     May 31,                May 31,
                               ------------------     -----------------
                                 1999       1998        1999      1998
                               -------    -------     -------   -------
Net sales                        100.0%     100.0%      100.0%    100.0%
Cost of sales                     90.6       89.6        90.7      89.4
                               -------    -------     -------   -------
  Gross profit                     9.4       10.4         9.3      10.6

Operating expenses:
  Selling, general and
    administrative                 3.7        4.3         3.7       4.3
  Research and development         0.4        0.4         0.4       0.4
  Acquisition costs                 -          -          0.1        -
                               -------    -------     -------   -------
    Operating income               5.3        5.7         5.1       5.9
Net interest income (expense)     (0.1)       0.1        (0.1)      0.1
                               -------    -------     -------   -------
    Income before income taxes     5.2        5.8         5.0       6.0

Income taxes                       1.7        1.9         1.6       2.0
                               -------    -------     -------   -------
Net income                         3.5%       3.9%        3.4%      4.0%
                               =======    =======     =======   =======

Net Sales

Net sales of $2.2 billion  increased 68.3% for the third quarter of fiscal 1999,
compared to the third quarter of 1998. Net sales of $6.0 billion increased 66.7%
for the first nine months of fiscal  1999,  compared to the first nine months in
fiscal 1998. The sales growth was  principally  due to significant  increases in
sales volume from both existing and new customers worldwide, as well as from the
acquisitions of Ericsson, NCR, and IBM ECAT in Charlotte,  North Carolina during
fiscal 1998 and  Mitsubishi in first quarter of fiscal 1999. In addition,  sales
from the  acquisition  of IBM ECAT in  Austin,  Texas on  February  1, 1999 were
recognized  beginning in the third quarter of fiscal 1999 because our Texas site
reports its results consistently one month in arrears.

Within the Americas,  the acquired  sites from NCR, IBM ECAT in  Charlotte,  IBM
ECAT in Texas and the new site in Mexico  were the largest  contributors  to the
strong growth in the fiscal 1999 periods as compared to the fiscal 1998 periods.
The Milpitas,  California site also

                                       15
<PAGE>


experienced  sales  growth  despite  the planned  transfer of personal  computer
printed  circuit  board  programs  and  computer  peripherals  systems  assembly
programs  to  Mexico  and  networking   business  to  Penang,   which  represent
management's  efforts to improve global load balancing  through specific product
program transitioning.

Net sales in our  European  and Asian  operations  increased  in the fiscal 1999
periods  over the same  periods  of fiscal  1998  primarily  as a result of core
business  growth  and new  accounts.  The sales  growth at the  Penang  site was
principally  due to  increased  demand  from  personal  computer  customers  and
networking business transferred in from California. For the first nine months of
fiscal 1999, the sales in European  operations also grew due to increased demand
from our telecommunications  customers.  Although we do not presently anticipate
any future  decline in sales,  to lessen the  potential  impact of any  possible
future  declines  related to customers  within any  particular  region or market
segment, we are committed to seeking  diversification of our customer base among
many countries, market segments and product lines within market segments.

Several  of our  customers  accounted  for more than 10% of our net sales in the
three- and  nine-month  periods of fiscal  1999 and 1998.  The  following  table
details these customers and the percentage of net sales attributed to them.

                                   Three Months Ended  Nine Months Ended
                                          May 31,           May 31,
                                   ------------------  -----------------
                                      1999      1998      1999     1998
                                   --------   -------   -------  -------
Cisco Systems, Inc.                   12.1%     12.8%      10.8%   11.2%
International Business Machines
  Corporation (IBM)                   10.7%       *          *       *
Hewlett-Packard Company (HP)          10.4%     13.8%      11.4%   14.3%
Sun Microsystems, Inc.                  *       11.0%        *     11.1%
-------------
*Less than 10%

No other  customer  accounted  for more than 10% of net sales  during any of the
periods presented.

In the first nine months of fiscal 1999,  our top ten customers  accounted up to
73.8% of consolidated net sales. For the same period of fiscal 1998, our top ten
customers  accounted for 66.8% of consolidated  net sales. We are dependent upon
continued  revenues  from  Cisco,  HP and  IBM,  and  the  rest  of our  top ten
customers.  There can be no guarantee that these or any other customers will not
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 have an adverse  material effect on Solectron's
results of operations.

