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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


Form 10-K

|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the Fiscal year ended December 26,
    2003                                             

Commission File No. 0-4466

Artesyn Technologies, Inc.

(Exact name of Registrant as specified in its
charter)


|                                                                                                |  |                                         
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Florida                                                                                         |  | 59-1205269                              
|(State or other jurisdiction of
    incorporation)                                              |  | (I.R.S. Employer
    Identification No.)
|                                                                                               
|7900 Glades Road,
    Suite 500,
    Boca Raton, FL(Address of principal executive
    offices) |  | 33434-4105(Zip Code)                    

(561) 451-1000

(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, $0.01 par value


Common Stock Purchase Rights


(Title of each class)


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 periods
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

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     o.

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate market value of common stock held
by non-affiliates of the Registrant as of June 28, 2003,
the last day of our most recently completed second fiscal
quarter, was approximately $199 million.

As of February 20, 2004, 38,879,808 shares
of the Registrants common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for the annual
meeting of shareholders to be held on May 6, 2004 are
incorporated by reference into Part III hereof.



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This Form 10-K may contain
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties. We caution readers that a number of
important factors, including those identified in the section
entitled Risk Factors that May Affect Future Results
as well as factors discussed in our other reports filed with the
Securities and Exchange Commission, could affect our actual
results and cause them to differ materially from those expressed
in the forward-looking statements. Forward-looking statements
typically use words or phrases such as estimate,
plans, projects,
anticipates, continuing,
ongoing, expects, believes,
or words of similar import. Forward-looking statements included
in this Form 10-K are made only as of the date hereof,
based on information available as of the date hereof, and
subject to applicable law to the contrary, we assume no
obligation to update any forward-looking statements.

PART I



|        |         
|------- | --------
|Item 1. | Business

Overview

We are a leader in the design, manufacture and
sale of power conversion equipment and board level computing
solutions incorporated into embedded communications systems. Our
products are sold to Original Equipment Manufacturers, or OEMs,
within four core market sectors in the communications
industry  server & storage, wireless
infrastructure, networking, and telecommunications. Our
operations are global with design, manufacturing and sales
resources in North America, Europe and Asia.

We have provided components and solutions to the
electronics industry since our establishment in 1968 as Computer
Products, Inc. We changed our name to Artesyn Technologies, Inc.
after our merger with Zytec Corporation in 1997. As a result of
this merger, we changed our strategy to focus exclusively on the
communications industry.

Our business is organized into two operating
segments, Power Conversion and Communications Products. The
Power Conversion group designs, manufactures and sells AC/DC and
DC/DC power conversion equipment. The Communications Products
group designs, manufactures and sells Central Processing Unit,
or CPU, boards and Wide Area Network input/output, or WAN I/O,
boards bundled with software protocols embedded in
communications infrastructure systems. The two segments share a
strategic direction and many of the same customers, but have
separate operations.

Strategic
Direction: Empowering Communications

Our mission is to be the best supplier of
products and services to our global communications customers at
the lowest total cost of ownership. To fulfill our mission, we
have developed the following strategic goals:

Grow market share within existing markets and
customer accounts.Our established
customers are leaders within their market sectors, and we have
long-standing relationships with them. We will continue to
cultivate these relationships with the goal of growing our
market share by meeting more of their power conversion and
embedded system requirements. Additionally, we have a sales
force that is dedicated to forming and fostering relationships
with emerging customers in our core market sectors.

Expand into new markets.We will continue to seek complementary
markets for our current and new product designs by leveraging
our technical know-how and knowledge of customer and industry
sector needs. We successfully executed on this strategy in 2003
as we entered the radio frequency power amplification market by
modifying existing technology to create a lower cost power
conversion solution for our wireless infrastructure customers.

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Invest in technology to create new
leading-edge solutions for customers and expand our product
line.Our continued research and
development investment in our Power Conversion and
Communications Products businesses is instrumental in our
ability to introduce leading-edge products to our customers. The
research in our Power Conversion group is focused on
Point-of-Load, or PoL, converters, a Distributed Power
Architecture, or DPA, technology. Our PoL research is directed
towards improving power densities, increasing switching speeds,
and adding and integrating control functions for the power
conversion module. New technologies and products for our
Communications Products group include expanding our CPU boards
with Intel-based CPUs, new products and system
architecture using the Advanced Telecommunications Computing
Architecture, or ATCA, standard and increasing use of the Linux
operating system.

Leverage manufacturing and operating
infrastructure to support growth.During the last three years, we
implemented restructuring actions to reduce our manufacturing
capacity and to lower our operating expense structure. With the
consolidation of our manufacturing into low-cost locations, we
believe we have sufficient manufacturing capacity to support
expected growth with modest investment in plant and equipment.
Our selling, administrative, and engineering organizations are
scalable to support higher levels of business activity. This
will allow us to meet our customers increasing needs while
improving our profitability.

Power Conversion

Overview

The Power Conversion group is our primary
business, accounting for 88%, 91% and 79% of our total sales in
2003, 2002 and 2001, respectively. Our products include AC/DC
and DC/DC power supplies, also referred to as power converters.

Power supplies are an essential element in the
supply, regulation and distribution of electrical power in all
electronic systems. To operate, these systems require a steady
supply of electrical power at one or more voltage levels. AC/DC
power supplies convert alternating current, or AC, from a
primary source, such as a wall outlet or utility grid, into a
precisely controlled direct current, or DC. DC/DC converters
modify an existing DC voltage level to other DC voltage levels
to meet the distinct power needs of the applications they are
powering.

We design our products to be used in complex
communications systems such as mid- to high-end servers, data
storage devices, routers, hubs, high-speed modems, access
concentrators, radio frequency power amplification systems, base
station controllers and base station transceivers. These systems
require power supplies with higher levels of capability and
reliability than those used in video gaming systems, mobile
phones or other consumer products.

Industry and
Market

According to Venture Data Corp., worldwide
merchant power supply industry revenues are projected to be
approximately $15 billion annually. The merchant power supply
industry is extremely competitive and fragmented, made up of
more than 1,000 companies ranging from billion-dollar
multinationals to sole proprietors. Artesyn Technologies was the
sixth largest power supply manufacturer in the world in 2002,
according to Micro-Tech Consultants, and one of only seven
companies with sales greater than $300 million.

Our revenue is dependent on the success of our
customers products and services in which our products are
designed into as a component or sub-system. We are focused on
the communications industry and our customers success is
impacted by macroeconomic and industry trends, primarily
corporate spending on information technology and capital
spending by communication services providers. These areas
experienced rapid growth in the late 1990s through 2000
with the growth of the internet, expansion of networks within
corporations and the increasing demand for wireless services.
These technological advances required greater and more reliable
power, driving demand

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for power conversion products and producing
double-digit annual revenue growth in the power industry.


However, the communications industry contracted
sharply in 2001, 2002 and, to a lesser extent, in the first half
of 2003, as consumers of computing and communications equipment
became more conservative with their capital investment plans.
This contraction negatively affected our performance as excess
capacity throughout the power supply industry put greater
downward pressure on power supply prices and compressed margins.
Most companies in the power supply industry experienced
substantial operating losses and implemented restructuring
actions to reduce capacity. The downward trend appears to have
ended in the fourth quarter of 2003 as evidenced by the higher
revenues reported across the power industry.

Without exception, electronic devices are
becoming more complex, particularly within the communications
industry. Microprocessors, Digital Signal Processors, or
DSPs, Field Programmable Gate Arrays, or FPGAs, and memory
chips are growing progressively more powerful and are being
utilized in smaller and smaller spaces. This is driving the
following key trends that will influence the demand for power
conversion products:



| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | Lower semiconductor operating voltages;                            
|
| |  | Faster operating speeds of silicon devices;                        
|
| |  | Increasing number of voltages;                                     
|
| |  | Need for higher efficiency and efficient heat
    distribution; and
|
| |  | Accelerated time to market.                                        

We believe that these trends will accelerate the
movement to DPA systems. Traditionally, electronics systems have
used centralized power architectures, whereby one centralized
AC/DC power supply creates multiple output voltage levels, which
are fed through a cable of wires to individual components
requiring a low voltage direct current. With the increasing
demands for lower semiconductor operating voltages, faster
operating speeds, higher efficiency levels and more efficient
heat distribution, a centralized AC/DC solution can become
limited both technically and economically when providing the
power requirements for todays newest generation of complex
semiconductors.

The move to DPA addresses the increasing number
of different and lower voltage and regulation requirements of
the electronic systems being designed today. A DPA design
incorporates multiple power processing or conversion locations
distributed throughout the system. Typically, a
front-end AC/DC power supply is used to convert an
incoming AC voltage to an intermediate-level DC voltage, which
is then fed to multiple DC/DC converters to generate the lower,
regulated voltage requirements needed to power the semiconductor
or peripheral load. The DC/DC converters are located throughout
the system close to the device that uses power improving
response time and heat distribution. Other advantages of a DPA
are that it is upgradeable, flexible and expandable, and enables
off-the-shelf products to be used to help shorten the
time-to-market.

Competitive
Strengths

As a global provider of power conversion
equipment, we differentiate ourselves from the competition as
follows:

Global sales and engineering organized by
customers.We have aligned our sales
and engineering divisions by the market sectors and the
customers we serve. The Power Conversion group is organized into
three global business units focusing on our server and storage
customers; our telecommunications and wireless customers; and
sales to smaller emerging customers as well as
customers in segments outside of our core communications base.

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We believe this sales and engineering structure
allows us to form close relationships with our customers and
provides better service by anticipating general market and
customer specific requirements. Additionally, by concentrating
on specific markets, we are able to leverage our investments in
applications and design engineering resources to better serve
our customers.

Industry leading technology development.We have industry-recognized engineers
on staff dedicated to the design and development of new
technologies that will meet our customers increasing
demands. We have a high retention level of engineers and
continue to grow our base of engineers globally to meet our
development needs. Our power engineers have demonstrated an
expertise in designing power solutions for the entire spectrum
of power conversion architectures. Our research is focused on
PoL converters and other DPA applications, which we believe have
the greatest potential for growth.

Broad product line.We market hundreds of products,
ranging from one-watt PoL modules to several kilowatt AC/DC
front ends. Customers can utilize our off-the-shelf standard
products or request a modified or custom solution for their
unique power needs. Our product line offers a complete DPA
solution, including the AC/DC front end, intermediate DC/DC
converters and PoL modules. As our customers move towards
reducing the number of approved vendors, our ability to provide
a complete power solution is critical in establishing our
position as one of a limited number of strategic suppliers.

Low cost global manufacturing structure.We have a global manufacturing
presence with most of our products produced in China and
Hungary, both low-cost manufacturing locations. We have been
manufacturing in China for almost twenty years and are
experienced in implementing the initial manufacture of new
products designed at our engineering locations around the world.
To support our manufacturing operations, we have also developed
a global supply chain to focus on securing better leverage of
our component costs, as well as to work with our designers to
ensure we are coordinating the commonality of component usage in
our products.

Products

Our power conversion solutions are offered to
customers through standard products, modified-standard products
and custom products. Standard products, which are manufactured
based on standard design topologies and are offered to customers
off-the-shelf, provide for rapid time-to-market and minimal risk
due to the proven design. They are ideal for low to moderate
volume applications or for application-specific requirements.
Modified-standard products are slightly customized from an
existing product to meet a particular customers special
requirements. Custom products are developed specifically for a
single customer and are tailored to its performance, capability
and cost requirements.

Our product lines are classified as either an
AC/DC or DC/DC power supply:



| |   |                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | AC/DC Power
    Supplies.These products represent
    approximately 62% of our power conversion product sales. Typical
    AC/DC power supplies include open-frame, closed-frame and
    external units, as well as a series of rack-mountable front-end
    power supplies for DPA systems. Most are advanced switch mode
    designs ranging in power from a few watts to several kilowatts.



| |  |                                                                                                                                                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rectifiers were recently added to our portfolio
of front-end power supplies. In addition to converting AC to DC,
these products can also charge batteries and are primarily used
by wireless infrastructure customers in base stations. Our
product is a new design of rectifier that is more efficient than
the typical rectifier currently offered by our competitors.



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | DC/DC Power
    Supplies.These products represent
    approximately 38% of our power conversion product sales. Each
    market sector we focus on has embraced the use of DPA for their
    communication systems, and to respond, we have grown our DC/DC
    product portfolio

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| |  |                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------
| |  | to include one of the broadest ranges of power
    conversion products available in the industry today.



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | With the emergence of low-voltage, high
    performance silicon, the development of DC/DC converters has
    migrated toward smaller, highly efficient low voltage modules
    with higher current outputs and improved thermal performance.
    During 2003, we introduced a new line of ultra low-profile, high
    power board-mounted DC/DC converters known as the
    TyphoonTM line of products. The Typhoon converters
    provide increased output power capabilities at a relatively low
    voltage, improved conversion efficiencies and radical reductions
    in physical size from previous options.                                                                                                                                                                                                      
|
| |  | Our fastest growing line of DC/DC converters
    provide power directly at the point of use and are referred to
    as PoL modules. The power requirements of advanced
    microprocessors, DSPs, FPGAs and memory chips can go from zero
    to full load in micro-seconds. In order to provide the low
    voltages, high currents and fast response time necessary, the
    power converter must be placed in close proximity to the
    semiconductor load. While we design and sell custom isolated PoL
    modules, we are also currently shipping eight distinct product
    families of non-isolated standard PoL products. During 2003,
    revenue from our PoL business continued to improve, resulting in
    sales of approximately $40 million, compared to sales of
    approximately $20 million in 2002.

Sales and
Distribution

Commercially we have aligned our sales,
application engineering and design resources by the market
sectors and customers we serve.

Our Power Conversion group is organized into
three global strategic business units:



| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enterprise Computing Group, or ECG, serves our
    server and storage customers such as Dell, EMC, Hewlett-Packard,
    IBM, Sun Microsystems and others.                                                        
|
| |  | Communications Infrastructure Group, or CIG,
    addresses the needs of telecommunications and wireless
    infrastructure customers such as Alcatel, Ericsson, Lucent,
    Motorola, Nortel, Siemens and others.
|
| |  | Marketing and Standard Products Group, or MSP,
    provides standard and modified-standard products to emerging
    customers through direct sales, manufacturers
    representatives and global distributors.  

Each group has dedicated sales people supported
by applications engineers knowledgeable in both power technology
and the customer product applications. Additionally, both ECG
and CIG have design teams strategically located near our
customers design teams to customize or create new products
to meet their specific requirements, time-to-market and required
price points.

MSP has in-house regional sales representatives
who oversee our network of manufacturers representatives.
These representatives are part of an independent sales force
that manages sales for emerging customers, some key accounts in
remote locations and customers outside of our core
communications market. During 2002, we established the first
pan-European network of independent manufacturers
representatives to sell power supplies. Our MSP sales force also
manages sales of our power supplies to stocking distributors,
including Arrow Electronics and Avnet, and liaises with the
contract manufacturers who provide manufacturing services to our
customers.

Manufacturing

A typical power supply generally consists of the
combination of printed circuit boards along with a number of
electronic and magnetic components attached. In many cases,
these components can be combined in a sheet metal chassis that
provides a structure for the finished product. The production of
our power supplies involves the combination of these components
and circuit boards

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utilizing highly automated surface mount
technology, or SMT, in the assembly process. The number of
components in our products range from 50 components in a low-end
PoL module to 2,500 components in a high-end AC/DC converter.


In response to market demands for increased
quality, reliability and product capability, reduced costs and
time-to-market, we continue to invest in state-of-the-art
equipment and will continue to automate as many of the assembly
and testing processes as possible. The use of SMT reduces board
size by eliminating the need for through-hole placements
allowing us to use smaller components. The use of SMT has also
improved our development process, production capacity and
product quality, and has considerably lowered our manufacturing
cost due to the increased speed and efficiency gained in
comparison with alternative methods of completing the same tasks.

Product quality and responsiveness to our
customers needs are of critical importance to our ability
to successfully compete in our industry. We emphasize quality
and reliability in both the design and manufacture of our
products. In addition to testing throughout the design and
manufacturing process, we test and/or burn-in all the products
we ship using automated equipment and customer-approved
processes.

We have four manufacturing facilities worldwide,
in China, Hungary, Germany and the United States. During 2002
and 2003, we closed three manufacturing facilities and
consolidated production in China and Hungary, our low cost
manufacturing locations. The reduction in capacity through the
factory closures and the demand increases seen in the fourth
quarter of 2003 have increased our current utilization to
approximately 75% of total capacity.

Communications Products

Overview

The Communications Products group represented
12%, 9% and 11% of our total sales in 2003, 2002 and 2001,
respectively. This group designs, manufactures and sells CPU
boards and WAN I/O boards bundled with software protocols that
are incorporated into embedded communications systems. These
embedded systems are specifically configured using various
hardware and software components, often from multiple suppliers,
to meet a variety of end applications found in markets such as
telecommunications and wireless infrastructure. The system
architecture may be proprietary or based on open standards.

A typical application for our CPU boards is to
control and monitor the activities of a high-speed line
interface card, or coordinate the activities of an entire rack
of interface boards, while a typical application of our WAN I/O
boards is to provide a link and carry data from the wireless
infrastructure systems to the wire-line telephone network or the
Internet.

Industry and
Market

The worldwide embedded systems market is
estimated to be over $3 billion in annual revenues. This market
includes proprietary embedded systems and products built by
telecommunications equipment and wireless infrastructure
suppliers. The embedded systems industry is competitive and made
up of approximately twenty companies, none of which has a
dominant market share.

The embedded systems industry was severely
impacted by the downturn in the communications industry that
started in 2001. This was reflected in the performance of the
Communications Products group where revenues fell almost 60%
from 2000 to 2002. However, out of the downturn are several
emerging trends that are expected to drive growth in the
embedded systems market, particularly for products based on open
standards:



| |   |                                                             
| | - | ------------------------------------------------------------
| |  | Increased deployment of broadband access.                   
|
| |  | Acceptance and deployment of 3G wireless
    infrastructure.

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| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | New equipment deployment to support the growing
    use of the internet for voice traffic, known as Voice Over
    Internet Protocol, or VoIP.                                                                                                                                         
|
| |  | Telecommunications equipment and wireless
    infrastructure suppliers have downsized resources and as a
    result are outsourcing system design to outside vendors, such as
    our Communications Products group, that design and sell systems
    or products using open standards.

These trends have already started to impact our
business as evidenced by the 33% growth in the Communications
Products groups revenue in 2003 compared to 2002. The
served available embedded systems market that we target within
communications has estimated annual revenues of over $2 billion
and is predicted to grow at an 11% compound annual growth rate
over the next three years.

Competitive
Strengths

As a global provider of board level solutions
incorporated into embedded communications systems, we
differentiate ourselves from the competition as follows:

Global sales and engineering organized by
customers.We have aligned our sales
and engineering resources to target the top customers in the
telecommunications and wireless infrastructure sectors. We
believe this sales and engineering structure allows us to form
close relationships with our customers and provides better
service by anticipating general market and customer specific
requirements. With the downsizing of our customers
internal resources, strong relationships are critical as our
customers see us as an extension of their engineering
capabilities.

Industry leading technology development using
open standards.We have
industry-recognized engineers on staff dedicated to the design
and development of new technologies that will meet our
customers increasing demands. As a result, we have become
known as an industry leader in ATCA development and related
technologies.

Time to market.We
have demonstrated the ability to quickly bring a new product
from conception to design and into production. Our product
development and new product introduction processes are rigorous
and entail a high level of cross-functional coordination. This
allows us to consistently meet or exceed customer expectations
for new product releases.

Products

The main product lines of our Communications
Products group are WAN I/O boards, such as T1 and E1, used to
interconnect computers over long distances carrying voice or
data, CPU boards to control these interfaces and other
specialized hardware/software subsystems used in communication
infrastructure systems. These products are employed in a wide
range of worldwide telecommunications and datacommunications
networks, such as gateway/routers, switching, call processing
and wireless communications infrastructure. Our products are
designed and manufactured to worldwide industry standards
primarily using open systems technology such as PCI,
CompactPCITM, and ATCA, and can be supplied
off-the-shelf or customized to meet customers specific
cost and performance requirements. Many of these products are
integrated hardware/software bundles used in a range of
applications.