In the first nine months of fiscal  1999,  international  locations  contributed
36.8% of  consolidated  net sales compared to 34.1% in the same period of fiscal
1998.  In addition to the sales growth  factors for Europe and Asia noted above,
the  Company's  international  sales also  benefited  from the Mexico and Brazil
sites  added  during  the first  quarter  of fiscal  1998 and the  Ireland  site
acquired from NCR in April 1998. As a result of Solectron's  international sales
and  facilities,  our operations are subject to risks of doing business  abroad.
While to

                                       16
<PAGE>


date these  dynamics have not had an adverse  material  effect on our results of
operations,  there can be no assurance  that there will not be such an impact in
the future. See "Trends and Uncertainties" for a further discussion of potential
fluctuations  in operating  results  associated with the risks of doing business
abroad.

Our  operations in Milpitas,  California  contributed  a substantial  portion of
Solectron's  net sales and  operating  income  during the first  nine  months of
fiscal 1999 and fiscal 1998. Although management has been undertaking deliberate
actions to achieve  improved  global  load  balancing  by  transferring  certain
projects from the Milpitas site to other sites worldwide, the performance of the
Milpitas  operation  is  expected to  continue  as a  significant  factor in the
overall financial  performance of Solectron.  Any adverse material change to the
customer base, product mix,  efficiency,  or other attributes of this site could
have an adverse material effect on our consolidated results of operations.

We believe  that our  ability to  continue  to achieve  growth  will depend upon
growth in sales to  existing  customers  for their  current  and future  product
generations,  successful  marketing  to  new  customers  and  future  geographic
expansion.  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,  there can be no assurance that any
of our current customers will continue to utilize our services. Because of these
factors,  there can be no assurance that our historical revenue growth rate will
continue.  See "Trends and  Uncertainties"  for a discussion of certain  factors
affecting  the  management  of  growth,   geographic   expansion  and  potential
fluctuations in sales and results of operations.

Gross Profit

The gross  margin  percentage  decreased  to 9.3% for the first  nine  months of
fiscal 1999 period from 10.6% for the  corresponding  period of fiscal 1998. The
decline was primarily  attributable to a shift toward higher volume projects and
systems build projects which  typically  generate  lower profit  margins.  As an
example, gross margins of the acquired NCR operations are lower than the overall
average margins of the rest of the Solectron's operations principally due to the
fact that the  majority of its net sales are derived  from  systems  integration
activities,  which normally yield lower gross margins than printed circuit board
assembly.

For the foreseeable  future, our gross margin is expected to depend primarily on
product mix,  production  efficiencies,  utilization of manufacturing  capacity,
start-up and integration costs of new and acquired businesses, the percentage of
sales  derived from  systems  build  projects,  pricing  within the  electronics
industry 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.  We
anticipate  that a larger portion of our sales may be derived from systems build
projects in future  periods.  Systems build projects  typically have lower gross
margin  percentages than printed circuit board assembly  projects.  Increases in
systems build business,  additional costs associated with new projects and price
erosion within the electronics industry could adversely affect our gross margin.
Additionally,  changes in product mix could cause our gross margin to fluctuate.
Also,  while the  availability  of raw  materials  appears  adequate to meet our
current revenue projections for the foreseeable future,  component  availability
is still subject to lead time and other  constraints  that could  possibly limit
Solectron's revenue growth. Because of these factors and others

                                       17
<PAGE>


discussed under "Trends and Uncertainties" below, there can be no assurance that
our gross margin will not fluctuate or decrease in future periods.

Selling, General and Administrative Expenses

In  absolute  dollars,  selling,  general  and  administrative  (SG&A)  expenses
increased  43.2% for the third  quarter  and 41.3% for the first nine  months of
fiscal  1999 over the same  periods  of fiscal  1998.  For the third  quarter of
fiscal 1999, the increase  principally  reflects expenses  associated with sales
growth.  The  increase  for the first nine months of fiscal 1999  resulted  from
investment in infrastructure such as personnel and related departmental expenses
at all manufacturing  locations as well as continuing  investment in information
systems to support the  increased  size and  complexity  of our  business.  As a
percentage  of net sales,  SG&A  expenses  were 3.7% in each of the fiscal  1999
periods and 4.3% for both the comparable fiscal 1998 periods. The primary reason
for the fiscal 1999  decrease in SG&A  expenses as a percentage  of net sales is
the  significant  increase  in the  sales  base  offset  partially  by the costs
associated  with  investments  in starting up new sites and  investments  in our
information  systems. We expect SG&A expenses will continue to increase in terms
of absolute dollars in the future,  and may possibly increase as a percentage of
net sales, as we continue to build the  infrastructure  necessary to support our
current and prospective business.

Research and Development Expenses

With the exception of Force  Computers  operation,  the research and development
(R&D) activities have been focused primarily on the development of prototype and
engineering design capabilities,  fine pitch interconnecting technologies (which
include   ball-grid   array,    tape-automated   bonding,   multichip   modules,
chip-on-flex,  chip-on-board  and flip  chip),  high  reliability  environmental
stress  test  technology  and the  implementation  of  environmentally  friendly
assembly  processes,  such as  VOC-free  and  no-clean.  Force's 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.  Research and development  expenses, as a percentage of net sales,
were 0.4% in each of the  fiscal  1999 and  fiscal  1998  periods.  In  absolute
dollars,  R&D expenses  increased  68.5% for the third quarter and 67.3% for the
first nine months of fiscal 1999 over the corresponding  periods in fiscal 1998.
The increases  were  primarily due to increased R&D  expenditures  at Force.  We
anticipate that R&D expenses will increase in absolute dollars in the future and
may possibly  increase as a percentage of net sales as we continues to invest in
R&D efforts.

Acquisition Costs

A one-time charge for acquisition costs of approximately $2.9 million related to
personnel  benefit  expenses was incurred as a result of the  acquisition of IBM
ECAT operations in Austin, Texas on February 1, 1999.

Net Interest Income (Expense)

Net interest expense was $2.0 million for the third quarter and $7.4 million for
first  nine  months of fiscal  1999,  compared  to net  interest  income of $1.6
million for the third quarter of fiscal 1998 and $1.9 million for the first nine
months of fiscal 1998. In the third quarter of fiscal 1999, the interest expense
consisted of $7.7 million for the 4% yield zero-coupon  convertible senior notes
issued  in  January  1999,

                                       18
<PAGE>

$2.8 million for the 7 3/8% senior notes, and  substantially no interest expense
from the 6%  convertible  subordinated  notes for which to a large  extent  were
converted  to common stock in early March of 1999.  The net interest  expense in
fiscal 1999 periods reflects the interest expense  associated with our long-term
debt offset by interest income earned on undeployed cash and investments and the
capitalization of interest expense.  In the first nine months of fiscal 1999, we
capitalized  $2.7 million of interest  expense  related to the costs of computer
software  developed for internal use and the facility  construction  projects at
the Brazil,  China and Mexico sites. We expect to utilize more of the undeployed
cash during  future  periods in order to fund  anticipated  future  growth.  See
"Trends  and  Uncertainties"  for  factors  related  to  management  growth  and
potential fluctuations in operating results."

Income Taxes

Income taxes  increased to $96.5 million in the first nine months of fiscal 1999
from $72.0 million in the fiscal 1998 period  primarily due to increased  income
before  income  taxes.  For the first nine months of fiscal 1999,  our effective
income  tax rate was 32.0%  compared  to 33.5% for the  corresponding  period in
fiscal  1998.  While our  effective  tax rate is  substantially  affected by the
proportion  of income  before  taxes  derived from  domestic  and  international
operations, the tax rate reduction in fiscal 1999 resulted from increased income
before taxes from the foreign  operations  which have been taxed at a lower rate
than in the United States.  This is primarily due to the tax holiday  granted to
our Malaysia sites.  The Malaysian tax holiday is effective  through January 31,
2002,  subject to certain  conditions.  We have also been  granted  various  tax
holidays in China,  which are  effective  for  various  terms and are subject to
certain conditions.

Liquidity and Capital Resources

Working capital was $1.8 billion at May 31, 1999 compared to $1.0 billion at the
end of  fiscal  1998.  During  the  same  period,  cash,  cash  equivalents  and
short-term  investments  increased to $707.9  million from $308.8  million.  The
increase  was  primarily  due to  proceeds  from the  completion  of the private
placement  of the 4% yield  zero-coupon  convertible  senior  notes,  offset  by
required  investments  in working  capital and capital  expenditures  to support
sales  growth and  acquisitions  of  manufacturing  locations.  The notes have a
maturity date in January 2019,  and no interest  payment will be made during the
term. We used approximately $25 million for the purchase of manufacturing assets
of MCEA's CMT division in the first quarter of fiscal 1999 and approximately $83
million  for the  acquisition  of  manufacturing  assets  and  rights to certain
intellectual  property from IBM ECAT in Austin,  Texas during the second quarter
of fiscal  1999.  As we continue to grow,  it is expected  that we will  require
greater amounts of working  capital to support our  operations.  We believe that
our  current  level of working  capital and  available  credit  facilities  will
provide adequate  working capital for the foreseeable  future.  However,  we may
need to raise  additional  funds to  finance  more  rapid  expansion,  including
establishing new locations or financing additional acquisitions. There can be no
assurance that such funds, if needed,  will be available on terms  acceptable to
us.