Our Communications Products group has two primary
types of protocol software  control software and data
software  that comprise our SpiderWare product line.
Both types of software are bundled with different interface
boards to provide a subsystem for our customers
communications infrastructure applications.



| |   |                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Control software.Otherwise known as signaling software,
    control software is used to control telephone calls in both the
    landline and wireless networks. Industry standard names for this
    software are SS7 and SIGTRAN. This software is used for actions
    such as setting up

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| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | a call, identifying a route for the call to take
    through the specific phone network, and providing information to
    the end user like caller ID.                                                                                                        
|
| |  | Data software.This
    software is used to enable a call, for either voice or data,
    from a mobile handset to a voice network or to the Internet. Our
    customers integrate this software with their proprietary
    software to create an end application.

We believe that our SpiderWare products and our
development in ATCA will provide us with significant
opportunities in telecommunications as this new technology gains
market and customer acceptance.

Sales and
Distribution

The Communications Products sales force is
divided into Global Accounts, aligned to support the ten largest
telecommunication equipment and wireless infrastructure
suppliers, and Key Accounts, a separate sales group targeting
emerging companies.

A typical Global Accounts team includes dedicated
sales people, supported by application engineers, serving a
customer with both standard off-the-shelf product and custom
designs. The Key Accounts group has regionally based account
managers overseeing manufacturers representatives. This
group uses standard products to develop viable solutions that
meet the needs of emerging companies.

Manufacturing

The Communications Products group manufactures
CPU boards and WAN I/O boards, primarily employing SMT
technology in production. A printed circuit board that has been
manufactured to our specifications is processed through an SMT
line where electronic components, which can include microchip
processors, are attached to the board. The SMT equipment will
place the parts according to our design based on our
customers requirements. The number of components
incorporated into our boards range from 300 components on a
low-end T1 or E1 interface board to over 2,500 components on a
high-end bundled hardware/software subsystem. All of our
products in the Communications Products segment are manufactured
at our facility in Madison, Wisconsin.

Customers

Our current customer list is made up of
world-class organizations within the communications industry
with whom we have developed long-standing relationships based on
the quality, reliability and efficiency of our products. Our ten
largest customers (in alphabetical order) are Alcatel, Cisco,
Dell, Hewlett-Packard, IBM, Lucent, Motorola, Nokia, Nortel and
Sun Microsystems. These customers are leaders in the server and
storage, networking, telecommunications and wireless
infrastructure market sectors. The following table is an
illustration of sales within our core market sectors.

|                                  |  |      |    |  
|--------------------------------- |  | ---- | -- | -
|                                  |  | 2003
|                                  |  |     
|Server and Storage                |  |      | 46 | %
|Wireless Infrastructure           |  |      | 25 | %
|Distribution and Other            |  |      | 18 | %
|Networking and Telecommunications |  |      | 11 | %

A large percentage of our sales are to a small
group of customers, with our ten largest customers representing
71%, 73% and 64% of our total sales in 2003, 2002 and 2001,
respectively. However, we are currently participating in more
than 100 separate projects limiting our exposure to the failure
or cancellation of any one project. Hewlett-Packard, Dell and
Sun Microsystems each represented more than 10% of sales during
2003. The table below shows the percent of total sales generated
from these companies for the respective years:

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|                 |  |      |     |      |  |      |     |  |  |  |     | 
|---------------- |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- | 
|                 |  | 2003 |     | 2002 |  | 2001
|                 |  |      |     |      |  |     
|Hewlett Packard  |  |      | 15% |      |  |      | 17% |  |  |  | 19% | 
|Dell             |  |      | 11% |      |  |      | 15% |  |  |  | 12% | 
|Sun Microsystems |  |      | 10% |      |  |      | 13% |  |  |  | 9%  | 

Suppliers

We maintain a network of suppliers for our
components and other materials used in the manufacture of our
power conversion and communications products. We typically
design products using materials readily available from several
sources and attempt to minimize our use of single-source
components. We procure based upon our enterprise resource
planning system and use a combination of forecasts, customer
purchase orders and formal purchase agreements to create our
materials requirements plan. The number of components in one of
our products can range from fifty on some small power products
to nearly 2,500 components on some of our AC/DC power supplies
and high-end communications products subsystems.

We occasionally use components or other materials
from a single source when introducing new technology and
products to the market. In these situations, we may seek to
establish long-term relationships with these suppliers. We
frequently enter into volume purchase agreements with suppliers
of key materials. This practice enables us to maintain a more
constant source for required supplies, reduce inventory and
produce substantial cost savings through volume purchase
discounts.

We are focused on increasing our vendor-managed
inventories, whereby the vendor holds the inventory in a
location near our factory and we pull the inventory as it is
needed for production. This arrangement allows us to reduce our
inventory while ensuring a continued supply of raw materials and
components for our manufacturing process. In 2003, approximately
55% of our materials and components were purchased using vendor
managed inventory.

Backlog

Sales are generally made pursuant to purchase
orders rather than long-term contracts. Backlog consists of
purchase orders on hand with delivery dates scheduled within the
next six months. Order backlog at December 26, 2003 was
$86.7 million as compared to $72.7 million at December 27,
2002. The level of backlog was considerably higher at the end of
2003 compared to the end of 2002 due to an increase in demand we
experienced with our server and storage customers in the fourth
quarter of 2003. We expect to ship substantially all of the
December 26, 2003 backlog in the first six months of 2004.

Research and Development

We maintain an active research and development
department, which is engaged in the development of new products
and technologies, devising solutions for our clients and
modifying and improving existing products. Expenditures for
research and development during fiscal years 2003, 2002 and 2001
were approximately $34.3 million, $34.3 million and $41.5
million, respectively. These amounts represented 10%, 10% and 8%
of revenue in the respective periods presented. Research and
development spending decreased in absolute dollars from 2001 to
2002 due to the restructuring initiatives announced and carried
out during that time. It was necessary to reduce the total
amount spent in order to properly match our cost structure with
our levels of revenue. We believe, however, that the percentage
of spending for research and development is among the highest in
our industry in relation to revenue, reflecting our commitment
to maintaining our level of timely introduction of new
technology and products.

9



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##### 



Intellectual Property Matters

We believe that our future success is primarily
dependent upon the technical competence and creative skills of
our personnel, rather than upon any patent or other proprietary
rights. However, we have protected certain products with patents
where appropriate and have defended, and will continue to
defend, our rights under these patents. We currently maintain
approximately 36 patents related to technology included in the
products we sell.

Competition

The industry in which we compete is highly
competitive and characterized by customer expectations for
continually improved product performance, shorter manufacturing
cycles and lower prices. These trends result in frequent
introductions of new products with added capabilities and
features and continuous improvements in the relative
price/performance of the products.

Our principal competitors include Acbel Polytech
(Taiwan), Delta Electronics (Taiwan and Thailand), Emerson
Electric, Invensys (UK), Lite-On (Taiwan), Power-One and Tyco
International. Our broad strategies to deal with competition
include, but are not limited to, a continued commitment to
investment in research and development, continually lowering our
product costs, and maintaining and expanding our relationships
with customers in the growth sectors of our industry.

Employees

We presently have approximately 1,300 full-time
employees. In addition, we presently have approximately 3,500
temporary employees and contractors, the majority of which work
at our facility in China. We believe our ability to conduct our
present and proposed activities is dependent on retaining
qualified engineers and technicians. We have not, to date,
experienced difficulty in attracting and retaining sufficient
engineering and technical personnel to meet our needs and
business objectives. Additionally, none of our domestic
employees are covered by collective bargaining agreements.

Environmental Matters

Compliance with federal, state, local and foreign
laws and regulations regulating the discharge of materials into
the environment has not had, and, under present conditions, we
do not anticipate that such laws and regulations will have a
material effect on our results of operations, capital
expenditures, financial condition or competitive position.

Company Website and Access to Company
Filings

If you would like any additional information on
the business, please visit our website at www.artesyn.com.
Information contained in our website, however, is not part of
this form 10-K. All annual reports, quarterly reports, current
reports and all amendments to these reports are available free
of charge as soon as reasonably practicable after such material
is electronically filed with or furnished to the Commission
through our website.

10



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##### 





|        |           
|------- | ----------
|Item 2. | Properties

We currently occupy approximately
1.4 million square feet of office and manufacturing space
worldwide, some of which we own and maintain. All facilities are
in good condition and are adequate for their current intended
use. We maintain the following facilities:

|                    |  |                               |  |             |         |          |  |  |        | 
|------------------- |  | ----------------------------- |  | ----------- | ------- | -------- |  |  | ------ | 
|                    |  |                               |  | Approximate |         |         
|                    |  |                               |  | Square      |         | Owned vs
|Facility            |  | Primary Activity              |  | Footage     |         | Leased  
|                    |  |                               |  |             |         |         
|Boca Raton, FL      |  | Corporate Headquarters        |  |             | 8,700   |          |  |  | Leased | 
|Eden Prairie, MN    |  | Engineering, Administration   |  |             | 28,000  |          |  |  | Leased | 
|Edinburgh, Scotland |  | Engineering, Administration   |  |             | 7,000   |          |  |  | Leased | 
|Einsiedel, Germany  |  | Manufacturing                 |  |             | 28,400  |          |  |  | Owned  | 
|Framingham, MA      |  | Engineering, Administration   |  |             | 23,000  |          |  |  | Leased | 
|Hong Kong, China    |  | Engineering, Administration   |  |             | 144,900 |          |  |  | Owned  | 
|Madison, WI         |  | Manufacturing/ Administration |  |             | 45,000  |          |  |  | Owned  | 
|Redwood Falls, MN   |  | Manufacturing                 |  |             | 117,000 |          |  |  | Owned  | 
|Tatabanya, Hungary  |  | Manufacturing                 |  |             | 118,000 |          |  |  | Owned  | 
|Vienna, Austria     |  | Engineering, Administration   |  |             | 20,600  |          |  |  | Leased | 
|Youghal, Ireland    |  | Engineering                   |  |             | 36,000  |          |  |  | Owned  | 
|Zhongshan, China    |  | Manufacturing                 |  |             | 800,000 |          |  |  | Leased | 

In addition to the above locations, we have
leased or own sales/engineering offices located in or near
Tucson, Arizona; Milpitas, California; Westminster, Colorado;
Tokyo, Japan; and Paris, France. All facilities operate within
the Power Conversion segment except the facilities in Boca
Raton, Florida (Corporate) and in Madison, Wisconsin and
Edinburgh, Scotland (Communications Products). The facilities
described in this Item provide us with enough capacity to meet
our current needs.



|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

On February 8, 2001, VLT, Inc. and Vicor
Corporation filed a suit against us in the United States
District Court of Massachusetts alleging that we have infringed
and are infringing on U.S. Reissue Patent No. 36,098
entitled Optimal Resetting of The Transformers Core
in Single Ended Forward Converters. VLT has alleged that
it is the owner of the patent and that we have manufactured,
used or sold electronic power converters with reset circuits
that fall within the claims of the patent. The suit requests
that we pay damages, including royalties, lost profits,
interest, attorneys fees and increased damages under
35 U.S.C. § 284. We have challenged the validity
of the patent and have denied the infringement claims. Based on
the district courts claim construction rulings on
January 3, 2003, we reached an agreement with VLT on a
stipulated judgment, which the court entered on May 31,
2003.

The respective parties each disagree with certain
aspects of the district courts claim construction, and the
stipulated judgment allowed the parties to appeal the
construction to the United States Court of Appeals for the
Federal Circuit in Washington, DC. Both parties have now
filed appeals to the claim construction contained within the
stipulated judgment. At this time, no determination of the
outcome of the appeals or any proceedings after the appeals can
be reasonably estimated. Although we believe that we have a
strong defense to the claims asserted by VLT, if we eventually
were found liable to pay all of the damages requested by VLT,
such a payment could have a material adverse effect on our
business, operating results and financial condition.

For additional detail with regards to the
VLT/Vicor suit, please refer to Note 10 of the Consolidated
Financial Statements in Item 8 of the Annual Report on
Form 10-K.

11



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##### 



We are a party to various other legal
proceedings, which have arisen in the ordinary course of
business. While the results of these matters cannot be predicted
with certainty, we believe that losses, if any, resulting from
the ultimate resolution of these matters will not have a
material adverse effect on our consolidated results of
operations, cash flows or financial position.



|        |                                                        
|------- | -------------------------------------------------------
|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 ended
December 26, 2003.

PART II



|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Our common stock is traded on The NASDAQ Stock
MarketSM under the symbol ATSN. High and low sales
prices by quarter for the common stock appears in Note 19
of the Notes to Consolidated Financial Statements entitled
Selected Consolidated Quarterly Data accompanying
the annual report.

As of February 20, 2004, there were
approximately 11,697 shareholders consisting of record
holders and individual participants in security position
listings.

To date, we have not paid any cash dividends on
our capital stock. The Board of Directors presently intends to
retain all of our earnings for use in our business and does not
anticipate paying cash dividends in the foreseeable future. In
addition, the payment of dividends is prohibited by our current
credit agreement.



| |                                     
| | ------------------------------------
| | Sales of Unregistered
    Securities

In August 2003, we completed a private placement
of $90 million of 5.5% Convertible Senior Subordinated
Notes due 2010 to Lehman Brothers Inc. and Stephens Inc. in a
private offering pursuant to the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended. The
Convertible Notes were offered and sold by Lehman Brothers Inc.
and Stephens Inc. to qualified institutional buyers in reliance
on the exemption from registration provided by rule 144A of
the Securities Act. Net proceeds from this offering were
$86.3 million, after deducting discounts and commissions
paid to the underwriters of approximately $3.7 million and
other expenses incurred in connection with the offering.

The Convertible Notes bear interest at 5.5%
payable semiannually on February 15 and August 15 of
each year beginning on February 15, 2004. The Convertible
Notes may be converted into shares of our common stock at any
time prior to their maturity date at a conversion price of
$8.064 per share (equivalent to an initial conversion rate of
124.0079 shares per $1,000 principal amount of Convertible
Notes), subject to adjustments for certain events as set forth
in the registration statement on Form S-3 filed after the
completion of the offering. On or after August 15, 2008, we
may redeem some or all of the Convertible Notes at 100% of their
principal amount plus accrued and unpaid interest to, but
excluding, the redemption date. The Convertible Notes and the
common stock issuable upon conversion were subsequently
registered for resale pursuant to a shelf registration statement
on Form S-3 under the Securities Act.

12



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##### 





| |                                     
| | ------------------------------------
| | Equity Compensation Plan Information

The following table sets forth information
regarding shares issued under equity compensation plans as of
December 26, 2003:

|                          |                              |                            |  |                     |  |                         |   |       |  |  |  |         |    
|------------------------- | ---------------------------- | -------------------------- |  | ------------------- |  | ----------------------- | - | ----- |  |  |  | ------- | ---
|                          |                              | Number of Securities to Be |  | Weighted Average    |  | Number of Securities   
|                          |                              | Issued Upon Exercise of    |  | Exercise Price of   |  | Remaining Available for
|                          |                              | Outstanding Options        |  | Outstanding Options |  | Future Issuance        
|                          |                              |                            |  |                     |  |                        
|Equity Compensation Plans |                              |                            |  |                     |  |                         |   |       |  |  |  |        
|                          | Not approved by stockholders |                            |  |                    |  |                         |   |      |  |  |  |        |    
|                          | Approved by stockholders     |                            |  | 6,931,359           |  |                         | $ | 11.68 |  |  |  | 654,000 | (1)



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under the terms of the 2000 Plan, the Company
    reserved 4,400,000 shares of Common Stock for issuance.
    Additionally, options under the Companys 1990 Performance
    Equity Plan that expire or terminate unexercised after the
    adoption of the 2000 Plan, and options under the 2000 Plan that
    expire or terminate unexercised, are available for new grants
    pursuant to the terms of the 2000 Plan.

13



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##### 





|        |                                   
|------- | ----------------------------------
|Item 6. | Selected Financial
    Information

The following table sets forth certain selected
financial information.

|                                                                            |                     |                                              |         |       |    |      |          |       |    |      |         |       |    |   |         |      |   |   |         |      |  
|--------------------------------------------------------------------------- | ------------------- | -------------------------------------------- | ------- | ----- | -- | ---- | -------- | ----- | -- | ---- | ------- | ----- | -- | - | ------- | ---- | - | - | ------- | ---- | -
|For the Fiscal Years                                                        |                     | 2003                                         |         | 2002  |    | 2001 |          | 2000  |    | 1999
|                                                                            |                     |                                              |         |       |    |      |          |       |    |     
|                                                                            |                     |                                             
|                                                                            |                     | (Dollars in thousands except per share data)
|Results of Operations                                                       |                     |                                              |         |       |    |      |          |       |    |      |         |       |    |   |         |      |   |   |         |     
|Sales                                                                       |                     | $                                            | 356,871 |       |    | $    | 350,829  |       |    | $    | 493,968 |       |    | $ | 690,083 |      |   | $ | 594,155 |     
|Net income (loss)                                                           |                     |                                              | (15,622 | )     |    |      | (108,822 | )     |    |      | (31,763 | )     |    |   | 43,253  |      |   |   | 43,362  |     
|                                                                            | Per share  basic   |                                              |         | (0.40 | )  |      |          | (2.84 | )  |      |         | (0.83 | )  |   |         | 1.15 |   |   |         | 1.16 |  
|                                                                            | Per share  diluted |                                              |         | (0.40 | )  |      |          | (2.84 | )  |      |         | (0.83 | )  |   |         | 1.10 |   |   |         | 1.11 |  
|Financial Position                                                          |                     |                                              |         |       |    |      |          |       |    |      |         |       |    |   |         |      |   |   |         |     
|Working capital                                                             |                     | $                                            | 109,519 |       |    | $    | 89,025   |       |    | $    | 152,776 |       |    | $ | 176,113 |      |   | $ | 127,637 |     
|Property, plant & equipment, net                                            |                     |                                              | 64,210  |       |    |      | 78,631   |       |    |      | 103,291 |       |    |   | 105,059 |      |   |   | 88,468  |     
|Total assets                                                                |                     |                                              | 316,676 |       |    |      | 303,587  |       |    |      | 426,483 |       |    |   | 497,815 |      |   |   | 359,050 |     
|Total debt, including current maturities                                    |                     |                                              | 90,004  |       |    |      | 69,533   |       |    |      | 100,606 |       |    |   | 74,813  |      |   |   | 46,110  |     
|Shareholders equity                                                        |                     |                                              | 114,037 |       |    |      | 123,446  |       |    |      | 219,245 |       |    |   | 256,512 |      |   |   | 199,912 |     
|Total capitalization (total debt plus equity)                               |                     |                                              | 204,041 |       |    |      | 192,979  |       |    |      | 319,851 |       |    |   | 331,325 |      |   |   | 246,022 |     
|Financial Statistics                                                        |                     |                                              |         |       |    |      |          |       |    |      |         |       |    |   |         |      |   |   |         |     
|Selling, general and administrative expenses                                |                     | $                                            | 38,898  |       |    | $    | 36,593   |       |    | $    | 54,057  |       |    | $ | 62,771  |      |   | $ | 50,185  |     
|                                                                            |  as a % of sales   |                                              |         | 10.9  | %  |      |          | 10.4  | %  |      |         | 10.9  | %  |   |         | 9.1  | % |   |         | 8.4  | %
|Research and development expenses                                           |                     |                                              | 34,329  |       |    |      | 34,341   |       |    |      | 41,470  |       |    |   | 44,867  |      |   |   | 36,413  |     
|                                                                            |  as a % of sales   |                                              |         | 9.6   | %  |      |          | 9.8   | %  |      |         | 8.4   | %  |   |         | 6.5  | % |   |         | 6.1  | %
|Operating income (loss)                                                     |                     |                                              | (9,584  | )     |    |      | (120,569 | )     |    |      | (31,945 | )     |    |   | 67,139  |      |   |   | 64,861  |     
|                                                                            |  as a % of sales   |                                              |         | (2.7  | )% |      |          | (34.4 | )% |      |         | (6.5  | )% |   |         | 9.7  | % |   |         | 10.9 | %
|Total debt as a % of total capitalization                                   |                     |                                              | 44.1    | %     |    |      | 36.0     | %     |    |      | 31.4    | %     |    |   | 22.6    | %    |   |   | 18.7    | %   
|Debt to equity ratio                                                        |                     |                                              | 78.9    | %     |    |      | 56.3     | %     |    |      | 45.9    | %     |    |   | 29.2    | %    |   |   | 23.1    | %   
|Other Data                                                                  |                     |                                              |         |       |    |      |          |       |    |      |         |       |    |   |         |      |   |   |         |     
|Capital expenditures                                                        |                     | $                                            | 7,081   |       |    | $    | 5,230    |       |    | $    | 28,763  |       |    | $ | 39,256  |      |   | $ | 33,359  |     
|Depreciation and amortization (includes
    impairment of goodwill in 2002) |                     | $                                            | 22,937  |       |    | $    | 78,834   |       |    | $    | 34,423  |       |    | $ | 27,195  |      |   | $ | 20,109  |     
|Common shares outstanding (000s)                                           |                     |                                              | 38,755  |       |    |      | 38,389   |       |    |      | 38,253  |       |    |   | 38,282  |      |   |   | 37,127  |     
|Employees                                                                   |                     |                                              | 1,341   |       |    |      | 2,366    |       |    |      | 2,427   |       |    |   | 5,227   |      |   |   | 4,628   |     
|Temporary employees and contractors                                         |                     |                                              | 3,492   |       |    |      | 2,310    |       |    |      | 2,818   |       |    |   | 3,960   |      |   |   | 3,269   |     

14



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion should be read in
conjunction with the consolidated financial statements and
related notes as well as the section under the heading
Risk Factors that May Affect Future Results. With
the exception of historical information, the matters discussed
below may include forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties. Forward-looking
statements typically use words or phrases such as
estimate, plans, projects,
anticipates, continuing,
ongoing, expects, believes,
or words of similar import. We caution readers that a number of
important factors, including those identified in the section
entitled Risk Factors that May Affect Future Results
as well as factors discussed in our other reports filed with the
Securities and Exchange Commission, could affect our actual
results and cause them to differ materially from those expressed
in the forward-looking statements. Forward-looking statements
included in this Form 10-K are made only as of the date
hereof, based on information available as of the date hereof,
and subject to applicable law to the contrary, we assume no
obligation to update any forward-looking statements.

Introduction

We are a leading designer and manufacturer of
advanced power conversion products and board level computing
solutions incorporated into embedded communications systems. We
generate revenue and earn profits through the sale of these
products to OEMs and distributors, predominately in the
communications industry. Our operations are global, with design,
manufacturing and sales resources in North America, Europe and
Asia.

Our business is organized into two operating
segments, Power Conversion and Communications Products. The
Power Conversion group designs, manufacturers and sells AC/DC
and DC/DC power conversion products. The Communications Products
group designs, manufactures and sells CPU boards and
WAN I/O boards bundled with software protocols embedded in
communications infrastructure systems. The two segments share a
strategic direction, but have separate operations.

Our products are used in commercial applications
in the server and storage, networking, wireless infrastructure
and telecommunications sectors of the communications industry.
Our revenue is dependent on the success of our customers
products and services, which incorporate our products as a
component or sub-system. Our customers success is impacted
by macroeconomic and industry trends, primarily corporate
spending on information technology and capital spending by
communication services providers. Spending in these areas
contracted sharply in 2001, 2002 and, to a lesser extent, in the
first half of 2003. In the fourth quarter of 2003, spending
appeared to recover as evidenced by the higher revenues reported
across the industry.

In evaluating our products, customers consider
quality, reliability, technology, service and cost relative to
our competitors. The trend towards DPA is the technological
shift having the greatest impact on our products. We are
investing heavily in PoL and other DPA technologies in order to
grow our competitive advantage in this area. In order to meet
the cost requirements of our customers, we have consolidated our
production in low-cost countries.

We generate cash through net income, efficient
working capital and capital equipment management and equity and
debt financing transactions. Although we incurred significant
net losses in the past three years, we generated substantial
cash through reductions in working capital and by minimizing
capital equipment purchases.

We are financed through a mixture of equity and
debt. We took actions in 2003 to lengthen our debt maturities
and to allow us more flexibility to invest in our business. Our
debt is in the form of 5.5% Convertible Senior Subordinated
Notes due 2010 and an asset-based senior revolving credit
facility, the availability under which is determined in
accordance with a borrowing base calculation using domestic
accounts receivable and inventory.

15



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2003 Overview

Beginning in 2001 and continuing through 2002,
there was a decrease in demand experienced throughout the
communications industry as consumers of computing and
communications equipment became more conservative with their
capital investment plans. The decline in our revenue that
followed resulted in substantial operating losses, as we were
unable to reduce our cost structure in line with the revenue
reductions. The operating losses required waivers from our
lenders and a renegotiation of terms on our existing revolving
credit agreement, including reductions in the amount available
for borrowing, during 2002.

In the fourth quarter of 2002, we announced a
series of restructuring actions to significantly lower operating
costs. The restructuring plan provided a path to return to
profitability and executing that plan was a primary focus of
management. Entering 2003, we identified four goals for the
year: achieve quarterly profitability, improve liquidity, grow
revenue and continue to invest in research and development.
These goals were substantially achieved as outlined below.

Achieve quarterly profitability.In 2003, we executed our restructuring
plan, including the closure of our Kindberg, Austria and
Youghal, Ireland factories and consolidating production in our
lower-cost China and Hungary plants. These and other actions
reduced excess capacity and better aligned our cost structure
with our revenue stream. The cost reductions combined with an
increase in end market demand resulted in a profit being
recorded in the fourth quarter of 2003, the first quarterly
profit since 2001.

Improve liquidity.We entered the year with
$23.0 million of borrowings under our revolving credit
agreement, due to expire in 2004, and a $50.0 million
convertible subordinated note, due in 2007, but redeemable by
the note holder (Finestar) in January 2005. In August 2003, we
issued $90.0 million of convertible senior subordinated
notes, due in 2010 and used a portion of the net proceeds to pay
off the Finestar note. We also replaced our prior credit
facility with a five-year, $35.0 million senior revolving
credit facility with Fleet Capital. The financing transactions
undertaken in 2003 have lengthened our debt maturities and
provide greater flexibility to make longer-term investments in
our business.

We also generated $24.2 million of operating
cash flow primarily driven by reductions in working capital. The
operating cash flow and the cash provided by the financing
activities described above, allowed us to fund capital
expenditures and increase cash by $29.2 million to
$94.2 million at the end of the year.

Grow revenue.Sales
in 2003 increased 2% from 2002 to $356.9 million driven by
new product introductions and improvement in end market demand.
Revenue increased sequentially from $81.9 million in the
first quarter to $99.3 million in the fourth quarter, as
demand improved across all of our market sectors late in the
year.

Continue to invest in research and
development.Although we reduced our
cost structure, we continue to invest in technology and new
products to grow our business. We invested $34.3 million or
10% of revenue on research and development in 2003, consistent
with our 2002 spending.

We exited 2003 in a substantially stronger
competitive and financial position. With the improvements made
to our cost structure and liquidity, our focus in 2004 will be
on growing the business. Our goals for 2004 are to grow market
share, enter new communications market segments, continue to
invest in industry leading technology and maintain profitability
for the year.

Critical Accounting Policies

We have identified the policies outlined below as
critical to our business operations and an understanding of our
results of operations. The listing is not intended to be a
comprehensive list of all of our accounting policies. In many
cases, the accounting treatment of a particular transaction is
specifically dictated by accounting principles generally
accepted in the United States, with no need

16



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##### 



for managements judgment in their
application. The impact and any associated risk related to these
policies on our business operations is discussed throughout
Managements Discussion and Analysis of Financial
Condition and Results of Operations where such policies
affect our reported and expected financial results. For a
detailed discussion on the application of these and other
accounting policies, see Note 1 in the Notes to the
Consolidated Financial Statements in Item 8 of this Annual
Report on Form 10-K.


Inventories

We value our inventory at the lower of the actual
cost to purchase and/or manufacture the inventory or its current
estimated market value. We regularly review inventory quantities
on hand and record a provision for excess and obsolete inventory
based primarily on our estimated forecast of product demand and
production requirements for the next twelve months. Demand for
our products can fluctuate significantly, and we consult with
our sales and customer service organizations in order to
determine the projections for each component and finished good.
Because of the magnitude of the value of our inventory, any
adjustment to excess and obsolete inventory would likely be
material to our results. The estimate of inventory reserves is
critical in both of our segments.

We refined our calculation related to estimating
our excess and obsolete inventory reserves during the fourth
quarter of 2002. The refinement resulted in an increase to our
excess and obsolete inventory reserve of $15.5 million in the
fourth quarter of the year. In 2003, our gross inventory
continued to decrease due to increased demand, enhanced resource
management and the disposal of obsolete inventory. These factors
contributed to a significant decrease in the reserve balance at
the end of 2003 compared to 2002. At December 26, 2003, our
inventory reserve balance was $23.7 million, representing
35% of the value of our gross inventory. This compares with
$39.5 million, or 42% of gross inventory, at the end of 2002.

Warranties

We offer warranties of various lengths to our
customers depending upon the specific product and terms of the
customer purchase agreement. Our standard warranties require us
to repair or replace defective products returned to us during
such warranty period at no cost to the customer. At the time of
sale, we record an estimate for warranty-related costs based on
our actual historical return rates and communications with our
customers. Changes in such estimates can have a material effect
on net income and require us to forecast expected warranty
claims. The estimate of warranty obligations is critical in both
segments.

The reserve is determined by first comparing the
historical relationship between warranty costs, which are made
up of labor and materials required to repair the parts returned,
and revenue over the prior two years to calculate a rate. The
rate is then applied to shipments under warranty using a sliding
scale, based on historical return patterns. The reserve also
includes specific large exposures that are probable and
reasonably estimated. We have recognized expenses related to
warranty costs of $5.2 million, $3.9 million and
$3.8 million in 2003, 2002 and 2001, respectively. Each of
these represents approximately 1% of revenue in their respective
periods. Our warranty costs have historically been within our
expectations and the provisions established.

Goodwill

We adopted Statement of Financial Accounting
Standards No. 142 on December 29, 2001. Under SFAS
No. 142, we assess goodwill using a two-step approach on an
annual basis in August of each year, or more frequently if
indicators of impairment exist. SFAS No. 142 states that
potential impairment exists if the fair value of a reporting
unit is less than the carrying value of the assets of that unit.
The amount of the impairment to recognize, if any, is calculated
as the amount by which

17



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the carrying value of goodwill exceeds its
implied fair value. Our initial application of SFAS No. 142
did not indicate an impairment existed.


Managements assumptions about future sales
and cash flows on which the fair value estimate is based require
significant judgment as prices and volumes fluctuate due to
changing business conditions. In addition, the impact of
recognizing a goodwill impairment charge was material to our
results of operations in 2002 and could be material in the
future to our consolidated financial results.

During 2002, based on business conditions at that
time, we performed an updated assessment of impairment of
goodwill. As a result of this assessment, we recognized an
impairment loss of $51.9 during the third quarter of the year.
For additional information on the assessment and impairment,
please refer to Note 17 of our Consolidated Financial
Statements. We performed the same test in the third quarter of
2003, and determined an impairment did not exist. As of
December 26, 2003, the balance of goodwill was
$20.8 million, making our estimate of future earnings
critical. We will continue to assess the impairment of goodwill
in accordance with SFAS No. 142 in future periods.

Accounting for Income Taxes

As part of the process of preparing our
Consolidated Financial Statements, we are required to estimate
our income taxes in each of the jurisdictions in which we
operate. This process requires us to estimate our actual current
tax exposure, together with assessing temporary differences
resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our
Consolidated Balance Sheet. We must then assess the likelihood
that our deferred tax assets will be recovered from future
taxable income and, to the extent we believe that recovery is
not likely, we must establish a valuation allowance. To the
extent we establish a valuation allowance or increase this
allowance in a period, we must include an expense within the tax
provision in the Statement of Operations. To the extent we
decrease the valuation allowance in a period, we must include a
benefit within the tax provision in the Statement of Operations.

Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. A change in these estimates
could have a material effect on our operating results. We have
recorded a valuation allowance of $12.4 million as of
December 26, 2003, due to uncertainties related to our
ability to utilize some of the net operating loss carryforwards
that make up our deferred tax assets before they expire. The
valuation allowance is based on historical tax positions, tax
planning strategies and expectations about future taxable
revenue by jurisdiction and the period over which our deferred
tax assets will be recoverable. The net deferred tax assets are
$25.0 million and $28.6 million, net of the valuation
allowance, at the end of 2003 and 2002, respectively.

Results of Operations



| |             
| | ------------
| | Consolidated

Sales.The following
table summarizes revenue by business segment in comparison to
previous periods (in millions):

|                        |       |      |       |       |  |      |       |             |  |             |       |       |  |  |    |    |   |  |     |     |   
|----------------------- | ----- | ---- | ----- | ----- |  | ---- | ----- | ----------- |  | ----------- | ----- | ----- |  |  | -- | -- | - |  | --- | --- | --
|                        |       |      |       |       |  |      |       | 2003        |  | 2002       
|                        |       |      |       |       |  |      |       | Compared to |  | Compared to
|                        |       | 2003 |       | 2002  |  | 2001 |       | 2002        |  | 2001       
|                        |       |      |       |       |  |      |       |             |  |            
|Power Conversion        |       | $    | 314.4 |       |  | $    | 318.9 |             |  | $           | 392.4 |       |  |  | (1 | )% |   |  | (19 | )% 
|Communications Products |       |      | 42.5  |       |  |      | 31.9  |             |  |             | 55.8  |       |  |  | 33 | %  |   |  | (43 | )% 
|Artesyn Solutions       |       |      |      |       |  |      |      |             |  |             | 45.8  |       |  |  |   |    |   |  |    |    
|                        |       |      |       |       |  |      |       |             |  |             |       |       |  |  |    |    |   |  |     |    
|                        | Total |      | $     | 356.9 |  |      | $     | 350.8       |  |             | $     | 494.0 |  |  |    | 2  | % |  |     | (29 | )%
|                        |       |      |       |       |  |      |       |             |  |             |       |       |  |  |    |    |   |  |     |    

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In Communications Products, the increase in 2003
compared to 2002 ($10.6 million) is primarily attributable
to increases in sales to our wireless and telecommunications
customers, as several new programs entered development and our
customers experienced an increase in end-user demand. In Power
Conversion, the decrease in revenue compared with 2002
($4.5 million) is due primarily to a decrease in sales to
our server and storage customers in the first half of 2003. This
was partially offset by an increase in sales to our distribution
customers reflecting the impact of expanding our distribution
network.

During 2003, we realized sequential growth as
revenue increased from $81.9 million in the first quarter
to $99.3 million in the fourth quarter. Revenue growth
accelerated in the fourth quarter across all of our markets due
to new product introductions and increased end-user demand as
spending on information technology and capital spending by
communications service providers increased. Based on orders
received in the fourth quarter of 2003 and our customers
forecasts, we expect the higher level of demand to continue
through the first half of 2004.

The decrease in sales in 2002 compared to 2001 is
primarily the result of a significant decrease in demand we
experienced from most of our major customers starting in early
2001. The decreased level of customer demand was driven by lower
spending on information technology and reduced capital spending
by communication service providers.

The reduction in sales was also impacted by the
sale of Artesyn Solutions in the fourth quarter of 2001. If the
impact of Artesyn Solutions were removed, the reduction in sales
in 2002 compared to 2001 would be $97.3 million, or 22%.

Gross Profit.Below
is a comparison of gross profit and gross profit as a percent of
revenue for 2003, 2002 and 2001 (in millions):

|                                                                       |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |   |  |  |     |   
|---------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ----------- |  | ----------- | ---- | - |  |  | --- | - |  |  | --- | --
|                                                                       |  |      |      |      |  |      |      | 2003        |  | 2002       
|                                                                       |  |      |      |      |  |      |      | Compared to |  | Compared to
|                                                                       |  | 2003 |      | 2002 |  | 2001 |      | 2002        |  | 2001       
|                                                                       |  |      |      |      |  |      |      |             |  |            
|Gross profit                                                           |  | $    | 69.3 |      |  | $    | 29.6 |             |  | $           | 56.3 |   |  |  | 134 | % |  |  | (47 | )%
|Inventory charges                                                      |  |      |     |      |  |      | 15.5 |             |  |             | 16.0 |   |  |  |    |   |  |  | (3  | )%
|                                                                       |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |   |  |  |     |   
|Gross profit  excluding inventory
    charges                         |  | $    | 69.3 |      |  | $    | 45.1 |             |  | $           | 72.3 |   |  |  | 54  | % |  |  | (38 | )%
|                                                                       |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |   |  |  |     |   
|Gross profit as a percent of revenue                                   |  |      | 19.4 | %    |  |      | 8.4  | %           |  |             | 11.4 | % |  |  |     |   |  |  |     |   
|Gross profit as a percent of revenue 
    excluding inventory charges |  |      | 19.4 | %    |  |      | 12.9 | %           |  |             | 14.6 | % |  |  |     |   |  |  |     |   

Included in the 2002 results are charges of
approximately $15.5 million for increased excess and
obsolete inventory reserves as a result of a change in the
reserve calculations. The charges were recorded in cost of
sales, and reflect a refinement in our estimate of excess and
obsolete inventory resulting from industry trends toward shorter
product lifecycles and other factors. We did not record charges
for excess and obsolete inventory outside of our normal
recurring adjustment in 2003.

The increase in 2003 gross profit, excluding the
impact of the additional inventory charge ($24.2 million),
was primarily the result of manufacturing cost reductions
resulting from our restructuring actions taken during the last
two years (approximately $20.0 million) and improvements in
volume and sales mix. Manufacturing costs were reduced due to
the closure of our Kindberg, Austria factory in April 2003, the
closure of our Youghal, Ireland factory in September 2003,
headcount reductions across all of our factories and lower
inventory charges due to the significant reduction of inventory
on hand.

In 2003, our Communications Products segment
accounted for approximately 12% of our total sales compared to
approximately 9% in 2002. The increased sales recorded by
Communications

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Products, which includes higher margin software
content and a historically higher pricing structure than Power
Conversion, was the primary reason for the improved sales mix.


We also experienced sequential improvement in
gross profit as a percent of revenue during 2003, as our gross
profit percentage increased from 16.4% in the first quarter to
22.4% in the fourth quarter. The improvement during 2003 was
primarily the result of cost reductions from the restructuring
actions discussed above.

The decrease in gross profit in 2002 compared to
2001 was primarily attributable to the decrease in revenue in
2002 compared to 2001 (approximately $20.0 million). In
addition, gross profit was negatively impacted by the exclusion
of Artesyn Solutions from our consolidated results in 2002
(approximately $9.0 million) and supplier cancellation
charges incurred in 2002 (approximately $2.0 million).
These effects were somewhat offset by cost savings from our
manufacturing locations, accounting for the balance of the
change between periods.

During 2001, we recorded a charge related to
excess and obsolete inventory of $16.0 million related to
raw materials purchased and finished goods manufactured to
fulfill orders cancelled or delayed as customer demand
unexpectedly decreased in the period. This charge corresponds to
the charge recorded in 2002 of $15.5 million previously
discussed.

The restructuring actions to reduce excess
capacity and lower manufacturing costs were largely complete at
the end of 2003. Gross profits in 2004 will be favorably
impacted by the full year effect of the restructuring actions
implemented throughout 2003. Additionally, higher demand will
increase manufacturing capacity utilization, which was
approximately 75% at the end of 2003, allowing for better
coverage of fixed costs and an improvement in gross profit as a
percent of revenue.

Operating Expenses.Operating expenses for 2003, 2002 and 2001 are as follows (in
millions):

|                                    |                          |      |      |      |  |      |      |              |  |      |       |      |  |  |    |    |   |  |    |    |   |  |    |    |  
|----------------------------------- | ------------------------ | ---- | ---- | ---- |  | ---- | ---- | ------------ |  | ---- | ----- | ---- |  |  | -- | -- | - |  | -- | -- | - |  | -- | -- | -
|                                    |                          |      |      |      |  |      |      |             
|                                    |                          |      |      |      |  |      |      | % of Revenue
|                                    |                          |      |      |      |  |      |      |             
|                                    |                          | 2003 |      | 2002 |  | 2001 |      | 2003         |  | 2002 |       | 2001
|                                    |                          |      |      |      |  |      |      |              |  |      |       |     
|Selling, general and administrative |                          | $    | 38.9 |      |  | $    | 36.6 |              |  | $    | 54.0  |      |  |  | 11 | %  |   |  | 10 | %  |   |  | 11 | % 
|Research and development            |                          |      | 34.3 |      |  |      | 34.3 |              |  |      | 41.5  |      |  |  | 10 | %  |   |  | 10 | %  |   |  | 8  | % 
|Restructuring and related charges   |                          |      | 5.6  |      |  |      | 27.3 |              |  |      | 15.9  |      |  |  | 2  | %  |   |  | 8  | %  |   |  | 3  | % 
|Goodwill impairment                 |                          |      |     |      |  |      | 51.9 |              |  |      |      |      |  |  |   |    |   |  | 15 | %  |   |  |   |   
|Goodwill amortization               |                          |      |     |      |  |      |     |              |  |      | 8.1   |      |  |  |   |    |   |  |   |    |   |  | 2  | % 
|Gain on sale of Artesyn Solutions   |                          |      |     |      |  |      |     |              |  |      | (31.3 | )    |  |  |   |    |   |  |   |    |   |  | (6 | )%
|                                    |                          |      |      |      |  |      |      |              |  |      |       |      |  |  |    |    |   |  |    |    |   |  |    |   
|                                    | Total operating expenses |      | $    | 78.8 |  |      | $    | 150.1        |  |      | $     | 88.2 |  |  |    | 22 | % |  |    | 43 | % |  |    | 18 | %
|                                    |                          |      |      |      |  |      |      |              |  |      |       |      |  |  |    |    |   |  |    |    |   |  |    |   

Included in 2002 was a reduction in selling,
general and administrative expenses, or SG&A, resulting from
the effect of changes in foreign currency exchange rates of
approximately $5.2 million. The effect in 2003 was a
reduction of approximately $0.5 million, accounting for the
increase in SG&A from 2002 to 2003.