Inventory levels fluctuate directly with our volume of manufacturing. Changes or
significant  fluctuations  in product market demands can cause  fluctuations  in
inventory  levels which may result in changes in levels of  inventory  turns and
liquidity.  Historically,  we have been able to manage our inventory levels with
regard to these  fluctuations.  However,

                                       19


<PAGE>



should material fluctuations occur in product demand, we could experience slower
turns and reduced liquidity.

In the first nine months of fiscal 1999, we invested  approximately $308 million
in capital  expenditures.  A large portion of these expenditures  related to the
purchase of new equipment,  primarily surface mount assembly and test equipment,
to meet current and expected production levels, as well as to replace or upgrade
older equipment which was retired or sold.  Significant  expenditures  were also
made for the  acquisition  of land and  buildings for our  manufacturing  sites,
principally in Brazil and Mexico. We expect total capital expenditures in fiscal
1999 to be in the range of $350 million to $375 million.

In addition to working capital as of May 31, 1999,  which includes cash and cash
equivalents of $390.4 million and short-term  investments of $317.5 million,  we
have available a $100 million unsecured  multicurrency revolving credit facility
and a $220 million asset  securitization  arrangement.  Both of these facilities
are subject to financial  covenants.  We also had  approximately  $93 million in
unused  foreign  credit  facilities  available  at the  end of the  quarter.  In
addition,  we filed with the Securities Exchange Commission a $1.0 billion shelf
registration  statement for common stock,  preferred  stock,  or debt securities
over the next two years. Such registration  statement was declared  effective in
June 1999.

"Year 2000" Issues

Solectron  is  aware  of  and is  addressing  the  issues  associated  with  the
programming code in existing  computer systems as the year 2000 approaches.  The
Year  2000  problem  is  pervasive  and  complex,   as  many  computer  systems,
manufacturing  equipment and industrial control systems will be affected in some
way by the  rollover  of the  two-digit  year value to 00.  Systems  that do not
properly  recognize such dates could generate  erroneous  information or cause a
system to fail. The Year 2000 issue creates risk for us from unforeseen problems
in our systems and from third parties with whom we deal on business transactions
worldwide.  Failures of  Solectron's  and/or third  parties'  computer  systems,
manufacturing  equipment and  industrial  control  systems would have an adverse
material impact on our ability to conduct the business.

We have  formed a  worldwide  task force and have  implemented  a  comprehensive
program to analyze the internal systems as well as all external systems (such as
vendor,  customer,  banking  systems,  etc.)  upon  which we are  dependent,  to
identify  and  evaluate any  potential  Year 2000 issues.  This task force meets
regularly  and tracks  progress  against the program,  modifying it as needed to
help  ensure  timely  completion.  We  are  committed  to  achieving  Year  2000
compliance; however, because a significant portion of the problem is external to
us and therefore  outside of our direct control,  we can offer no assurance that
we will be fully Year 2000 compliant at the critical juncture.  In addition,  as
full testing of Year 2000 functionality  must occur in a simulated  environment,
we will not be able to test full system Year 2000  interfaces  and  capabilities
prior to the Year 2000.

As of May 31, 1999, we had completed an inventory, assessment,  remediation, and
testing of internal systems,  hardware,  software,  manufacturing  equipment and
embedded  chips in  industrial  control  instruments.  While we believe that our
testing  and  evaluation  have  been  entirely  comprehensive,  there  can be no
complete  assurance that all systems  critical to Year 2000 compliance have been
identified,  or that  the  corrective  actions  identified  will  be  completely
successful.

                                       20
<PAGE>

As of May 31, 1999, we had inventoried  every key supplier of goods and services
to us, and considered the potential  impact on us and our customers of Year 2000
compliance  by  these  suppliers.  Also,  we had  evaluated  the key  suppliers'
responses  to our  mailing  surveys  and are in the  process of  auditing  these
suppliers.  We plan to disqualify  potentially  non-compliant  sources, look for
alternative  sources and  re-qualify  new  suppliers to help  mediate  potential
business  disruptions.  We are also involved with various  geographic  Year 2000
consortiums worldwide,  with the intent to leverage contacts and information for
commonly  used  suppliers  and  services  such  as  utility  companies.  We were
instrumental  in  founding  the  High  Tech  Consortium  (HTC)  which,   through
collaborative  efforts,  has the goal of ensuring that member  companies will be
ready.  The HTC will help address the risk associated  with the  inter-connected
supply chain.  Detailed  supplier  audits by the HTC's  independent  consultants
started in late March. In addition,  we are nearly  completed with the reviewing
of EDI linkages and data transmission for our customers and suppliers.  While we
believe that we will be able to qualify alternative  suppliers as needed,  until
all supplier and customer survey responses have been received and evaluated,  we
can not fully evaluate the extent of potential problems and the costs associated
with corrective actions.