Excluding the effect of changes in foreign
currency exchange rates, SG&A decreased $2.4 million in
2003 compared to 2002 as a result of the restructuring actions
taken since 2001. These actions, which are discussed below in
Restructuring and Related Charges, were intended to
reduce infrastructure and personnel and to maintain the proper
relationship between operating expenses and revenue. These cost
saving initiatives are also the primary reason for the dollar
reductions in SG&A in 2002 as compared to 2001. In addition,
approximately $5.5 million of the decrease in SG&A in
2002 compared to 2001 is attributable to the exclusion of
Artesyn Solutions after its sale.

Research and development expenses totaled
$34.3 million, or 10% of sales, in both 2003 and 2002.
There were some reductions in research and development expenses
in 2003 as a result of the

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restructuring actions, but these amounts were
offset by additional expenses related to the increase in new
product introductions in the fourth quarter. While we have
reduced our research and development expenses and consolidated
engineering facilities over the last several years to maintain
an appropriate relationship with revenue, we believe a strong
commitment to invest in research and development activities is
vital to our ability to provide our customers with
technologically-capable, low-cost product alternatives. As a
result, we expect the level of research and development expenses
in 2004 to maintain its current relationship with revenue.


Restructuring and Related
Charges.Pursuant to our restructuring
plans, we recorded the following restructuring and related
charges (in millions):

|                                            |                             |      |     |      |  |      |      |      |  |   |     |      | 
|------------------------------------------- | --------------------------- | ---- | --- | ---- |  | ---- | ---- | ---- |  | - | --- | ---- | 
|                                            |                             | 2003 |     | 2002 |  | 2001
|                                            |                             |      |     |      |  |     
|Employee termination costs                  |                             | $    | 2.2 |      |  | $    | 9.9  |      |  | $ | 8.7 |     
|Liability for payback of development grants |                             |      |    |      |  |      | 2.5  |      |  |   |    |     
|Facility closures                           |                             |      | 3.4 |      |  |      | 14.9 |      |  |   | 7.2 |     
|                                            |                             |      |     |      |  |      |      |      |  |   |     |     
|                                            | Total restructuring charges |      | $   | 5.6  |  |      | $    | 27.3 |  |   | $   | 15.9 | 
|                                            |                             |      |     |      |  |      |      |      |  |   |     |     

The amounts recorded in 2003 were related to the
transfer of manufacturing functions to our China facility and
further consolidation of our business in Europe. The amount
recorded in 2002 included amounts related to the closure of our
Kindberg and Youghal manufacturing facilities. Although the
closures were not completed until 2003, the majority of the
expenses were recorded in 2002. During 2001, the charges reflect
the closure of our manufacturing facility in Broomfield,
Colorado and several engineering and administrative facilities
worldwide.

As part of ongoing restructuring efforts, we
expect to record total charges of approximately
$0.5 million in 2004, primarily related to costs that were
not yet incurred when the restructuring was initiated, such as
asset transfer costs and final amounts related to our
restructuring actions in Europe. For additional information on
our restructuring actions, please see Note 5 of our Consolidated
Financial Statements.

Amortization/ Impairment of
Goodwill.On December 29, 2001,
we adopted SFAS 142, Goodwill and Other Intangible
Assets. With the adoption of SFAS 142, goodwill is no
longer subject to amortization but is subject to an annual
impairment test. We have not recorded and will not record
amortization expense related to goodwill in any period after
adoption of SFAS 142.

Due to adverse business conditions in our end
markets, we performed impairment tests of goodwill in accordance
with SFAS No. 142 in the third quarter of 2002. The result
of these tests indicated an impairment existed and a goodwill
impairment loss was recognized in the Power Conversion segment
for $35.0 million and the Communications Products segment
for $16.9 million during the third quarter. The total
impairment charge of $51.9 million is included in operating
expenses in 2002.

Our annual assessment of the fair value of our
reporting units was performed in 2003 in accordance with SFAS
No. 142, and no additional impairment was recognized.

Gain on Sale of Artesyn Solutions.During December 2001, we sold our
repair and logistics business, Artesyn Solutions, Inc., to
Solectron Global Services, Inc. for $33.5 million. A
substantial portion of the net proceeds was used to pay down
outstanding debt. The gain on the transaction was
$31.3 million and was included as a line item offset in
operating expenses in 2001.

Loss on Debt Extinguishment.Losses on debt extinguishment were
$3.7 million in 2003 compared with $0.6 million in
2002. In conjunction with the placement of our 5.5% convertible
notes in 2003, a portion of the net proceeds from the placement
was used to pay off our then outstanding $50.0 million
obligation to Finestar. The losses on debt extinguishment were
comprised of the accretion of the remaining debt discount
related to the transactions with Finestar ($2.4 million)
along with the write-off of the remaining unamortized debt
issuance costs ($0.7 million). For

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additional information on the placement of
convertible debt completed in 2003 and the transaction with
Finestar International Limited, please see Note 7 of the
Consolidated Financial Statements.


In March 2003, we entered into a new asset-based
revolving credit facility with Fleet Capital Corporation, which
replaced our prior revolving credit facility. Loss on debt
extinguishment in 2003 also includes $0.6 million in
expense related to the write-off of unamortized debt issuance
costs in association with our previous credit agreement.

During the fourth quarter of 2002, we entered
into an agreement to amend the revolving credit facility in
place at that time. One of the results of this amendment was a
reduction in the overall availability/borrowing capacity under
the agreement. We recorded debt extinguishment expenses of
$0.6 million at the time related to the reduction in the
facilitys capacity.

Interest Expense,
net.Interest expense, net is detailed
as follows (in millions):

|                      |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |    |  |  |     |   
|--------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ----------- |  | ----------- | ---- | - |  |  | --- | -- |  |  | --- | --
|                      |  |      |      |      |  |      |      | 2003        |  | 2002       
|                      |  |      |      |      |  |      |      | Compared to |  | Compared to
|                      |  | 2003 |      | 2002 |  | 2001 |      | 2002        |  | 2001       
|                      |  |      |      |      |  |      |      |             |  |            
|Interest expense      |  | $    | 5.0  |      |  | $    | 7.6  |             |  | $           | 8.2  |   |  |  | (34 | )% |  |  | (7  | )%
|Less: Interest income |  |      | (0.5 | )    |  |      | (1.1 | )           |  |             | (0.9 | ) |  |  | (55 | )% |  |  | 22  | % 
|                      |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |    |  |  |     |   
|Net interest expense  |  | $    | 4.5  |      |  | $    | 6.5  |             |  | $           | 7.3  |   |  |  | (31 | )% |  |  | (11 | )%
|                      |  |      |      |      |  |      |      |             |  |             |      |   |  |  |     |    |  |  |     |   

We entered 2003 with substantially lower
borrowings on our revolving credit facility compared to the
beginning of 2002. During the first quarter of 2003, we replaced
our then existing revolving credit facility with a new,
$35.0 million, five-year revolving asset-based credit
facility with Fleet Capital Corporation. Using cash generated
from operations, the outstanding debt on our credit facility was
further reduced to zero at the end of 2003, compared to
$23.0 million at the end of 2002. The reduction in interest
expense was primarily the result of the reduced level of
borrowings.

As discussed above, the note previously
outstanding with Finestar was paid off in the third quarter of
2003. As a result of the placement of convertible notes in 2003,
the $50.0 million note outstanding with Finestar at 3% was
replaced with $90.0 million of notes at 5.5%. The
additional borrowings and the higher interest rate will result
in higher interest expense in 2004 compared to 2003.

Benefit for Income
Taxes.Below is a comparison of the
benefit for income tax and effective tax rate for 2003, 2002 and
2001 (in millions):

|                         |  |      |     |      |  |      |      |   |  |   |     |  
|------------------------ |  | ---- | --- | ---- |  | ---- | ---- | - |  | - | --- | -
|                         |  | 2003 |     | 2002 |  | 2001
|                         |  |      |     |      |  |     
|Benefit for income taxes |  | $    | 2.2 |      |  | $    | 18.8 |   |  | $ | 7.5 |  
|Effective tax rate       |  |      | 12  | %    |  |      | 15   | % |  |   | 19  | %

The difference in the 2003 and 2002 tax rates is
the result of the non-deductibility of goodwill written off and
losses in certain tax jurisdictions that require a valuation
allowance for the related deferred tax benefits. We record
deferred tax assets for tax benefits on losses. We continually
evaluate whether our deferred tax assets will be realized, and
record a valuation allowance when appropriate. If we continue to
experience losses or elect to cease operations in certain tax
jurisdictions, we may need to record additional valuation
allowances in the appropriate jurisdiction, and our effective
tax rate could change significantly.

The primary reasons for the difference between
the effective tax rates in 2002 compared with 2001 periods was
the non-deductibility of the majority of the goodwill impairment
charge recorded in 2002 along with the valuation allowance of
$3.1 million recorded in 2002 related to deferred tax
assets in Hungary.

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Net Loss.The net
loss recorded in each of the last three years is as follow (in
millions, except per share data):

|                                     |  |      |       |      |  |      |       |   |  |   |       |  
|------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                     |  | 2003 |       | 2002 |  | 2001
|                                     |  |      |       |      |  |     
|Net loss                             |  | $    | 15.6  |      |  | $    | 108.8 |   |  | $ | 31.8  |  
|Net loss per basic and diluted share |  | $    | (0.40 | )    |  | $    | (2.84 | ) |  | $ | (0.83 | )
|Basic and diluted shares outstanding |  |      | 38.7  |      |  |      | 38.4  |   |  |   | 38.2  |  

In comparison to 2002, the improvement in net
loss in 2003 resulted from the goodwill impairment loss, the
additional excess and obsolete inventory charges and the
significantly higher restructuring charges that were recorded in
2002. In addition, the higher gross profit as a result of
manufacturing cost savings contributed to the improvement.

The primary reasons for the increased loss in
2002 in comparison to 2001 were the goodwill impairment charge
recorded in 2002, the gain on the sale of Artesyn Solutions
recorded in 2001 and the reduction in revenue as discussed
above. There was no amortization expense recognized in 2002
related to goodwill, which partially offset the negative factors
discussed above.

Power Conversion

Results for the Power Conversion segment in 2003
compared with prior years are as follows (in millions):

|               |  |      |       |      |  |      |       |             |  |             |       |  |  |  |     |    |  |  |     |   
|-------------- |  | ---- | ----- | ---- |  | ---- | ----- | ----------- |  | ----------- | ----- |  |  |  | --- | -- |  |  | --- | --
|               |  |      |       |      |  |      |       | 2003        |  | 2002       
|               |  |      |       |      |  |      |       | Compared to |  | Compared to
|               |  | 2003 |       | 2002 |  | 2001 |       | 2002        |  | 2001       
|               |  |      |       |      |  |      |       |             |  |            
|Revenue        |  | $    | 314.4 |      |  | $    | 318.9 |             |  | $           | 392.4 |  |  |  | (1  | )% |  |  | (19 | )%
|Operating loss |  | $    | 15.8  |      |  | $    | 98.7  |             |  | $           | 60.9  |  |  |  | (84 | )% |  |  | 62  | % 

The decrease in revenue recorded in 2003 compared
to 2002 was primarily the result of a decrease in sales to our
server and storage customers somewhat offset by increases in
sales to distribution customers. The decline in server and
storage revenue reflected lower demand from the purchasers of
information technology and occurred primarily in the first half
of the year. During 2002 and 2003, we made additional
investments in our infrastructure designed to better service our
distribution customers. These investments consisted of expanding
our sales staff and distribution networks in the U.S. and
Europe, resulting in the growth in sales to distribution
customers.

During 2002, all of the markets serviced by our
Power Conversion segment eroded compared to 2001. The reduction
in end-user demand was the single most important factor in the
decline of the segments revenue in 2002 compared to 2001.

The primary reason for the reduction in the
operating loss in 2003 was the $35.0 million charge for
goodwill impairment recorded in 2002 along with the
restructuring charges recorded in 2002 in excess of the amount
recorded in 2003 ($20.8 million). The remainder of the
difference is attributable to the additional excess and obsolete
inventory charges recorded in 2002 ($15.0 million) and
costs savings resulting from the restructuring actions.

The goodwill impairment charge in 2002 is also
the primary reason for the increase in the operating loss in
2002 compared to 2001. The remainder of the difference is
attributable to the decrease in revenue ($6.8 million) and
an increase in restructuring charges ($1.5 million) offset
by amortization of goodwill recorded in 2001 ($2.0 million)
and the effect of cost savings initiatives.

23



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Communications Products

Results for the Communications Products segment
in 2003 compared with prior years are as follows (in millions):

|                        |  |      |      |      |  |      |       |             |  |             |      |   |  |  |     |   |  |  |      |   
|----------------------- |  | ---- | ---- | ---- |  | ---- | ----- | ----------- |  | ----------- | ---- | - |  |  | --- | - |  |  | ---- | --
|                        |  |      |      |      |  |      |       | 2003        |  | 2002       
|                        |  |      |      |      |  |      |       | Compared to |  | Compared to
|                        |  | 2003 |      | 2002 |  | 2001 |       | 2002        |  | 2001       
|                        |  |      |      |      |  |      |       |             |  |            
|Revenue                 |  | $    | 42.5 |      |  | $    | 31.9  |             |  | $           | 55.8 |   |  |  | 33  | % |  |  | (43  | )%
|Operating income (loss) |  | $    | 6.2  |      |  | $    | (21.9 | )           |  | $           | (4.9 | ) |  |  | 128 | % |  |  | (347 | )%

The increase in revenue in our Communications
Products segment in 2003 compared to 2002 is primarily the
result of increases in sales to our wireless and
telecommunications customers. The increase reflects the
introduction of new products and higher sales of existing
products as customers responded to improved end-user demand. The
decrease in revenue in 2002 compared to 2001 reflects the
decrease in demand in the wireless and telecommunications market
sectors resulting from the reduction in capital spending by
communications service providers.

The primary reason for the improvement in
operating income in 2003 compared to 2002 is the goodwill
impairment charge of $16.9 million recorded in 2002.
Increased revenue in 2003 compared to 2002 was a substantial
factor in the improvement (approximately $6.0 million),
with the remainder of the difference being the inventory charge
and restructuring expenses recorded in 2002.

The goodwill impairment charge is also the
primary difference between the operating loss recorded in 2002
in comparison to 2001, along with the effect of lower revenue
($10.8 million). These amounts were partially offset by the
amortization expense recorded in 2001 ($6.1 million) and
cost savings resulting from restructuring actions.

Liquidity and Capital Resources

The following table presents selected financial
statement information for each of the past three years (in
millions except statistical data):

|                                  |                                      |      |      |      |  |      |      |      |   |   |       |       |  
|--------------------------------- | ------------------------------------ | ---- | ---- | ---- |  | ---- | ---- | ---- | - | - | ----- | ----- | -
|                                  |                                      | 2003 |      | 2002 |  | 2001
|                                  |                                      |      |      |      |  |     
|Cash and cash equivalents         |                                      | $    | 94.2 |      |  | $    | 65.0 |      |   | $ | 54.1  |      
|Long-term debt and capital leases |                                      |      |     |      |  |      | 23.0 |      |   |   | 100.4 |      
|Convertible subordinated debt     |                                      |      | 90.0 |      |  |      | 46.5 |      |   |   |      |      
|                                  |                                      |      |      |      |  |      |      |      |   |   |       |      
|                                  | Cash net of debt                     |      | $    | 4.2  |  |      | $    | (4.5 | ) |   | $     | (46.3 | )
|                                  |                                      |      |      |      |  |      |      |      |   |   |       |      
|Working Capital Statistics:       |                                      |      |      |      |  |      |      |      |   |   |       |      
|                                  | Days of sales outstanding            |      |      | 48   |  |      |      | 47   |   |   |       | 60    |  
|                                  | Days of inventory on-hand            |      |      | 53   |  |      |      | 76   |   |   |       | 121   |  
|                                  | Days of accounts payable outstanding |      |      | 58   |  |      |      | 51   |   |   |       | 42    |  

The primary sources of cash currently available
to us are cash on hand and amounts available under our current
revolving credit facility. These amounts are available to
finance capital expenditures and payments of interest on our
convertible senior subordinated debt. Movements in our working
capital and cash flows from net income can be either sources or
uses of cash, depending on prevailing business conditions.

During 2003, our cash and equivalents increased
from $65.0 million at the end of 2002 to $94.2 million
at the end of 2003. The primary sources of cash were the
issuance of convertible senior subordinated notes in the third
quarter of 2003 along with reductions in inventory and increases
in accounts payable during the year. These amounts were offset
by the repayment of our note outstanding with Finestar and
amounts outstanding on our revolving credit facility, increases
in accounts receivable, capital expenditures and payments
associated with previous acquisitions.

24



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##### 



Cash Flows from Operating
Activities.During 2003, our cash
flows from operating activities served as a source of cash of
$24.2 million. An improvement in the performance of our
working capital accounts was the significant component of our
sources of cash from operations in 2003. We were able to reduce
our balances in inventory significantly while maintaining our
performance in accounts receivable and extending our terms in
accounts payable. Inventory decreased due to programs, such as
vendor managed inventory, put in place to reduce inventory
requirements.

Operating cash flows were impacted by
$15.5 million in payments related to restructuring actions
and $7.8 million in federal income tax refunds in 2003.

Over the past three years, we have significantly
improved our working capital performance as evidenced by the
reduction in days of sales outstanding and days of inventory
on-hand and the increase in days of accounts payable
outstanding. Looking forward, we anticipate only modest
improvement in our accounts receivable and accounts payable
performance, as we believe we are operating close to an optimal
level for our industry. We expect to continue to improve our
inventory performance through better demand management and
increased use of vendor-managed inventory.

Cash Flows from Investing
Activities.Cash flows from investing
activities reflect a net cash use of $10.6 million in 2003,
comprised primarily of capital expenditures ($7.1 million)
and deferred payments related to previous acquisitions. Capital
expenditures for the last two years have been below the level we
would normally require to maintain and improve our manufacturing
capabilities. The plant closures that occurred have provided us
with enough available equipment that we have been able to
maintain the necessary manufacturing capacity.

Trends in design are resulting in a higher number
of surface-mounted components in our products. These trends,
combined with the expectation of higher demand, are dictating an
increase in the number of SMT lines, automated test equipment
and other related production equipment we currently utilize. As
a result, our capital expenditures are expected to increase to
approximately $15-$20 million in 2004 compared to the
$7.1 million recorded in 2003.

In 2003, we made deferred or contingent payments
related to the acquisitions of Spider Software Limited and
AzCore Technologies, Inc. for approximately $4.3 million.
The remaining $0.7 million of contingent consideration for
the AzCore acquisition was paid in the first quarter of 2004.
All deferred or contingent obligations related to past
acquisitions have been satisfied. For additional information on
our acquisitions, please see Note 6 of the Consolidated
Financial Statements.

Cash Flows from Financing Activities.In 2003, cash flows from financing
activities were a source of cash of $12.4 million in 2003.
The primary source of cash was the issuance of
$90.0 million of convertible senior subordinated notes due
2010. The net proceeds from the issuance were partially offset
by the payoff of a $50 million convertible subordinated
note to Finestar and payoffs related to the two revolving credit
arrangements we had in place during 2003.