We still estimate the cost to complete the current  compliance  program to be in
the range of $28  million  to $42  million.  Of this  amount,  approximately  $8
million  is  associated  with the  replacement  of capital  equipment,  of which
approximately  half is being  purchased  to replace  non-compliant  systems that
would not otherwise  have been replaced at this time.  The  variability in these
estimates  depends  largely on the response from our suppliers and the extent to
which  supplier   re-qualification  is  needed.  Cost  estimates  will  also  be
re-evaluated as the status of the overall compliance  program is updated.  There
can be no  assurance  that  actual  costs  will not be  materially  higher  than
currently anticipated.  A significant portion of these costs is not likely to be
incremental  to us, but rather  will  represent  the  redeployment  of  existing
information technology resources.  Certain other information technology projects
have been delayed due to the focus on Year 2000 issues.  The potential  costs of
the  redeployment of personnel and delays in implementing  other projects is not
known but could be substantial. The total amount spent on the compliance program
this fiscal year  through  May 31,  1999 was $21  million,  of which $13 million
pertained to payroll  costs for  personnel  involved in the program and costs of
outside consultants,  and $8 million principally pertained to the replacement of
capital  equipment.  Prior to  fiscal  1999,  costs  of  software  and  hardware
applications  incurred  for Year 2000  compliance  were not material and related
payroll costs for the information systems group were not tracked separately.

Although we have developed  initial  contingency  plans, such as the replacement
and  re-qualification of suppliers,  the stockpiling of supplies and purchase of
generators,  a final  contingency plan will not be established  until the end of
August,  1999 when the audit of  suppliers is expected to be  completed.  We are
unable to determine the extent of effect on us, our  supplier,  or our customers
due to the  failure  of  systems  caused  by  the  Year  2000  issues,  but  any
significant  failures  could have an adverse  material  effect on our results of
operations and financial condition.

                                       21
<PAGE>


                            Trends and Uncertainties

A Majority of Our Sales Comes from a Small Number of  Customers;  If We Lose
Any of These Customers, Our Sales Could Decline Significantly.

      The  majority  of our  annual  sales  come  from  a  small  number  of our
customers.  Our 10 largest customers  accounted for 68.7% of net sales in fiscal
1998,  65.5% of net sales in fiscal 1997 and 64.0% of net sales in fiscal  1996.
In the first nine months of fiscal 1999,  the  Company's  ten largest  customers
accounted  for 73.8% of  consolidated  net sales.  Since we are  dependent  upon
continued   revenue  from  our  10  largest   customers,   any  material  delay,
cancellation  or reduction of orders from these or other major  customers  could
cause our sales to decline  significantly.  Some of these customers individually
account for more than 10% of our annual net sales.  Hewlett-Packard  Company has
historically  been one of our largest  customers  and sales to that  corporation
were 13.9% of net sales in fiscal  1998,  13.5% of net sales in fiscal  1997 and
10.7% of net  sales  in  fiscal  1996.  Sales to  Cisco  Systems,  Inc.  and Sun
Microsystems, Inc. were 10.7% and 10.5% of total net sales in fiscal 1998. Sales
to Nortel  Networks Inc.,  formerly Bay Networks,  Inc., were 10.4% of total net
sales in fiscal 1997.  There is no guarantee  that we will be able to retain any
of our 10 largest  customers or any other accounts.  In addition,  our customers
may materially  reduce the levels 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.

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,  NCR, and IBM, under which these customers are obligated to
obtain  services from us, they are not obligated to purchase any minimum  amount
of services from us. As a result,  while we may have some  long-term  contracts,
there is no guarantee that we will receive any revenue from these contracts.  In
addition,  these customers with whom we have long-term  contracts may materially
reduce the levels 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.

Possible  Fluctuation of Operating  Results from Quarter to Quarter Could
Affect the Market Price of Our Common Stock.