On August 13, 2003, we completed an initial
placement to qualified institutional investors of
$75.0 million of our 5.5% convertible senior subordinated
notes due 2010, and on August 27, 2003, we completed the
sale of an additional $15.0 million. Net proceeds from the
issuance of convertible senior subordinated notes in the third
quarter of 2003 were approximately $86.3 million. The
placement was completed in order to replace the convertible note
that had previously been issued to Finestar and to provide us
with additional long-term working capital. The note with
Finestar was to mature in 2007 and contained a provision that
allowed either party to redeem the note in January 2005. The new
convertible debt issuance extended the maturity date and removed
the possibility of redemption on the part of the holder. There
are no financial covenant requirements associated with the 5.5%
convertible senior subordinated notes. For additional
information on the terms of the notes, please see Note 7 of
the Consolidated Financial Statements.

On January 15, 2002, we received an
investment by Finestar, an entity controlled by Mr. Bruce
Cheng, founder and chairman of Delta Electronics, a leading
global power supply, electronic

25



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##### 



component and video display manufacturer and one
of our competitors. After the first closing of our August 2003
placement of 5.5% convertible senior subordinated notes due
2010, we fully paid the convertible subordinated note
outstanding with Finestar. Additionally, because the Finestar
note has been paid in full, the shares of our common stock
underlying the convertible note are no longer issuable upon
conversion or subject to the registration statement on
Form S-3 filed in connection with the Finestar transaction.


On March 28, 2003, we entered into a new
five-year, $35.0 million senior revolving credit facility
with Fleet Capital Corporation. The asset-based facility
replaced our prior senior revolving credit facility that was due
to expire in March 2004. For additional information on the terms
of our new asset-based revolver, please see Note 8 of the
Consolidated Financial Statements. On the day the agreement was
completed, we used $19.0 million of cash on hand to pay off
the amounts outstanding under our previous credit facility. We
then borrowed $10.5 million on the new facility, resulting
in a net reduction of total outstanding borrowings of
$8.5 million. While the total availability under the
facility is limited to $35.0 million, the amount available
to be borrowed is based on our level of qualifying domestic
accounts receivable and inventory, which is subject to changing
business conditions. Generally, as our level of qualifying
accounts receivable and inventory increases, our availability
increases up to the prescribed limit. As of the end of the year,
our outstanding balance on the revolving credit facility was
zero, and our availability was $21.8 million.

In addition to other affirmative and negative
covenants customary for asset-based credit facilities, we are
also subject to an EBITDA covenant that is triggered when the
amount available to be borrowed plus cash deposited with Fleet
falls below $20.0 million. As of the end of the year, the
availability and the cash deposited with Fleet were above the
prescribed limit, and we were not subject to the additional
covenant. Up to $5.0 million of the facilitys
capacity can be used for letters of credit.

Our sources of cash are the cash we currently
have on hand, the availability we maintain on our asset-based
credit facility and expected cash generated from net income. We
are expecting to generate cash from net income in 2004, but if
our projections are significantly below our expectations, we
believe that our other sources of cash are sufficient to cover
our operating expenses, capital expenditures, restructuring
requirements and interest payments for the next twelve months.
If we are not able to generate cash from operations for a
sustained period of time, we would, after our cash on hand and
available line of credit were depleted, need to identify
additional sources of cash. These sources could include
additional issuances of debt or equity, sales of equipment or
portions of the business.

From a long-term perspective, our sources of cash
are expected to remain the same. We are dependent on generating
cash from net income as our primary long-term source of cash. We
would be required to identify other long-term sources of cash if
we were not able to generate cash from net income or if we
decided to take on a strategic initiative, such as an
acquisition, which would require cash. We continually evaluate
options with respect to additional financing, including the sale
of debt or equity instruments and portions of the business. Any
such financing or sale transactions could have an adverse effect
on our stock price and could dilute our shareholders
ownership interest in our company.

26



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##### 



The following is a summary of future payments
under contractual obligations as of December 26, 2003 (in
millions):

|                                      |  |                        |       |         |  |           |      |           |  |           |      |          |  |   |     |  |  |   |     |  |  |   |       | 
|------------------------------------- |  | ---------------------- | ----- | ------- |  | --------- | ---- | --------- |  | --------- | ---- | -------- |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                                      |  |                       
|                                      |  | Payments Due by Period
|                                      |  |                       
|                                      |  | Total                  |       | <1 year |  | 1-2 years |      | 2-3 years |  | 4-5 years |      | >5 years
|                                      |  |                        |       |         |  |           |      |           |  |           |      |         
|Convertible senior subordinated notes |  | $                      | 90.0  |         |  |           |     |           |  |           |     |          |  |   |    |  |  |   |    |  |  | $ | 90.0  | 
|Asset-based revolving credit facility |  |                        |      |         |  |           |     |           |  |           |     |          |  |   |    |  |  |   |    |  |  |   |      | 
|Interest payments on convertible debt |  |                        | 34.8  |         |  |           | 5.0  |           |  |           | 5.0  |          |  |   | 5.0 |  |  |   | 5.0 |  |  |   | 14.8  | 
|Operating leases                      |  |                        | 22.4  |         |  |           | 9.5  |           |  |           | 7.3  |          |  |   | 1.9 |  |  |   | 1.0 |  |  |   | 2.6   | 
|                                      |  |                        |       |         |  |           |      |           |  |           |      |          |  |   |     |  |  |   |     |  |  |   |       | 
|Total contractual cash obligations    |  | $                      | 147.2 |         |  | $         | 14.5 |           |  | $         | 12.3 |          |  | $ | 6.9 |  |  | $ | 6.0 |  |  | $ | 107.4 | 
|                                      |  |                        |       |         |  |           |      |           |  |           |      |          |  |   |     |  |  |   |     |  |  |   |       | 

|                                      |  |                                 |      |         |  |           |   |           |  |           |   |          |  |  |   |  |  |  |   |  |  |   |      | 
|------------------------------------- |  | ------------------------------- | ---- | ------- |  | --------- | - | --------- |  | --------- | - | -------- |  |  | - |  |  |  | - |  |  | - | ---- | 
|                                      |  |                                
|                                      |  | Commitment Expiration by Period
|                                      |  |                                
|                                      |  | Total                           |      | <1 year |  | 1-2 years |   | 2-3 years |  | 4-5 years |   | >5 years
|                                      |  |                                 |      |         |  |           |   |           |  |           |   |         
|Asset-based revolving credit facility |  | $                               | 35.0 |         |  |           |  |           |  |           |  |          |  |  |  |  |  |  |  |  |  | $ | 35.0 | 
|                                      |  |                                 |      |         |  |           |   |           |  |           |   |          |  |  |   |  |  |  |   |  |  |   |      | 

Risk Factors That May Affect Future
Results

The following discussion should be read in
conjunction with the Consolidated Financial Statements and
related notes. With the exception of historical information, the
matters discussed below may include forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involves risks and
uncertainties. Forward-looking statements typically use words or
phrases such as estimate, plans,
projects, anticipates,
continuing, ongoing,
expects, believes, or words of similar
import. We caution readers that a number of important factors,
as well as factors discussed in our other reports filed with the
Securities and Exchange Commission, could affect our actual
results and cause them to differ materially from those expressed
in the forward-looking statements. Forward-looking statements
included in this form 10-K are made only as of the date hereof,
based on information available as of the date hereof, and
subject to applicable law to the contrary, we assume no
obligation to update any forward looking-statements.



| |                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Economic and business conditions in the
    communications industry have caused us to incur significant
    losses in recent years, and our losses will continue if demand
    for communications infrastructure does not
    improve.

We have incurred significant losses in 2001, 2002
and 2003 due to a drop in demand for our products resulting from
a reduction in spending on computing and communications
infrastructure during that time. While we are seeing a reversal
of this trend which is reflected in improvements in revenue in
the second half of 2003, we had net losses of
$15.6 million, $108.8 million (which includes non-cash
after-tax write-offs of $49.4 million in goodwill
impairment charges and $11.3 million in additional excess
and obsolete inventory charges) and $31.8 million for 2003,
2002 and 2001, respectively. Growth in the communications
industry has been driven primarily by the expansion of the
Internet, broadband and wireless networks. During the past three
years, these applications have suffered a significant downturn.
Our future revenue growth depends in large part on the resumed
growth of these services as widely used media for commerce and
communication. In addition, unless we take steps to further
reduce our cost structure, we do not anticipate a significant
increase in profitability without revenue growth. If demand for
our products does not improve, we could continue to experience
operating losses.

27



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| |  |                                                                                                                                                                                                                
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our future profitability depends on our
    ability to successfully market our products in a volatile,
    competitive industry characterized by rapidly changing prices,
    technologies and customer demand.

The markets for our products are characterized by
rapidly changing technologies, changing customer demands,
evolving industry standards, frequent new product introductions
and, in some cases, short product life cycles. The development
of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation and
investment as well as an accurate anticipation of technological
and market trends. To respond to the needs of our customers in
the communications industry, we must continuously develop new
and more advanced products at lower prices. We are making
significant investments in next generation technologies but
there can be no assurance that these investments will lead to
additional revenue and profitability. Our inability to properly
assess developments in the communications industry or to
anticipate the needs of our customers could cause us to lose
business with our current customers and prevent us from
obtaining new customers.



| |  |                                                                     
| |  | --------------------------------------------------------------------
| |  | Price erosion could have a material effect
    on our profitability.

We operate in an industry where quality,
reliability, stability, product capability and other factors
influence our customers decisions to purchase our
products. The price of our products is also a factor, and it
could become a more important factor the more competitive our
industry becomes. The competitive nature of our industry could
result in price reductions, reduced profit margins and loss of
market share, each of which would adversely affect our business,
operating results and financial condition. Our strategies to
manage the competition include, but are not limited to,
maintaining an appropriate level of investment in research and
development and sustaining and expanding relationships with our
customers in the high-growth sectors of our industry; however,
there can be no assurance that such strategies will be effective.



| |  |                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------
| |  | We face risks by having most of our
    manufacturing capacity concentrated in foreign
    locations

In 2003, approximately 88% of our total sales
were from products manufactured in China and Europe. The closure
of our facilities in Austria and Ireland in 2003 has further
concentrated our manufacturing capacity of our Power Conversion
segment to our low-cost facilities in China and Hungary. We
would expect the percentage of products sold that were
manufactured in foreign locations to be in excess of 90% of our
total sales in 2004. The cost structure of these facilities and
its relationship to our customers expectations for the
price of our products makes our future success dependent on the
ability to efficiently utilize our foreign manufacturing
locations. International operations are subject to inherent
risks, including unexpected changes in regulatory requirements
and tariffs, interruptions in air or sea transportation,
political or economic changes, difficulties in staffing and
managing foreign operations, foreign currency exchange rates and
potentially adverse tax consequences, any or all of which could
adversely affect our ability to manufacture our products and
deliver those products to our customers.



| |  |                                                                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We rely on significant relationships with a
    small number of customers and the loss of any of those customers
    could adversely affect our revenue and operating
    results.

Our ten largest customers accounted for 71% of
our total sales for the 2003 fiscal year, with sales to
Hewlett-Packard, Dell Computer and Sun Microsystems accounting
for approximately 15%, 11% and 10% of our total 2003 sales,
respectively. While we are designed into and derive revenue from
several distinct products with each customer, decisions by a
small number of our customers to defer their purchasing
decisions or to purchase products elsewhere could have a
material adverse effect on our business, operating results and
financial condition.

In addition, if we were to experience an
unanticipated catastrophic quality issue (i.e., a product or
design failure) with one of our customers (especially one of our
three largest customers) that threatened our relationship with
that customer, the competitive nature of our industry could
allow that customer to terminate its relationship with us and
move its business to one of our competitors.

28



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Although we are designed in to many
long-term customer programs enabling us to be included in our
customers new products over a product lifecycle,
significant parts of our business depend primarily on continued
relationships with our existing customers. If one or more of
such relationships are terminated for any reason, or
significantly reduced, it could significantly reduce our total
sales, thereby greatly impacting our future operating results
and profitability.




| |  |                                                                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | If demand for our products were to
    increase, we could face production capacity constraints very
    quickly due to recent restructuring actions.

During the recent decrease in demand, we closed
manufacturing facilities in Broomfield, Colorado; Kindberg,
Austria; and Youghal, Ireland and moved production from these
plants to our lower-cost facilities in Tatabanya, Hungary and
Zhong Shan, China. Our current capabilities are in line with
what we expect to be required to produce over the near term. If
demand were to increase from our expectations, we would be
forced to add additional production capacity on very short
notice. We began to see a turnaround in demand in the latter
half of 2003. If our capacity constraints keep us from
fulfilling customers orders, it could have a material
adverse effect on our results from operations.



| |  |                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidating our manufacturing capacity
    into lower cost facilities could result in production delays and
    quality issues.

The decrease in demand experienced by our company
and our industry over the past few years led to our decision to
close several manufacturing and engineering facilities and move
the production of a number of products to lower-cost facilities.
Although the closures and transfers have been completed,
transition issues that normally occur when a new product goes
into production at a new location may still result in production
delays or quality issues. Any problems associated with delays of
shipments to customers, cancellations of delayed shipments,
diversion of management attention, increases in inventory
levels, increases in quality issues, increases in warranty
returns or an inability to achieve anticipated manufacturing
cost reductions could result in a material adverse effect on our
business, operating results and financial condition.



| |  |                                                                                 
| |  | --------------------------------------------------------------------------------
| |  | We face risks associated with the sale of
    our products in foreign locations.

International sales have been, and are expected
to continue to be, an important component of our total sales. In
2003, international sales represented 37% of our total sales.
Because our customers do business in international locations,
our future success is dependent on our continued growth and our
ability to administer our sales operations in foreign markets.
The success and profitability of our international operations is
subject to inherent risks, including unexpected changes in
regulatory requirements and tariffs, increased import duties,
interruptions in air or sea transportation, political or
economic changes, difficulties in managing foreign operations,
longer payment cycles, problems in collecting accounts
receivable, foreign currency exchange rates and potentially
adverse tax consequences, any or all of which could adversely
affect our operations.



| |  |                                                                                            
| |  | -------------------------------------------------------------------------------------------
| |  | Our future profitability may be adversely
    affected by a disruption in our supply chain.

As a result of the custom nature of certain of
our manufactured products, components used in the manufacture of
these products are currently obtained from a limited number of
suppliers, and a small percentage of components are purchased
from a single vendor. A change in suppliers, which could take
several months to properly transition, could cause a delay in
manufacturing, additional manufacturing costs, and a possible
loss of sales that could adversely affect our future operating
results and financial position.



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | With an asset-based credit facility, we
    face risks associated with fluctuating credit
    availability.

The amount available for borrowing under our
senior credit facility is calculated as a percentage of our
domestic accounts receivable and inventory that meet certain
criteria as set forth in the credit

29



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##### 



agreement, minus reserves as determined by our
lender. Our lender maintains the right to change the advance
rates and eligibility criteria for our domestic accounts
receivable and inventory and the discretion to change or
institute new reserves against our availability. Accordingly,
the amount available for borrowing under our senior credit
facility may be reduced due to the reduction in the amount of
our eligible assets resulting from changing market conditions,
and the application of or changes to eligibility criteria, as
well as the reduction of advance rates and/or the increase or
change in reserve amounts, which may be imposed at the
discretion of our lender. These factors could have the result of
reducing the amount we may borrow under the facility at a time
when we have a need to borrow additional amounts or requiring
repayments under the facility at a time when we do not have
adequate cash flow to make such repayments or when such
repayments may not be in our best interest due to the economic
climate and/or our financial condition at that time. These
consequences could negatively impact our liquidity and such
impact could be material. As of December 26, 2003, however,
there were no amounts outstanding on our asset-based revolving
credit facility.




| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | The provisions of our credit agreement
    could affect our ability to enter into certain
    transactions.

On March 28, 2003, we entered into a
five-year, $35.0 million credit facility with Fleet Capital
Corporation. The asset-based facility replaced our prior
revolving credit facility that was due to expire in March 2004.
Our credit agreement may restrict our ability to enter into
certain corporate transactions (including, among other things,
the disposition of assets, making certain capital expenditures
and forming or acquiring subsidiaries) unless we obtain the
prior written consent of Fleet Capital Corporation. Because we
cannot guarantee that Fleet Capital Corporation will, in all
circumstances, provide consent for the specific purposes for
which we intend, our ability to enter into certain corporate
transactions may be prohibited or delayed.



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Market consolidation could create companies
    that are larger and have greater resources than
    us.

Our principal competitors include Acbel Polytech
(Taiwan), Delta Electronics (Taiwan and Thailand), Emerson
Electric, Invensys (UK), Lite-On (Taiwan), Power-One, and Tyco
International. If our competitors consolidate, they would likely
create entities with increased market share, customer bases,
proprietary technology, marketing expertise and sales forces and
would likely have increased purchasing leverage for acquiring
raw materials. Such a development may create stronger
competitors, which would likely adversely affect our ability to
compete in the markets we serve.



| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | We face, and might in the future face,
    intellectual property infringement claims that might be costly
    to resolve.

We have from time to time received, and may in
the future receive, communications from third parties asserting
that our products or technology infringe on a third partys
patent or other intellectual property rights. Such claims have
resulted in litigation in the past, and could result in
litigation in the future. If we do not prevail in any such
litigation, our business may be adversely affected, depending on
the technology at issue. In addition, our industry is
characterized by uncertain and conflicting intellectual property
claims and, in some instances, vigorous protection and pursuit
of intellectual property rights or positions, which have on
occasion resulted in protracted and expensive litigation. We
cannot make the assurance that intellectual property claims will
not be made against us in the future or that we will not be
prohibited from using our technologies subject to any such
claims or that we will not be required to obtain licenses and
make corresponding royalty payments. In addition, the necessary
management attention to, and legal costs associated with,
litigation could have a material adverse effect on our business,
operating results and financial condition.

30



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##### 



Currently, we are a defendant in one such patent
infringement suit with VLT, Inc. For additional information on
the VLT lawsuit, please refer to Item 3  Legal
Proceedings and Note 10 of the Consolidated Financial
Statements.



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our future success could depend on the
    protection of our intellectual property; costs associated with
    enforcing our intellectual property rights could adversely
    affect our operating results.

We generally rely on patents and trade secret
laws to establish and maintain proprietary rights in some of our
technology and products, and such protections may become more
important in our industry. While we have been issued a number of
patents and other patent applications are currently pending,
there can be no assurance that any of the patents will not be
challenged, invalidated or circumvented, or that any rights
granted under these patents will, in fact, provide us with
competitive advantages. In addition, there can be no assurance
that patents will be issued from pending applications, or that
claims on future patents will be broad enough to protect our
technology. Also, the laws of some foreign countries may not
protect our proprietary rights to the same extent as the laws of
the United States. Litigation may be necessary to enforce our
patents and other intellectual property rights, to protect our
trade secrets, to determine the validity of and scope of the
proprietary rights of others or to defend against claims of
infringement or invalidity. Litigation could result in
substantial costs and diversion of resources and could have a
significant adverse effect on our operating results.



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Our future profitability may be adversely
    affected by a change in governmental regulation.

Our operations are subject to laws, regulations,
government policies and product certification requirements
worldwide. Changes in such laws, regulations, policies or
requirements could result in the need to modify products and
could affect the demand for our products, which may involve
substantial costs or delays in sales and could have an adverse
effect on our future operating results.



| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | We rely on certain key personnel and a loss
    of such personnel could adversely affect our
    business.

If we lose one or more members of senior
management, or if we cannot attract and retain qualified
management or technical personnel, our operating results could
be adversely affected. Our capacity to develop and implement new
technology depends on our ability to employ personnel with
highly technical skills. Competition for such qualified
technical personnel is intense due to the relatively limited
number of engineers available.



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Increased leverage as a result of the
    issuance of our convertible debt may harm our financial
    condition and results of operations.

At December 26, 2003, we had
$90 million of outstanding debt as reflected in our
consolidated balance sheet included in this filing. We may incur
additional indebtedness in the future and the notes do not
restrict our future issuance of indebtedness. Our level of
indebtedness will have several important effects on our future
operations, including, without limitation:



| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a portion of our cash flow from operations will
    be dedicated to the payment of interest required with respect to
    outstanding indebtedness;                                                         
|
| |  | increases in our outstanding indebtedness and
    leverage will increase our vulnerability to adverse changes in
    general economic and industry conditions, as well as to
    competitive pressure; and 
|
| |  | depending on the levels of our outstanding debt,
    our ability to obtain additional financing for working capital,
    capital expenditures, and general corporate and other purposes
    may be limited.

31



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##### 



Our ability to make payments of principal and
interest on our indebtedness depends upon our future
performance, which will be subject to the success of the
marketing of our products, general economic conditions, industry
cycles and financial, business and other factors affecting our
operations, many of which are beyond our control. If we are not
able to generate sufficient cash flow from operations in the
future to service our debt, we may be required, among other
things:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | to seek additional financing in the debt or
    equity markets;                              
|
| |  | to refinance or restructure all or a portion of
    our indebtedness, including the notes; or
|
| |  | to sell selected assets.                                                                     

Such measures might not be sufficient to enable
us to service our debt. In addition, any such financing,
refinancing or sale of assets might not be available on
economically favorable terms.



| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | We may not have sufficient funds to
    repurchase our convertible notes upon a change of
    control.

Our convertible notes issued during 2003 include
a provision that the note holders have the right to tender the
notes and request that the notes be repurchased if a
change of control occurs. Should a change of
control occur, no assurance can be given that we will have
sufficient funds available to purchase notes that are tendered
for repurchase or that we will be able to arrange financing on
favorable terms. A failure to repurchase the tendered notes
constitutes an event of default under the indenture.



| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our Board of Directors ability to
    issue preferred shares could deter a change in control that
    could be profitable to our shareholders.

Pursuant to our Certificate of Incorporation, as
amended, our Board of Directors has the authority to issue up to
1,000,000 shares of preferred stock, of which 451,376 have been
designated as series A Junior Participating Preferred Stock
in connection with our poison pill, and to establish
the preferences and rights of any such shares of preferred stock
issued. The issuance of the preferred shares can have the effect
of creating preferential dividends and/or other rights and/or
delaying, making more difficult, or preventing a change of
control of our Company, even if a change of control is in the
shareholders interest.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | We have a poison pill that
    could deter a potentially profitable take-over by a third
    party.

Under our Companys rights agreement, rights
are issued along with each of our shares of common stock. A
holder of such rights can purchase from us, under specified
conditions, a portion of a preferred share, or receive common
stock of our Company, or receive common stock of the entity
acquiring us having a value equal to twice the exercise price of
the right. The exercise price of the right is $95.00. This
arrangement is often called a poison pill. Our
poison pill may have the effect of delaying or preventing a
change of control of our Company, even if a change of control is
in the shareholders interest.



| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | There are certain provisions of Florida law
    that could limit acquisitions and changes of
    control.

The Florida 1989 Business Corporation Act, as
amended, contains a section entitled control-share
acquisitions, which, in certain circumstances, eliminates
the voting rights of shares acquired in quantities so as to
constitute control shares, as defined under Florida
law. Florida law may also restrict business combinations between
our Company and 10% owners of our common stock unless approved
by two-thirds of the voting shares of disinterested
shareholders or by a majority of our Companys
disinterested directors. These provisions may also
have the effect of inhibiting a third-party from making an
acquisition proposal for our Company or of delaying, deferring
or preventing a

32



---



##### 



change of control of our Company under
circumstances that otherwise could provide the holders of our
common stock with the opportunity to realize a premium over the
then current price.




| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our former independent public accountant,
    Arthur Andersen LLP, has been found guilty of federal
    obstruction of justice charges and involved parties are unlikely
    to be able to exercise effective remedies against such firm in
    any legal action.

Our former independent public accountant, Arthur
Andersen LLP, provided us with auditing services for prior
fiscal periods through December 28, 2001, including issuing
an audit report on our fiscal 2001 consolidated financial
statements included in this filing. On June 15, 2002, a
jury in Houston, Texas found Arthur Andersen LLP guilty of a
Federal obstruction of justice charge arising from the Federal
Governments investigation of Enron Corp. On
August 31, 2002, Arthur Andersen LLP ceased practicing
before the Commission. Arthur Andersen LLP has not reissued its
audit report with respect to our audited consolidated financial
statements, has not consented to the inclusion of its audit
report and has not performed any procedures in connection with
this filing. As a result, there may not be an effective remedy
against Arthur Andersen LLP in connection with a material
misstatement or omission with respect to our audited
consolidated financial statements that are included in this
report or any other filing we may make with the Commission,
including, with respect to any offering registered under the
Securities Act or any claim under Section 11 of the
Securities Act. In addition, even if such a claim could be
asserted, as a result of its conviction and other lawsuits,
Arthur Andersen LLP may fail or otherwise have insufficient
assets to satisfy claims made by investors or by us that might
arise under Federal securities laws or otherwise relating to any
alleged material misstatement or omissions with respect to our
audited consolidated financial statements.

In addition, in connection with any future
capital market transaction in which we are required to include
financial statements that were audited by Arthur Andersen LLP,
as a result of the foregoing, investors may elect not to
participate in any such offering or, in the alternate, may
require us to obtain a new audit of previously audited financial
statements. Consequently, our financing costs may increase or we
may miss a capital market opportunity.



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our shareholders will be diluted if we
    issue shares subject to options, warrants, convertible notes or
    payment of matching contributions under our 401(k)
    plan.

As of December 26, 2003, we had reserved the
following shares of our common stock for issuance:



| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 1,550,000 shares issuable upon exercise of
    outstanding warrants held by Finestar International, which are
    subject to anti-dilution provision that provide for adjustments
    to the exercise price of the warrants for issuances of
    additional securities below certain prices;
|
| |  | 6,931,000 shares issuable pursuant to stock
    options outstanding;                                                                                                                                                                                                                        
|
| |  | 654,000 shares available for future grant under
    the Companys stock option plans;                                                                                                                                                                                                       
|
| |  | 11,161,000 shares issuable upon conversion of
    5.5% Convertible Senior Subordinated notes issued in August 2003.                                                                                                                                                                         
|
| |  | 704,000 shares for the purpose of making matching
    contributions under our 401(k) plan                                                                                                                                                                                                   



|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure
    About Market Risk

We are exposed to the impact of interest rate
changes and foreign currency fluctuations. In the normal course
of business, we employ established policies and procedures to
manage our exposure to changes in interest rates and
fluctuations in the value of foreign currencies using a variety
of derivative financial instruments. In the past, we have
managed our interest rate risk on variable rate debt instruments
through the use of interest rate swaps, pursuant to which we

33



---



##### 



exchange our floating rate interest obligations
for fixed rates. The fixing of the interest rates offsets our
exposure to the uncertainty of floating interest rates during
the term of the debt.


We have significant assets and operations in
Europe and Asia and, as a result, our financial performance
could be affected by significant fluctuations in foreign
exchange rates. To mitigate potential adverse trends, our
operating strategy takes into account changes in exchange rates
over time. Accordingly, in the past, we have entered into
various forward contracts that change in value as foreign
exchange rates change to protect the value of our existing
foreign currency assets, liabilities, commitments and
anticipated foreign currency revenues. The principal currency
hedged was the Euro.

It is our policy to enter into foreign currency
and interest rate transactions only to the extent considered
necessary to meet the objectives as stated above. We do not
enter into foreign currency or interest rate transactions for
speculative purposes. Gains or losses that result from changes
in foreign currency rates are recorded at the time they are
incurred. These gains or losses have not been material in any
recent periods. We currently have no hedging instruments
outstanding.

34



---



##### 





|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

Board of Directors

Artesyn Technologies, Inc.


We have audited the accompanying consolidated
balance sheets of Artesyn Technologies, Inc. as of
December 26, 2003 and December 27, 2002, and the
related consolidated statements of operations,
shareholders equity and comprehensive loss, and cash flows
for the fiscal years ended December 26, 2003 and
December 27, 2002. Our audits also included the financial
statement schedule for the years ended December 26, 2003
and December 27, 2002 listed in the Index at
Item 15(a). These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits. The financial
statements and schedule of Artesyn Technologies, Inc. for the
fiscal year ended December 28, 2001 were audited by other
auditors who have ceased operations and whose report dated
January 21, 2002 expressed an unqualified opinion on those
statements and schedule.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
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 2003 and 2002 financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of Artesyn
Technologies, Inc. at December 26, 2003 and
December 27, 2002 and the consolidated results of its
operations and its cash flows for the fiscal years ended
December 26, 2003 and December 27, 2002, in conformity
with accounting principles generally accepted in the United
States. Also, in our opinion, the 2003 and 2002 financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 17 to the consolidated
financial statements, effective December 29, 2001, the
Company changed its method of accounting for goodwill and
certain intangible assets as a result of adopting Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets.

As discussed above, the financial statements of
Artesyn Technologies, Inc. for the fiscal year ended
December 28, 2001 were audited by other auditors who have
ceased operations. As described in Note 17, these financial
statements have been revised to include the transitional
disclosures required by Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets, which was adopted by the Company as of
December 29, 2001. Our audit procedures with respect to the
disclosures in Note 17 with respect to 2001 included
(a) agreeing the previously reported net loss to the
previously issued financial statements and the adjustments to
reported net loss representing amortization expense recognized
in that period related to goodwill to the previously issued
financial statements and the Companys underlying records
obtained from management, and (b) testing the mathematical
accuracy of the reconciliation of adjusted net loss to reported
net loss, and the related loss per share amounts. In our
opinion, the disclosures for 2001 in Note 17 are
appropriate. However, we were not engaged to audit, review, or
apply any procedures to the 2001 financial statements or
schedule of the Company other than with respect to such
disclosures and, accordingly, we do not express an opinion or
any other form of assurance on the 2001 financial statements or
schedule taken as a whole.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

West Palm Beach, Florida

January 26, 2004


35



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To Artesyn Technologies, Inc.:

We have audited the accompanying consolidated
statements of financial condition of Artesyn Technologies, Inc.
(a Florida corporation) and subsidiaries as of December 28,
2001 and December 29, 2000, and the related consolidated
statements of operations, shareholders equity and
comprehensive income (loss) and cash flows for each of the three
fiscal years in the period ended December 28, 2001. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
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 Artesyn Technologies, Inc.
and subsidiaries as of December 28, 2001 and
December 29, 2000, and the results of their operations and
their cash flows for each of the three fiscal years in the
period ended December 28, 2001 in conformity with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Fort Lauderdale,

Florida, January 21, 2002.


This is a copy of the audit report previously
issued by Arthur Andersen LLP in connection with Artesyns
Annual Report on Form 10-K for the year ended
December 28, 2001. This audit report has not been re-issued
by Arthur Andersen LLP in connection with this filing on
Form 10-K.

We will not be able to obtain the written consent
of Arthur Andersen LLP as required by Section 7 of the
Securities Act of 1933 for any registration statement or
periodic report we may file in the future. Accordingly,
investors will not be able to sue Arthur Andersen LLP pursuant
to section 11(a)(4) of the Securities Act with respect to any
such filings and, therefore, ultimate recovery from Arthur
Andersen LLP may also be limited as a result of Arthur Andersen
LLPs financial condition or other matters resulting from
the various civil and criminal lawsuits against that firm.

36



---



##### 



CONSOLIDATED BALANCE SHEETS

|                                         |                                                                                                                                                   |                              |         |              |         |   |         |         |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                                         |                                                                                                                                                   | December 26,                 |         | December 27,
|                                         |                                                                                                                                                   | 2003                         |         | 2002        
|                                         |                                                                                                                                                   |                              |         |             
|                                         |                                                                                                                                                   |                             
|                                         |                                                                                                                                                   | (Amounts in thousands except
|                                         |                                                                                                                                                   | share data)                 
|ASSETS                                  
|Current Assets                           |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         | Cash and cash equivalents                                                                                                                         |                              | $       | 94,215       |         |   | $       | 65,001  |        
|                                         | Accounts receivable, net of allowances of $2,831
    in 2003 and $3,121 in 2002                                                                   |                              |         | 54,196       |         |   |         | 44,235  |        
|                                         | Inventories                                                                                                                                       |                              |         | 44,047       |         |   |         | 55,588  |        
|                                         | Prepaid expenses and other current assets                                                                                                         |                              |         | 2,753        |         |   |         | 1,926   |        
|                                         | Deferred income taxes                                                                                                                             |                              |         | 11,526       |         |   |         | 16,234  |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total current assets         |         |              | 206,737 |   |         |         | 182,984 | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|Property, Plant & Equipment, Net         |                                                                                                                                                   |                              | 64,210  |              |         |   | 78,631  |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|Other Assets                             |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         | Goodwill                                                                                                                                          |                              |         | 20,806       |         |   |         | 18,676  |        
|                                         | Deferred income taxes                                                                                                                             |                              |         | 19,211       |         |   |         | 18,803  |        
|                                         | Other assets                                                                                                                                      |                              |         | 5,712        |         |   |         | 4,493   |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total other assets           |         |              | 45,729  |   |         |         | 41,972  | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | $                            | 316,676 |              |         | $ | 303,587 |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|Current Liabilities                      |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         | Accounts payable                                                                                                                                  |                              | $       | 47,994       |         |   | $       | 37,451  |        
|                                         | Accrued and other current liabilities                                                                                                             |                              |         | 49,224       |         |   |         | 56,508  |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total current liabilities    |         |              | 97,218  |   |         |         | 93,959  | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|Long-Term Liabilities                    |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         | Long-term debt and capital lease obligations                                                                                                      |                              |         |             |         |   |         | 23,004  |        
|                                         | Convertible subordinated debt                                                                                                                     |                              |         | 90,000       |         |   |         | 46,517  |        
|                                         | Deferred income taxes                                                                                                                             |                              |         | 5,693        |         |   |         | 6,460   |        
|                                         | Other long-term liabilities                                                                                                                       |                              |         | 9,728        |         |   |         | 10,201  |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total long-term liabilities  |         |              | 105,421 |   |         |         | 86,182  | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total liabilities            |         |              | 202,639 |   |         |         | 180,141 | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|Commitments and Contingencies            |                                                                                                                                                   |                              |         |              |         |   |         |        
|Shareholders Equity                     |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         | Preferred stock, par value $0.01; 1,000,000
    shares authorized; none issued or outstanding                                                     |                              |         |             |         |   |         |        |        
|                                         | Common stock, par value $0.01; 80,000,000 shares
    authorized; 38,755,365 shares issued and outstanding in 2003
    (38,389,065 shares in 2002) |                              |         | 387          |         |   |         | 384     |        
|                                         | Additional paid-in capital                                                                                                                        |                              |         | 129,169      |         |   |         | 127,887 |        
|                                         | Retained earnings (accumulated deficit)                                                                                                           |                              |         | (8,041       | )       |   |         | 7,581   |        
|                                         | Accumulated other comprehensive loss                                                                                                              |                              |         | (7,478       | )       |   |         | (12,406 | )      
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | Total shareholders equity   |         |              | 114,037 |   |         |         | 123,446 | 
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        
|                                         |                                                                                                                                                   | $                            | 316,676 |              |         | $ | 303,587 |        
|                                         |                                                                                                                                                   |                              |         |              |         |   |         |        

The accompanying notes are an integral part of
these consolidated financial statements.

37



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##### 



CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |         |  
|-------------------------------------------------------------------- | ----------------------------------- | -------------------------------------------- | ------- | ------------ | - | ------------ | -------- | ------ | - | - | ------- | ------- | -
|                                                                     |                                     |                                             
|                                                                     |                                     | For the Fiscal Years Ended                  
|                                                                     |                                     |                                             
|                                                                     |                                     | December 26,                                 |         | December 27, |   | December 28,
|                                                                     |                                     | 2003                                         |         | 2002         |   | 2001        
|                                                                     |                                     |                                              |         |              |   |             
|                                                                     |                                     |                                             
|                                                                     |                                     | (Amounts in thousands except per share data)
|Sales                                                                |                                     | $                                            | 356,871 |              |   | $            | 350,829  |        |   | $ | 493,968 |        
|Cost of Sales                                                        |                                     |                                              | 287,617 |              |   |              | 321,263  |        |   |   | 437,700 |        
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Gross Profit                                                         |                                     |                                              | 69,254  |              |   |              | 29,566   |        |   |   | 56,268  |        
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Expenses                                                             |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|                                                                     | Selling, general and administrative |                                              |         | 38,898       |   |              |          | 36,593 |   |   |         | 54,057  |  
|                                                                     | Research and development            |                                              |         | 34,329       |   |              |          | 34,341 |   |   |         | 41,470  |  
|                                                                     | Gain on sale of Artesyn Solutions   |                                              |         |             |   |              |          |       |   |   |         | (31,308 | )
|                                                                     | Restructuring and related charges   |                                              |         | 5,611        |   |              |          | 27,345 |   |   |         | 15,913  |  
|                                                                     | Goodwill amortization               |                                              |         |             |   |              |          |       |   |   |         | 8,081   |  
|                                                                     | Goodwill impairment                 |                                              |         |             |   |              |          | 51,856 |   |   |         |        |  
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|                                                                     |                                     |                                              | 78,838  |              |   |              | 150,135  |        |   |   | 88,213  |        
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Operating Loss                                                       |                                     |                                              | (9,584  | )            |   |              | (120,569 | )      |   |   | (31,945 | )      
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Other Income (Expense)                                               |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|                                                                     | Debt extinguishment expense         |                                              |         | (3,723       | ) |              |          | (558   | ) |   |         |        |  
|                                                                     | Interest expense                    |                                              |         | (5,003       | ) |              |          | (7,576 | ) |   |         | (8,236  | )
|                                                                     | Interest income                     |                                              |         | 534          |   |              |          | 1,122  |   |   |         | 894     |  
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|                                                                     |                                     |                                              | (8,192  | )            |   |              | (7,012   | )      |   |   | (7,342  | )      
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Loss Before Benefit for Income Taxes                                 |                                     |                                              | (17,776 | )            |   |              | (127,581 | )      |   |   | (39,287 | )      
|Benefit for Income Taxes                                             |                                     |                                              | (2,154  | )            |   |              | (18,759  | )      |   |   | (7,524  | )      
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Net Loss                                                             |                                     | $                                            | (15,622 | )            |   | $            | (108,822 | )      |   | $ | (31,763 | )      
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Basic and Diluted Loss Per Share                                     |                                     | $                                            | (0.40   | )            |   | $            | (2.84    | )      |   | $ | (0.83   | )      
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        
|Weighted Average Common and Common Equivalent
    Shares Outstanding |                                     |                                              | 38,678  |              |   |              | 38,370   |        |   |   | 38,229  |        
|                                                                     |                                     |                                              |         |              |   |              |          |        |   |   |         |        

The accompanying notes are an integral part of
these consolidated financial statements.