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

o  Differences in the  profitability of the types of  manufacturing  services we
   provide (for example, systems assembly services have lower gross margins than
   printed circuit board assembly services),
o  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,
o  The amount of  automation  that we can use in the  manufacturing  process for
   cost  reduction,  which varies  depending  upon the complexity of the product
   being made,
o  Our ability to optimize  the ordering of inventory as to timing and amount to
   avoid  holding  excess  inventory  in excess of  immediate  production.  (For
   example,  electronic  components  could  be made  obsolete  by  technological
   advances), and

                                       22
<PAGE>


o  Fluctuations in demand for our services or the products being manufactured.

      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 materially and adversely affected.

We Are Dependent Upon the Electronics Industry Which Continually Produces
Technologically Advanced Products with Short Life Cycles; Our Inability to
Continually Manufacture Such Products on a Cost-Effective Basis Would Harm
Our Business.

      A majority of our sales is to corporations  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,  their products could become obsolete and the demand
for  our  services  could  significantly  decline.  If we are  unable  to  offer
technologically advanced, quick response manufacturing services to our customers
that are cost  effective,  our  customers'  demand  for our  services  will also
decline.  In addition,  a substantial portion of our revenue 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 sales
would significantly decline.

We 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 of our
customers is purchasing  electronics  components  used in the  manufacturing  of
their products. As a result of this service, we bear the risk of price increases
for these  components  because we are unable to  purchase  them at the same time
when we agree with our  customers on the pricing for the  electronic  components
that we will use for manufacturing their products.

Our Sales Will Decline If Our Competitors Provide Comparable Manufacturing
Services 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. These competitors
may have  greater  manufacturing,  financial,  research and  development  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  they  may have  lower  cost
structures as a result of where they are located  geographically or the services
they  provide.  Our  inability  to provide  comparable  or better  manufacturing
services at a lower cost than our competitors could cause our sales to decline.

If We Are Unable to Manage Our Rapid Growth and  Assimilate  New Operations in a
Cost-Effective Manner, Our Profitability Could Decline.

      We have experienced rapid growth over our last five fiscal years, with net
sales  increasing  from $1.5  billion in fiscal  1994 to $5.3  billion in fiscal
1998.  Solectron reported net sales of $6.0 billion for the first nine months of
fiscal 1999. Our historical  growth may not continue.  In recent years,  we have
established operations in different places throughout the world. For example, in
fiscal 1998,  we opened

                                       23
<PAGE>

offices in Taiwan and Israel,  commenced manufacturing  operations in Mexico and
Romania and, in fiscal 1999,  announced a joint venture with Ingram Micro,  Inc.
In fiscal 1998, we acquired  foreign  facilities in Brazil,  Sweden and Ireland.
Furthermore,   through  acquisitions  in  fiscal  1998  and  1999,  we  acquired
facilities in Georgia and South Carolina and enhanced our  capabilities in North
Carolina and Texas.  In March 1999,  We announced the grand opening of the first
phase of our new facility in Brazil.

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

We Need to Manage Integration of Our Acquisitions to Maintain Profitability

      In  fiscal  1998  and  1999,   we   completed   acquisitions   of  certain
manufacturing  assets and  facilities  from Ericsson,  NCR, IBM and  Mitsubishi.
Currently,  we have three pending acquisitions  including Trimble,  Glenayre and
Sequel to be  completed  during  the  fourth  quarter  of fiscal  1999.  We also
continue  to  evaluate  acquisition  opportunities  and  may  pursue  additional
acquisitions over time. These acquisitions involve risks, including:

o     integration and management of the operations,

o     retention of key personnel,

o     integration of purchasing operations and information systems,

o     management of an increasingly larger and more geographically disparate
      business, and

o     diversion of management's attention from other ongoing business concerns.

      Our profitability  will suffer if we are unable to successfully  integrate
and manage our recent  acquisitions,  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  International  Sales Are a Significant and Growing Portion of Our
Revenues; We  Are   Increasingly   Exposed  to  Unique  Risks  Associated  with
Operating Internationally.

      In fiscal  1998  approximately  34% of our sales came from  outside of the
United  States.  For the first nine  months of fiscal  1999,  our  international
locations  contributed  approximately 37% of consolidated net sales. As a result
of our foreign sales and facilities,  our operations are subject to a variety of
risks that are unique to our international operations including the following:

o    Adverse  movement  of foreign  currencies  against our U.S.  dollar
     reporting currency,
o    Import and export  duties,  and value add taxes that we may have to
     absorb,

                                       24
<PAGE>

o    Import  and export  regulation  changes  that could  erode our profit
     margins or restrict exports,
o    Potential restrictions on the transfer of funds,
o    Inflexible  employee contracts in the event of business  downturns,  and
o    The burden and cost of compliance with foreign laws.