38



---



##### 



CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND COMPREHENSIVE LOSS

|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|----------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---------- |  | ----------------- | --- | ----------- |  | ------------------ | ------- | ------------- |  | ---- | -------- | - |  | - | ------- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |              
|                                                                                          |  |                        |        |            |  |                   |     |             |  | Accumulated Other  |         |              
|                                                                                          |  |                        |        |            |  |                   |     |             |  | Comprehensive Loss |         |              
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |              
|                                                                                          |  |                        |        |            |  |                   |     | Foreign     |  | Changes in         |         |              
|                                                                                          |  | Common Stock           |        | Additional |  | Retained Earnings |     | Currency    |  | Fair Value         |         |              
|                                                                                          |  |                        |        | Paid-in    |  | (Accumulated      |     | Translation |  | of                 |         | Comprehensive
|                                                                                          |  | Shares                 |        | Amount     |  | Capital           |     | Deficit)    |  | Adjustment         |         | Derivatives   |  | Loss
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |     
|                                                                                          |  |                       
|                                                                                          |  | (Amounts in thousands)
|Balance, December 29, 2000                                                                |  |                        | 38,282 |            |  | $                 | 383 |             |  | $                  | 121,360 |               |  | $    | 149,873  |   |  | $ | (15,104 | ) |  | $ |       |   |  | $ |         |  
|Issuance of common stock under stock option plans                                         |  |                        | 160    |            |  |                   | 2   |             |  |                    | 1,093   |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Tax benefit from exercises of stock options                                               |  |                        |       |            |  |                   |    |             |  |                    | 186     |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Repurchases and retirement of common stock                                                |  |                        | (189   | )          |  |                   | (2  | )           |  |                    | (598    | )             |  |      | (1,707   | ) |  |   |        |   |  |   |       |   |  |   |         |  
|Cumulative effect of accounting change for
    derivatives, net of tax provision of $442  |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   |        |   |  |   | 938    |   |  |   | 938      |  
|Changes in fair value of derivatives, net of tax
    benefit of $(499)                    |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   |        |   |  |   | (1,178 | ) |  |   | (1,178   | )
|Net loss                                                                                  |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      | (31,763  | ) |  |   |        |   |  |   |       |   |  |   | (31,763  | )
|Foreign currency translation adjustment, net of
    tax benefit of $(1,004)               |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   | (4,238  | ) |  |   |       |   |  |   | (4,238   | )
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Comprehensive loss                                                                        |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   | (36,241  | )
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Balance, December 28, 2001                                                                |  |                        | 38,253 |            |  |                   | 383 |             |  |                    | 122,041 |               |  |      | 116,403  |   |  |   | (19,342 | ) |  |   | (240   | ) |  |   |         |  
|Issuance of common stock under stock option plans                                         |  |                        | 136    |            |  |                   | 1   |             |  |                    | 741     |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Issuance of warrants in connection with
    convertible subordinated debt                 |  |                        |       |            |  |                   |    |             |  |                    | 5,105   |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Net loss                                                                                  |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      | (108,822 | ) |  |   |        |   |  |   |       |   |  |   | (108,822 | )
|Changes in fair value of derivative financial
    instrument, net of tax provision of $89 |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   |        |   |  |   | 240    |   |  |   | 240      |  
|Foreign currency translation adjustment, net of
    tax provision of $2,565               |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   | 6,936   |   |  |   |       |   |  |   | 6,936    |  
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Comprehensive loss                                                                        |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   | (101,646 | )
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Balance, December 27, 2002                                                                |  |                        | 38,389 |            |  |                   | 384 |             |  |                    | 127,887 |               |  |      | 7,581    |   |  |   | (12,406 | ) |  |   |       |   |  |   |          |  
|Issuance of common stock                                                                  |  |                        | 295    |            |  |                   | 3   |             |  |                    | 899     |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Issuance of common stock under stock option plans                                         |  |                        | 71     |            |  |                   |    |             |  |                    | 202     |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Modification of warrants in connection with
    convertible subordinated debt             |  |                        |       |            |  |                   |    |             |  |                    | 181     |               |  |      |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Net loss                                                                                  |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      | (15,622  | ) |  |   |        |   |  |   |       |   |  |   | (15,622  | )
|Foreign currency translation adjustment, net of
    tax benefit of $(679)                 |  |                        |       |            |  |                   |    |             |  |                    |        |               |  |      |         |   |  |   | 4,928   |   |  |   |       |   |  |   | 4,928    |  
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Comprehensive loss                                                                        |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  | $ | (10,694  | )
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|Balance, December 26, 2003                                                                |  |                        | 38,755 |            |  | $                 | 387 |             |  | $                  | 129,169 |               |  | $    | (8,041   | ) |  | $ | (7,478  | ) |  | $ |       |   |  |   |          |  
|                                                                                          |  |                        |        |            |  |                   |     |             |  |                    |         |               |  |      |          |   |  |   |         |   |  |   |        |   |  |   |          |  

The accompanying notes are an integral part of
these consolidated financial statements

39



---



##### 



CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |         |         |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ------- | ------------ | ------- | ------------ | ------- | -------- | ------- | - | ------ | ------- | ------- | -
|                                                                 |                                                                                      |                                                                                                                  
|                                                                 |                                                                                      | For the Fiscal Years Ended                                                                                       
|                                                                 |                                                                                      |                                                                                                                  
|                                                                 |                                                                                      | December 26,                                                                                                      |         | December 27, |         | December 28,
|                                                                 |                                                                                      | 2003                                                                                                              |         | 2002         |         | 2001        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |             
|                                                                 |                                                                                      |                                                                                                                  
|                                                                 |                                                                                      | (Amounts in thousands)                                                                                           
|Operating Activities                                             |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|                                                                 | Net loss                                                                             |                                                                                                                   | $       | (15,622      | )       |              | $       | (108,822 | )       |   | $      | (31,763 | )      
|                                                                 | Adjustments to reconcile net loss to net cash
    provided by operating activities:  |                                                                                                                   |         |              |         |              |         |          |         |   |        |         |        
|                                                                 |                                                                                      | Depreciation, goodwill amortization and
    amortization of deferred debt issuance costs                          |         |              | 22,937  |              |         |          | 26,978  |   |        |         | 34,423  |  
|                                                                 |                                                                                      | Impairment of goodwill                                                                                            |         |              |        |              |         |          | 51,856  |   |        |         |        |  
|                                                                 |                                                                                      | Deferred income tax provision (benefit)                                                                           |         |              | 980     |              |         |          | (12,826 | ) |        |         | (9,114  | )
|                                                                 |                                                                                      | Provision for inventory valuation reserves                                                                        |         |              | 1,874   |              |         |          | 25,818  |   |        |         | 31,722  |  
|                                                                 |                                                                                      | Provision for bad debts and returns                                                                               |         |              | 1,418   |              |         |          | 356     |   |        |         | 2,059   |  
|                                                                 |                                                                                      | Gain on sale of Artesyn Solutions                                                                                 |         |              |        |              |         |          |        |   |        |         | (31,308 | )
|                                                                 |                                                                                      | Non-cash restructuring charges                                                                                    |         |              | 1,349   |              |         |          | 5,883   |   |        |         | 2,765   |  
|                                                                 |                                                                                      | Accretion of convertible subordinated debt
    discount                                                           |         |              | 1,064   |              |         |          | 1,622   |   |        |         |        |  
|                                                                 |                                                                                      | Loss on debt extinguishment                                                                                       |         |              | 3,723   |              |         |          | 588     |   |        |         |        |  
|                                                                 |                                                                                      | (Gain) loss on foreign currency transactions                                                                      |         |              | (451    | )            |         |          | (5,231  | ) |        |         | 340     |  
|                                                                 |                                                                                      | Other non-cash items                                                                                              |         |              | (109    | )            |         |          | 724     |   |        |         | 311     |  
|                                                                 | Changes in operating assets and liabilities, net
    of the effects of acquisitions: |                                                                                                                   |         |              |         |              |         |          |         |   |        |         |        
|                                                                 |                                                                                      | Accounts receivable                                                                                               |         |              | (8,577  | )            |         |          | 30,768  |   |        |         | 41,144  |  
|                                                                 |                                                                                      | Inventories                                                                                                       |         |              | 11,525  |              |         |          | 27,366  |   |        |         | 12,642  |  
|                                                                 |                                                                                      | Prepaid expenses and other assets                                                                                 |         |              | 278     |              |         |          | (102    | ) |        |         | 3,187   |  
|                                                                 |                                                                                      | Accounts payable and accrued liabilities                                                                          |         |              | 3,816   |              |         |          | 1,111   |   |        |         | (54,440 | )
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Net Cash Provided by Operating
    Activities                    |                                                                                      |                                                                                                                   | 24,205  |              |         |              | 46,089  |          |         |   | 1,968  |        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Investing Activities                                             |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|                                                                 |                                                                                      | Purchases of property, plant & equipment                                                                          |         |              | (7,081  | )            |         |          | (5,230  | ) |        |         | (28,763 | )
|                                                                 |                                                                                      | Proceeds from sale of property, plant &
    equipment                                                             |         |              | 735     |              |         |          | 538     |   |        |         | 353     |  
|                                                                 |                                                                                      | Proceeds from sale of Artesyn Solutions                                                                           |         |              |        |              |         |          |        |   |        |         | 33,500  |  
|                                                                 |                                                                                      | Earn-out payments related to acquisitions                                                                         |         |              | (4,259  | )            |         |          | (4,335  | ) |        |         | (10,349 | )
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Net Cash Used in Investing
    Activities                        |                                                                                      |                                                                                                                   | (10,605 | )            |         |              | (9,027  | )        |         |   | (5,259 | )      
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Financing Activities                                             |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|                                                                 |                                                                                      | Proceeds from issuance of convertible senior
    subordinated notes due 2010                                      |         |              | 90,000  |              |         |          |        |   |        |         |        |  
|                                                                 |                                                                                      | Financing costs on convertible senior
    subordinated notes due 2010                                             |         |              | (3,725  | )            |         |          |         |   |        |         |         |  
|                                                                 |                                                                                      | Proceeds from issuances of long-term debt, net of
    financing costs                                             |         |              | 9,481   |              |         |          |        |   |        |         | 60,690  |  
|                                                                 |                                                                                      | Principal payments on convertible debt                                                                            |         |              | (50,000 | )            |         |          |        |   |        |         |        |  
|                                                                 |                                                                                      | Principal payments on debt and capital leases                                                                     |         |              | (33,512 | )            |         |          | (79,115 | ) |        |         | (35,862 | )
|                                                                 |                                                                                      | Proceeds from exercises of stock options                                                                          |         |              | 202     |              |         |          | 742     |   |        |         | 1,095   |  
|                                                                 |                                                                                      | Proceeds from issuance of senior subordinated
    convertible notes due 2007 and warrants, net of financing costs |         |              |        |              |         |          | 49,000  |   |        |         |        |  
|                                                                 |                                                                                      | Repurchases of common stock                                                                                       |         |              |        |              |         |          |        |   |        |         | (2,307  | )
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Net Cash Provided by (Used in) Financing
    Activities          |                                                                                      |                                                                                                                   | 12,446  |              |         |              | (29,373 | )        |         |   | 23,616 |        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Effect of Exchange Rate Changes on Cash and
    Cash Equivalents |                                                                                      |                                                                                                                   | 3,168   |              |         |              | 3,229   |          |         |   | (625   | )      
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Increase in Cash and Cash
    Equivalents                        |                                                                                      |                                                                                                                   | 29,214  |              |         |              | 10,918  |          |         |   | 19,700 |        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Cash and Cash Equivalents, Beginning of
    Year                 |                                                                                      |                                                                                                                   | 65,001  |              |         |              | 54,083  |          |         |   | 34,383 |        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        
|Cash and Cash Equivalents, End of
    Year                       |                                                                                      | $                                                                                                                 | 94,215  |              |         | $            | 65,001  |          |         | $ | 54,083 |        
|                                                                 |                                                                                      |                                                                                                                   |         |              |         |              |         |          |         |   |        |        

The accompanying notes are an integral part of
these consolidated financial statements.

40



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                               
|-- | ----------------------------------------------
|1. | Summary of Significant Accounting
    Policies

GeneralArtesyn
Technologies, Inc. (Nasdaq: ATSN), a Florida corporation formed
in 1968, is primarily engaged in the design, development,
manufacture and sale of power conversion products and board
level solutions within the communications industry.

Basis of PresentationThe consolidated financial statements
include the accounts of Artesyn Technologies, Inc. and our
subsidiaries. Intercompany accounts and transactions have been
eliminated in consolidation.

For purposes of clarity, as used herein, the
terms we, us, our, the
Company, and Artesyn mean Artesyn
Technologies, Inc. and its subsidiaries (unless the context
indicates another meaning).

Fiscal YearOur
fiscal year ends on the Friday nearest December 31, which
results in a 52- or 53-week year. The fiscal years ended
December 26, 2003, December 27, 2002, and
December 28, 2001 are all comprised of 52 weeks. The
upcoming fiscal year will be 53 weeks in length and will
end on December 31, 2004.

Cash and Cash EquivalentsHighly liquid investments with
original maturities of 90 days or less are classified as
cash and cash equivalents. These investments are carried at
cost, which approximates market value.

Trade ReceivablesTrade receivables are recognized on our Consolidated Balance
Sheets at fair value. We perform ongoing credit evaluations of
our customers and adjust credit limits based upon payment
history and the customers credit worthiness, as determined
by our review of their current credit information. We
continuously monitor collections and payments from our customers
and maintain an allowance for estimated credit losses based upon
our historical experience and specific customer collection
issues that we have identified. Trade receivables are evaluated
and written off against the allowance if they are determined to
be uncollectible.

InventoriesInventories are stated at the lower of cost or market, on a
first-in, first-out basis. A provision has been made to reduce
obsolete or excess inventories to market based on current and
expected demand for the finished product and the components used
to manufacture it. Finished goods and work-in-process
inventories include material, labor and manufacturing overhead.

Property, Plant & EquipmentProperty, plant and equipment is
stated at cost. Depreciation and amortization is provided on the
straight-line method over the estimated useful lives of the
assets ranging from three to thirty years. Leasehold
improvements are recorded at cost and are amortized using the
straight-line method over the remaining lease term, or the
economic useful life, whichever is shorter. Leasehold
improvements are written-off if the related leasehold is
vacated. Major renewals and improvements are capitalized, while
maintenance, repairs and minor renewals not expected to extend
the life of an asset beyond its normal useful life are expensed
as incurred.

Impairment of Long-Lived AssetsWe periodically evaluate whether
events or changes in circumstances have occurred that may
warrant revision of the estimated useful lives of our long-lived
assets to be held and used, or whether the remaining balance of
long-lived assets to be held and used should be evaluated for
possible impairment. We use an estimate of the related
undiscounted cash flows over the remaining life of long-lived
assets to be held and used to determine whether impairment has
occurred. Fair value is compared to carrying value in
calculating the amount of the impairment. There was no
impairment of assets held and used for any of the years
presented. (See Note 5 for asset disposals related to
restructuring activities).

Long-lived assets meeting the criteria prescribed
by Statement of Financial Accounting Standard No. 144
are classified as long-lived asset to be disposed of, and are
reported at the lower of

41



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


the carrying amount or fair value minus the costs
to sell such assets. A gain or loss on the ultimate disposition
of an asset held for sale is recorded when the sale is completed.

GoodwillThe excess
of purchase price over net identifiable assets of companies
acquired (goodwill), which were accounted for under the purchase
method of accounting, is capitalized and periodically evaluated
for impairment as prescribed by Statement of Financial
Accounting Standards No. 142, which we adopted in the first
quarter of 2002. Under SFAS No. 142, we assess
goodwill using a two-step approach on an annual basis, in August
of each year or more frequently if indicators of impairment
exist. SFAS No. 142 states that potential impairment
exists if the fair value of a reporting unit is less than the
carrying value of the assets of that unit. The amount of the
impairment to recognize, if any, is calculated as the amount by
which the carrying value of goodwill exceeds its implied fair
value.

The reporting units on which the goodwill
assessment was performed were determined to be at our segment
level. There were no further distinctions made because there
were no business units below the segment level where discrete
financial information is available, that were regularly reviewed
by segment management and exhibited separate economic
characteristics from the other components of the operating
segment.

Foreign Currency TranslationThe functional currency of our
European and certain Asian subsidiaries is each entitys
local currency. Assets and liabilities are translated from their
functional currency into US dollars using exchange rates in
effect at the balance sheet date. Equity is translated using
historical exchange rates. Income and expense items are
translated using average exchange rates for the period. The
effect of exchange rate fluctuations on translating foreign
currency assets and liabilities into US dollars is included
in accumulated other comprehensive loss, net of income taxes.
Translation of intercompany accounts and foreign exchange
transaction gains and losses are included in the results of
operations and resulted in a $5.2 million gain during 2002
and insignificant amounts for all other periods presented. The
functional currency of our Asian subsidiaries is predominantly
the US dollar, as their transactions are generally
denominated in US dollars. The effect of exchange rate
fluctuations for these subsidiaries is included in results of
operations.

Revenue RecognitionWe recognize revenue and the related
costs of sales as products are shipped and title is passed to
the customer or as services are provided. For sales including
software products, we typically have no installation,
maintenance or other obligations related to the software,
accordingly, revenue is recognized as the products are shipped
and the customer accepts title. For those products which require
additional services, revenue related to the services is deferred
and recognized as the services are performed in accordance with
Statement of Position 97-2, Software Revenue
Recognition, and related interpretations.

Sales are comprised of gross revenues less
provisions for expected customer returns and other sales
allowances. The related reserves for these provisions are
included in Accounts Receivable, net of allowances
in the accompanying consolidated balance sheets. We establish
provisions for estimated returns and sales allowances
concurrently with the recognition of revenue based on a variety
of factors including actual return and sales allowance history
and projected economic conditions. We continually monitor
customer inventory levels and make adjustments to these
provisions when we believe actual product returns or other
allowances may differ from established reserves.

All amounts billed to customers related to
shipping and handling are included in sales. All costs
associated with shipping and handling are recognized in cost of
sales.

Product WarrantyWe
record estimated product warranty costs in the period in which
the related revenues are recognized. Management periodically
evaluates estimates used in the prepara-

42



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


tion of the financial statements for continued
reasonableness. Warranty expense is generally determined by
calculating the historical relationship between sales and
warranty costs and applying the calculation to the current
periods sales. Appropriate adjustments, if any, to the
estimates used are made prospectively based on such periodic
evaluation.

Changes in our product warranty liability are as
follows ($000s):

|                                    |  |      |        |      |  |   |        |  
|----------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                    |  | 2003 |        | 2002
|                                    |  |      |        |     
|Balance, beginning of period        |  | $    | 5,378  |      |  | $ | 6,197  |  
|Warranties issued during the period |  |      | 5,183  |      |  |   | 3,947  |  
|Settlements made during the period  |  |      | (2,707 | )    |  |   | (4,766 | )
|                                    |  |      |        |      |  |   |        |  
|Balance, end of period              |  | $    | 7,854  |      |  | $ | 5,378  |  
|                                    |  |      |        |      |  |   |        |  

Research and DevelopmentResearch and development costs include
product engineering, product development and research and
developments costs, which are expensed in the period incurred.

Advertising ExpensesCosts related to advertising are
recognized in Selling, General and Administrative expenses as
incurred. Advertising expense is not material in any of the
periods presented.

Income TaxesIncome
taxes reflect the current and deferred tax consequences of
events that have been recognized in our financial statements or
tax returns. The realization of deferred tax assets is based on
historical tax positions, tax planning strategies and
expectations about future taxable income.

Valuation allowances are recorded related to
deferred tax assets if their realization does not meet the
more likely than not criteria detailed in
SFAS 109, Accounting for Income Taxes.

Tax returns related to our consolidated financial
statements are filed in the United States, individual states,
and foreign countries where Artesyn conducts business.

Stock-Based CompensationWe apply Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations in accounting for
stock-based compensation for employees and non-employee
directors. In accordance with APB 25, if the exercise price
of our stock options equals the market price of the underlying
stock on the date of grant, no compensation cost is recognized
for our fixed stock option plans. Pro forma information
regarding net loss and loss per share is required by
SFAS 123, Accounting for Stock-Based Compensation as
amended by Statement of Financial Accounting Standards
No. 148, and has been determined as if we had
accounted for our employee and outside directors stock-based
compensation plans under the fair value method. The fair value
of each option grant was estimated at the date of grant using
the Black-Scholes option-pricing model with the following
weighted-average assumptions:

|                        |  |      |           |      |  |      |           |   |  |  |           |  
|----------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                        |  | 2003 |           | 2002 |  | 2001
|                        |  |      |           |      |  |     
|Risk-free interest rate |  |      | 1.4%-2.8  | %    |  |      | 3.1       | % |  |  | 4.5       | %
|Dividend yield          |  |      |          |      |  |      |          |   |  |  |          |  
|Expected volatility     |  |      | 94        | %    |  |      | 98        | % |  |  | 94        | %
|Expected life           |  |      | 3.3 years |      |  |      | 3.9 years |   |  |  | 3.9 years |  

43



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Our pro forma information follows ($000s except
per share data):

|                                     |  |  |             |      |  |      |         |      |  |   |          |   |  |   |         |  
|------------------------------------ |  |  | ----------- | ---- |  | ---- | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                     |  |  |             | 2003 |  | 2002 |         | 2001
|                                     |  |  |             |      |  |      |         |     
|Net loss                             |  |  | As reported |      |  | $    | (15,622 | )    |  | $ | (108,822 | ) |  | $ | (31,763 | )
|Pro forma expense, net of tax effect |  |  |             |      |  |      | (5,464  | )    |  |   | (11,965  | ) |  |   | (11,748 | )
|                                     |  |  |             |      |  |      |         |      |  |   |          |   |  |   |         |  
|                                     |  |  | Pro forma   |      |  | $    | (21,086 | )    |  | $ | (120,787 | ) |  | $ | (43,511 | )
|                                     |  |  |             |      |  |      |         |      |  |   |          |   |  |   |         |  
|Loss per share-Basic and Diluted     |  |  | As reported |      |  | $    | (0.40   | )    |  | $ | (2.84    | ) |  | $ | (0.83   | )
|                                     |  |  |             |      |  |      |         |      |  |   |          |   |  |   |         |  
|                                     |  |  | Pro forma   |      |  | $    | (0.55   | )    |  | $ | (3.15    | ) |  | $ | (1.14   | )
|                                     |  |  |             |      |  |      |         |      |  |   |          |   |  |   |         |  

The effects of applying SFAS 123 in this pro
forma disclosure are not necessarily indicative of future
results. See Note 11 of the consolidated financial
statements for other disclosures related to our stock option
plans.