      In  addition,   we  have   operations  in  several   locations  that  have
inflationary  economies or potentially  volatile  currencies,  including Mexico,
Brazil,  China and  Romania.  In the future,  these  factors may have a material
adverse  impact on the results of our  operations.  The Southeast  Asian,  Latin
American and Eastern European markets are  experiencing  currency,  economic and
political instability.  As of May 31, 1999, the Company recorded a $64.9 million
cumulative  foreign  exchange  translation  loss on its balance  sheet which was
primarily the result of the recent  devaluation of the Brazilian Real. While, to
date,  these factors have not had a significant  adverse impact on the Company's
results of operations,  there can be no assurance that there will not be such an
impact.  Furthermore,  while the Company may adopt measures to reduce the impact
of losses  resulting from volatile  currencies and other risks of doing business
abroad, no assurance may be given that such measures will be adequate.

      The Malaysian  government  adopted currency exchange  controls,  including
controls on ringgit held outside Malaysia, and established a fixed exchange rate
for the ringgit against the U.S. dollar. Solectron does not hold ringgit outside
of Malaysia  and  therefore  will not be affected by these  controls.  The fixed
exchange  rate,  when applied to local  expenses  denominated  in ringgit,  will
result in higher expenses when translated to U.S. dollars.  However,  such local
expenses  represent  a  small  percentage  of  our  total  costs  and  therefore
Solectron's results of operations will not be significantly affected in the near
future.  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.

      Solectron  has been granted a tax holiday for its Malaysia  sites which is
effective through January 31, 2002, subject to certain conditions.  We have also
been granted various tax holidays in China. These tax holidays are effective for
various terms and are subject to certain conditions.  There is no assurance that
the current tax holidays  will not be  terminated or modified or that any future
tax holidays  that we may seek will 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 the Exchange Rates of Foreign Currency.

      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 nonfunctional currencies. Gains and losses
on these foreign currency hedges are generally  offset by  corresponding  losses
and gains on the  underlying  transaction.  At May 31, 1999,  all of the foreign
currency  hedging  contracts  mature in three  months or less and there  were no
material deferred gains or losses. In addition, our international  operations in
some  instances  act as a natural hedge

                                       25
<PAGE>

because both operating  expenses and a portion of sales are denominated in local
currency.  In these  instances  including  our recent  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. However, because less than 10% of net sales are denominated
in currencies other than the U.S.  dollar,  we do not believe our total exposure
to be significant.

      We have a task force  which is  constantly  evaluating  the effects of the
Euro conversion on the Company. We do not believe that significant modifications
of its  information  technology  systems  are  needed  in order to  handle  Euro
transactions  and  reporting.  We are in  the  process  of  evaluating  its  tax
positions  and all  outstanding  contracts in  currencies  of the  participating
countries to determine the effects,  if any, of the Euro  conversion.  We do not
expect the Euro conversion to have a significant impact on our derivatives as we
have already  modified  the hedging  policies to take the Euro  conversion  into
account. While we currently believe that the Euro conversion effects do not have
a significant adverse material effect on our business and operations,  there can
be no assurances that such  conversion will not have an adverse  material effect
on our results of operations and financial position due to competitive and other
factors that may be affected by the conversion that cannot be predicted by us.

We Are Exposed to Fluctuations in Interest Rates.

      The  primary  objective  of  our  investment  activities  is  to  preserve
principal  while  at the  same  time  maximizing  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 May 31,  1999,  approximately  64% of our  portfolio
mature in less than 6 months.  Because our  investments  are  diversified and of
relatively  short maturity,  a hypothetical 10% increase in interest rates would
not have a material effect on our financial position.

      We have entered into an interest rate swap transaction  under which we pay
a fixed rate of interest hedging against the variable  interest rates charged by
the lessor for the facility  lease at Milpitas,  California.  The interest  rate
swap expires in the year of 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 fact,  such  interest rate swap has fixed
the interest rate for the facility lease reducing interest rate risk.

      Our debt  instruments are subject to fixed interest rates and, in the case
of the convertible  notes, to fixed conversion  ratios into the Company's common
stock.  In  addition,  the amount of  principal to be repaid at maturity is also
fixed. Therefore, we are not subject to market risk from its 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

                                       26
<PAGE>

meaningful protection for our manufacturing  process and equipment  innovations.
In addition,  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 manufacturing
process or to obtain  licenses.  We may not be successful  in developing  such a
process or obtaining a license on reasonable terms, if at all. In addition,  any
such  litigation  could be lengthy and costly and could have a material  adverse
effect on our financial condition.

Failure to Comply with Environmental Regulations Could Harm Our Business.

      As a company  in the  contract  manufacturing  services  industry,  we are
subject to a variety of environmental  regulations  relating to the use, storage
and discharge and disposal of hazardous  chemicals used during our manufacturing
process.  Although we have never sustained any  significant  loss as a result of
noncompliance  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 Stock Price May Be Volatile Due to Factors Outside of Our Control.

      Our stock price could fluctuate due to the following factors:

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

Failure to Maintain 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.  The loss of services of
certain key personnel could have an adverse  material effect on us.  Solectron's
business  also depends upon its ability to continue to attract and retain senior
managers and skilled  associates.  Failure to do so could  adversely  affect our
operations.

Year 2000 Compliance Issues Could Harm Our Business.

      The Year 2000 issue is the result of computer  programs  written using two
digits rather than four to define the applicable  year.  Computer  programs that
have this  date-sensitive  software may  recognize a date using "00" as the year
1900  rather  than the year  2000.  This  could  result in a system  failure  or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things,  a temporary  inability to process  transactions,  send invoices,  order
materials or otherwise engage in normal business activities.

                                       27

<PAGE>

      A key  to  our  ability  to  successfully  manage  our  operations  is the
responsiveness of the supply chain for electronics components. This supply chain
is often controlled by computer systems, which could fail. While we control some
of these  systems,  our vendors,  our customers and service  providers  that are
outside of our control  operate some of these  computer  systems as well. If the
computer  systems  within their  control  fail,  this could delay our receipt of
previously-ordered electronics components thereby causing us to delay, cancel or
modify orders from our customers, which could harm our business.

      We have not yet developed a final contingency plan to handle the Year 2000
problem and, when developed, such a contingency plan may still not be successful
in  preventing  a disruption  of our  operations.  Although we have  extensively
tested our equipment and interfaces with other companies, we cannot be sure that
this  testing  will  fully  replicate  the actual  situation  when the Year 2000
arrives.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  "Trends and  Uncertainties -- Fluctuations in interest Rate" and "--
Fluctuations in the Exchange Rates of Foreign Currency."


                                       28
<PAGE>


SOLECTRON CORPORATION AND SUBSIDIARIES



Part II. OTHER INFORMATION

Item 1:  Legal Proceedings

         None

Item 2:  Changes in Securities

         None

Item 3:  Defaults upon Senior Securities

         None

Item 4:  Submission of Matters to a Vote of Security Holders

         None

Item 5:  Other Information

         None

Item 6:  Exhibits and Reports on Form 8-K

   (a)   Exhibits


      10.1  Second Amended and Restated  Receivables  Purchase  Agreement
            among Solectron Funding Corporation,  Solectron  Corporation,
            Solectron Technology, Inc., Solectron California Corporation,
            Quincy  Capital  Corporation,  and Bank Of  America  National
            Trust and Savings Association, dated February 22, 1999

      10.2  Amended and Restated Purchase and Sale Agreement among Solectron
            Corporation, Solectron California Corporation, Solectron Technology,
            Inc. and Solectron Funding Corporation, dated February 22, 1999

      27.1  Financial Data Schedule - Nine Months Ended May 28, 1999

   (b)   Reports on Form 8-K

              None




                                       29
<PAGE>



SOLECTRON CORPORATION



SIGNATURE



Pursuant  to the  requirements  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: July 12, 1999                 By: /s/ Susan Wang
                                     ----------------------
                                    Susan S. Wang
                                    Senior Vice President, Chief
                                    Financial Officer and Secretary
                                    (Principal Financial and
                                    Accounting Officer)



                                       30




<PAGE>

                                 EXHIBIT INDEX

Exhibit
Number   Document
-------  --------


10.1 Second Amended and Restated  Receivables Purchase Agreement among Solectron
     Funding Corporation,  Solectron  Corporation,  Solectron Technology,  Inc.,
     Solectron California Corporation,  Quincy Capital Corporation,  and Bank Of
     America National Trust and Savings Association, dated February 22, 1999


10.2 Amended  and  Restated   Purchase  and  Sale  Agreement   among   Solectron
     Corporation,  Solectron California Corporation,  Solectron Technology, Inc.
     and Solectron Funding Corporation, dated February 22, 1999

27.1 Financial Data Schedule -  Nine Months Ended May 28, 1999