Loss Per ShareBasic
loss per share (EPS) is calculated by dividing loss
available to common shareholders by the weighted-average number
of common shares outstanding during each period in accordance
with SFAS No. 128, Earnings Per Share.
Where applicable, diluted earnings per share includes the
potential impact of convertible securities and dilutive common
stock equivalents using the treasury stock method. All
outstanding stock options, warrants and stock related to
convertible debt were excluded from computing diluted earnings
per share because their effects were anti-dilutive for all
fiscal periods presented.

Comprehensive LossSFAS No. 130,
Reporting Comprehensive Income requires companies to
report all changes in equity in a financial statement for the
period in which they are recognized, except those resulting from
investment by owners and distributions to owners. We have chosen
to disclose Comprehensive Loss, which encompasses net loss and
the effects of foreign currency translation adjustments and
changes in fair value of derivative financial instruments, both
net of tax, in the Consolidated Statements of Shareholders
Equity and Comprehensive Loss.

Use of Estimates in the Preparation of
Financial StatementsThe preparation
of financial statements in conformity with accounting principles
generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.
The more significant estimates made by management include the
provision for doubtful accounts receivable, inventory
write-downs for potentially excess or obsolete inventory,
restructuring liabilities, warranty reserves, valuation
allowances on deferred tax assets, and the valuation of
intangible assets. Actual results could differ from those
estimates.

Concentration of Credit RiskFinancial instruments that potentially
subject us to concentrations of credit risk consist principally
of cash and cash equivalents, trade accounts receivable and
financial instruments used in hedging activities. Our cash
management and investment policies restrict investments to
low-risk, highly liquid securities, and we perform periodic
evaluations of the credit standing of the domestic and foreign
financial institutions with which we deal. We sell our products
to customers in various geographical areas. We perform ongoing
credit evaluations of our customers financial condition
and generally do not require collateral. We maintain reserves
for potential credit losses, and such losses traditionally have
been within our expectations and have not been material in any
year. There were no financial instruments used in hedging
activities during 2003. As of December 26, 2003 and
December 27, 2002, we believe we had no significant
concentrations of credit risk.

44



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The following table includes sales to customers
in excess of 10% of total sales for the periods presented:

|                 |  |      |    |      |  |      |    |   |  |  |    |  
|---------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                 |  | 2003 |    | 2002 |  | 2001
|                 |  |      |    |      |  |     
|Hewlett-Packard  |  |      | 15 | %    |  |      | 17 | % |  |  | 19 | %
|Dell Computer    |  |      | 11 | %    |  |      | 15 | % |  |  | 12 | %
|Sun Microsystems |  |      | 10 | %    |  |      | 13 | % |  |  | 9  | %

Revenue from Hewlett-Packard is recorded in both
segments, with revenue from Dell and Sun recorded only in Power
Conversion. Sales to Hewlett-Packard during 2001 include sales
from Artesyn Solutions, Inc. prior to the 2001 sale of this
subsidiary (See Note 16). During 2001, sales from Artesyn
Solutions Inc. represented approximately one-third of the amount
sold to Hewlett-Packard.

Fair Value of Financial
InstrumentsCarrying values of cash
and cash equivalents, accounts receivable and accounts payable
approximate fair value due to the short-term nature of these
accounts. The fair value of amounts outstanding under our credit
facility is determined using current applicable interest rates
as of the balance sheet date and approximates the carrying value
of such debt because the underlying instruments are at variable
rates that are re-priced frequently. The fair value of our
Senior Subordinated Convertible Notes is $113.5 million
based on actual, private market transactions occurring at or
near the end of the year as reported to us by the initial
purchasers.

Recent Accounting Pronouncements

We adopted the provisions of Statement of
Financial Accounting Standard No. 143,
Accounting for Asset Retirement Obligations,
effective December 28, 2002. SFAS 143 changes the way
companies recognize and measure retirement obligations that are
legal obligations and result from the acquisition, construction,
development or operation of long-lived tangible assets. Our
primary asset retirement obligations relate to certain leasehold
improvements for which an asset retirement obligation has been
recorded. The adoption of SFAS 143 did not have a material
impact on our consolidated financial condition or results of
operations.

In the first quarter of 2003, the Company adopted
SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections
(SFAS 145). Among other matters, SFAS 145
rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt which required
gains and losses from extinguishments of debt to be classified
as extraordinary items, net of related income taxes. We adopted
SFAS 145 effective December 28, 2002, and there was no
material impact on our consolidated results of operations and
financial position. Amounts written off related to the repayment
of our previous credit facility in the third quarter of 2003
(See Note 8 of our Consolidated Financial Statements) and
the fulfillment of our obligation to Finestar (See Note 7
of our Consolidated Financial Statements) were not classified as
extraordinary as a result of the application of SFAS 145.

In June 2002, the FASB issued Statement of
Financial Accounting Standards No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred and nullifies the guidance of
EITF No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in
Restructuring), which recognized a liability for an exit
cost at the date of an entitys commitment to an exit plan.
SFAS 146 requires that the initial measurement of a
liability be at fair value. SFAS 146 is effective for exit
or disposal activities that were initiated after
December 31, 2002. We adopted SFAS 146 effective
December 28, 2002, and there was no material impact on our
consolidated results of operations and financial position.

45



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The FASB issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of FASB Statements No. 5,
57, and 107 and a rescission of FASB Interpretation No. 34,
dated November 2002. FIN 45 elaborates on the disclosures
to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued.
FIN 45 also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair
value of the obligation undertaken. The disclosure requirements
are effective for financial statements of interim or annual
periods ending after December 31, 2002. The initial
recognition and measurement provisions of the interpretation are
applicable to guarantees issued or modified after
December 31, 2002. Upon adoption, these provisions did not
have a material effect on our consolidated financial condition
or results of operations.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities, which addresses the consolidation of
variable interest entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, as a result of ownership, contractual or other financial
interests in the entity. In December 2003, the FASB issued FASB
Interpretation 46 (revised December 2003), which effectively
modified and clarified certain provisions of FIN 46, as
originally issued, and modified the effective date for certain
entities. Public companies will apply the provisions of
FIN 46, as revised, no later than the first reporting
period that ends after March 15, 2004. We do not expect any
impact on our financial position, results of operations or cash
flows from adoption.

In November 2002, the Emerging Issues Task Force
of the FASB reached a consensus on EITF No. 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables. The consensus addresses how to account for
arrangements that may involve the delivery or performance of
multiple products, services and/or rights to use assets. Revenue
arrangements with multiple deliverables are required to be
divided into separate units of accounting if the deliverables in
the arrangement meet certain criteria. Arrangement consideration
should be allocated among the separate units of accounting based
on their relative fair values. The consensus also supersedes
certain guidance set forth in SEC Staff Accounting Bulletin
No. 101, Revenue Recognition in Financial Statements. The
final consensus is applicable to agreements entered into in
quarters beginning after June 15, 2003. We adopted this new
pronouncement effective June 28, 2003 and are applying the
provisions of this statement on a prospective basis subsequent
to that date. The impact to our financial position, results of
operations, and cash flows would not have been materially
different had we adopted this new pronouncement on
December 29, 2001.

In November 2003, the Emerging Issues Task Force
of the FASB reached a consensus on EITF No. 03-5,
Applicability of AICPA Statement of Position 97-2 to
Non-Software Deliverables in an Arrangement Containing
More-Than-Incidental Software. The consensus addresses
arrangements that include software that is more than incidental
to the products or services as a whole, requiring software and
software related elements to be included within the scope of
SOP 97-2. If the software included in an arrangement were
essential to the functionality of the hardware, the hardware
would be considered software related and should be included
under the scope of 97-2. However, if the software were not
essential to the functionality of the unrelated equipment, the
equipment would not be considered software related and would,
therefore, be excluded from the scope of SOP 97-2. The
impact to our financial position, results of operations, and
cash flows would not have been materially different had we
adopted this new pronouncement on December 28, 2002.

ReclassificationsCertain prior years amounts have
been reclassified to conform to the current years
presentation.

46



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |            
|-- | -----------
|2. | Inventories

The components of inventories are as follows
($000s):

|                |  |              |        |              |  |   |        | 
|--------------- |  | ------------ | ------ | ------------ |  | - | ------ | 
|                |  | December 26, |        | December 27,
|                |  | 2003         |        | 2002        
|                |  |              |        |             
|Raw materials   |  | $            | 17,184 |              |  | $ | 24,105 | 
|Work-in-process |  |              | 8,446  |              |  |   | 9,304  | 
|Finished goods  |  |              | 18,417 |              |  |   | 22,179 | 
|                |  |              |        |              |  |   |        | 
|                |  | $            | 44,047 |              |  | $ | 55,588 | 
|                |  |              |        |              |  |   |        | 



|   |                            
|-- | ---------------------------
|3. | Property, Plant & Equipment

Property, plant & equipment is comprised
of the following ($000s):

|                                               |  |              |          |              |  |   |          |  
|---------------------------------------------- |  | ------------ | -------- | ------------ |  | - | -------- | -
|                                               |  | December 26, |          | December 27,
|                                               |  | 2003         |          | 2002        
|                                               |  |              |          |             
|Land                                           |  | $            | 1,633    |              |  | $ | 1,553    |  
|Buildings and fixtures                         |  |              | 21,953   |              |  |   | 21,101   |  
|Machinery and equipment                        |  |              | 162,301  |              |  |   | 168,847  |  
|Leasehold improvements                         |  |              | 8,914    |              |  |   | 10,508   |  
|                                               |  |              |          |              |  |   |          |  
|                                               |  |              | 194,801  |              |  |   | 202,009  |  
|Less accumulated depreciation and amortization |  |              | (130,591 | )            |  |   | (123,378 | )
|                                               |  |              |          |              |  |   |          |  
|                                               |  | $            | 64,210   |              |  | $ | 78,631   |  
|                                               |  |              |          |              |  |   |          |  

Depreciation and amortization expense related to
property, plant & equipment was $22.2 million,
$25.8 million, and $25.5 million in fiscal years 2003,
2002 and 2001, respectively.



|   |                              
|-- | -----------------------------
|4. | Accrued and Other Liabilities

The components of accrued and other current
liabilities are as follows ($000s):

|                                        |  |              |        |              |  |   |        | 
|--------------------------------------- |  | ------------ | ------ | ------------ |  | - | ------ | 
|                                        |  | December 26, |        | December 27,
|                                        |  | 2003         |        | 2002        
|                                        |  |              |        |             
|Compensation and benefits               |  | $            | 14,780 |              |  | $ | 13,858 | 
|Income taxes payable                    |  |              | 9,949  |              |  |   | 6,958  | 
|Warranty reserve                        |  |              | 7,854  |              |  |   | 5,378  | 
|Commissions                             |  |              | 879    |              |  |   | 713    | 
|Restructuring reserve (current portion) |  |              | 5,552  |              |  |   | 16,348 | 
|Deferred acquisition payments           |  |              | 715    |              |  |   | 4,284  | 
|Other                                   |  |              | 9,495  |              |  |   | 8,969  | 
|                                        |  |              |        |              |  |   |        | 
|                                        |  | $            | 49,224 |              |  | $ | 56,508 | 
|                                        |  |              |        |              |  |   |        | 

At December 26, 2003 and December 27,
2002, other accrued liabilities consisted primarily of accruals
for professional fees, consulting, insurance, interest, deferred
income and other taxes.

47



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The components of other long-term liabilities are
as follows ($000s):

|                        |  |              |       |              |  |   |        | 
|----------------------- |  | ------------ | ----- | ------------ |  | - | ------ | 
|                        |  | December 26, |       | December 27,
|                        |  | 2003         |       | 2002        
|                        |  |              |       |             
|Restructuring reserve   |  | $            | 8,662 |              |  | $ | 9,139  | 
|Directors pension plan |  |              | 1,066 |              |  |   | 1,062  | 
|                        |  |              |       |              |  |   |        | 
|                        |  | $            | 9,728 |              |  | $ | 10,201 | 
|                        |  |              |       |              |  |   |        | 



|   |                                  
|-- | ---------------------------------
|5. | Restructuring and Related Charges

Starting in 2001, we implemented plans to
restructure our operations due to the significant reduction in
customer demand for our products that had resulted in excess
manufacturing capacity and costs. Our restructuring activities
address these issues and are comprised of the following elements:



| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) A realignment of our commercial
    functions along customer/market lines in order to provide
    enhanced customer service.                                                                           
|
| | (2) Addressing excess capacity and cost
    issues by closing several operating and administrative
    facilities throughout the world and consolidating these
    functions into other existing locations.
|
| | (3) The elimination of a number of
    operational and administrative positions company-wide.                                                                                                              

Pursuant to our restructuring plans, during 2003,
2002 and 2001, we recorded restructuring and related charges
totaling approximately $5.6 million, $27.3 million and
$15.9 million, respectively. This amount included employee
and facility expenses related to the closure of our Kindberg,
Austria and Youghal, Ireland manufacturing facilities. Other
headcount reductions, asset write-offs and facility closure
expenses are included in this charge. The components of this
charge, along with the 2003 activity related to these and other
restructuring charges, are presented in the following table
($000s):

|                                              |  |              |        |               |  |            |       |              |  |      |         |   |  |   |        |   |  |   |        | 
|--------------------------------------------- |  | ------------ | ------ | ------------- |  | ---------- | ----- | ------------ |  | ---- | ------- | - |  | - | ------ | - |  | - | ------ | 
|                                              |  |              |        |               |  |           
|                                              |  |              |        | 2003 Activity |  |           
|                                              |  |              |        |               |  |           
|                                              |  | Accrued      |        |               |  |            |       | Accrued     
|                                              |  | Liability at |        |               |  | Reductions |       | Liability at
|                                              |  | December 27, |        | Restructuring |  |            |       | December 26,
|                                              |  | 2002         |        | Charge        |  | Cash       |       | Non-Cash     |  | 2003
|                                              |  |              |        |               |  |            |       |              |  |     
|Employee termination costs                    |  | $            | 8,879  |               |  | $          | 2,201 |              |  | $    | (9,618  | ) |  | $ |       |   |  | $ | 1,462  | 
|Liability for payback of developmental grants |  |              | 2,654  |               |  |            | 30    |              |  |      | 396     |   |  |   |       |   |  |   | 3,080  | 
|Facility closures                             |  |              | 13,954 |               |  |            | 3,380 |              |  |      | (6,313  | ) |  |   | (1,349 | ) |  |   | 9,672  | 
|                                              |  |              |        |               |  |            |       |              |  |      |         |   |  |   |        |   |  |   |        | 
|                                              |  | $            | 25,487 |               |  | $          | 5,611 |              |  | $    | (15,535 | ) |  | $ | (1,349 | ) |  | $ | 14,214 | 
|                                              |  |              |        |               |  |            |       |              |  |      |         |   |  |   |        |   |  |   |        | 

The charge for facility closures is comprised of
write-offs of equipment and other fixed assets to be disposed of
or abandoned, and an estimate of the future lease commitments
and buy-out options for those locations being closed, after
considering sublease and time-to-market expectations. We closed
our Kindberg, Austria facility in April 2003 and our Youghal,
Ireland plant in September 2003. The disposal of assets related
to the two closures was substantially completed by the end of
the fourth quarter of 2003. Remaining lease payments for the
closed facilities, which total approximately $8.9 million,
extend into 2006 (remaining lease payments are recorded in both
current and long-term liabilities). We will continue to
aggressively market these locations in an attempt to secure
sublease arrangements on favorable terms.

48



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The restructuring plans include the termination
and payment of related severance benefits for approximately
1,900 employees (1,200 direct labor, 500 indirect
labor and 200 administrative), of which approximately
1,800 employees have been terminated as of
December 26, 2003. The remaining terminations and
associated termination payments will be made during the first
half of 2004, at which time we expect to record an additional
restructuring provision of approximately $0.3 million.

The charges for payback of developmental grants
relate to the headcount reduction at our Ireland location. We
were granted development funds by the Irish government subject
to the condition we maintain a work force of at least
300 employees at the facility in Ireland. The restructuring
actions at the facility have resulted in a headcount
significantly below 300 employees, triggering an obligation to
repay the grants. In September 2003, we negotiated a
supplemental agreement with the Irish government containing a
payment schedule for the amounts in question, resulting in the
reclassification of the liability from short-term to long-term.

As part of ongoing restructuring efforts, we
expect to record total charges of approximately
$0.5 million in 2004, primarily related to non-exit costs
that were not yet incurred when the restructuring was
recognized, such as facility maintenance, and final amounts
related to our restructuring actions in Europe.

The components of the restructuring charge, along
with the 2002 activity are presented in the following table
($000s):

|                                              |  |              |       |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |        | 
|--------------------------------------------- |  | ------------ | ----- | ------------- |  | ---------- | ------ | ------------ |  | ---- | ------ | - |  | - | ------ | - |  | - | ------ | 
|                                              |  |              |       |               |  |           
|                                              |  |              |       | 2002 Activity |  |           
|                                              |  |              |       |               |  |           
|                                              |  | Accrued      |       |               |  |            |        | Accrued     
|                                              |  | Liability at |       |               |  | Reductions |        | Liability at
|                                              |  | December 28, |       | Restructuring |  |            |        | December 27,
|                                              |  | 2001         |       | Charge        |  | Cash       |        | Non-Cash     |  | 2002
|                                              |  |              |       |               |  |            |        |              |  |     
|Employee termination costs                    |  | $            | 2,283 |               |  | $          | 9,887  |              |  | $    | (3,291 | ) |  | $ |       |   |  | $ | 8,879  | 
|Liability for payback of developmental grants |  |              |      |               |  |            | 2,547  |              |  |      | 107    |   |  |   |       |   |  |   | 2,654  | 
|Facility closures                             |  |              | 3,149 |               |  |            | 14,911 |              |  |      | 1,777  |   |  |   | (5,883 | ) |  |   | 13,954 | 
|                                              |  |              |       |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |        | 
|                                              |  | $            | 5,432 |               |  | $          | 27,345 |              |  | $    | (1,407 | ) |  | $ | (5,883 | ) |  | $ | 25,487 | 
|                                              |  |              |       |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |        | 

The components of the restructuring charge, along
with the 2001 activity are presented in the following table
($000s):

|                           |  |              |     |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |       | 
|-------------------------- |  | ------------ | --- | ------------- |  | ---------- | ------ | ------------ |  | ---- | ------ | - |  | - | ------ | - |  | - | ----- | 
|                           |  |              |     |               |  |           
|                           |  |              |     | 2001 Activity |  |           
|                           |  |              |     |               |  |           
|                           |  | Accrued      |     |               |  |            |        | Accrued     
|                           |  | Liability at |     |               |  | Reductions |        | Liability at
|                           |  | December 29, |     | Restructuring |  |            |        | December 28,
|                           |  | 2000         |     | Charge        |  | Cash       |        | Non-Cash     |  | 2001
|                           |  |              |     |               |  |            |        |              |  |     
|Employee termination costs |  | $            | 255 |               |  | $          | 8,687  |              |  | $    | (6,659 | ) |  | $ |       |   |  | $ | 2,283 | 
|Facility closures          |  |              | 153 |               |  |            | 7,226  |              |  |      | (1,465 | ) |  |   | (2,765 | ) |  |   | 3,149 | 
|                           |  |              |     |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |       | 
|                           |  | $            | 408 |               |  | $          | 15,913 |              |  | $    | (8,124 | ) |  | $ | (2,765 | ) |  | $ | 5,432 | 
|                           |  |              |     |               |  |            |        |              |  |      |        |   |  |   |        |   |  |   |       | 



|   |                      
|-- | ---------------------
|6. | Business Combinations

Effective March 27, 2000, we acquired 100%
of the capital stock of Spider Software Limited
(Spider). Spider supplies embedded
telecommunications and protocol software to the communications
marketplace within our Communications Products segment. The
purchase price included approximately $33 million of fixed
cash payments, of which $28 million was paid in the first
quarter of 2000 and the remaining $5 million was paid in
April 2002 and 2003, in equal installments. We initially
forecasted up to an additional $11.0 million of contingent
consideration that could have been

49



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


earned based on Spiders ability to achieve
certain earnings targets through March 2003. For the earn-out
period ended March 30, 2001, an additional
$1.2 million in purchase price was recorded based on
Spiders results. Approximately $0.7 million of the
earn-out was paid during 2001, with the remaining
$0.5 million paid in the third quarter of 2002. No
additional amounts were earned or paid related to the earn-out
periods ended March 31, 2002 and 2003.

In connection with the acquisition, the
allocation of purchase price was as follows (in millions):

|                                       |  |   |      |  
|-------------------------------------- |  | - | ---- | -
|Fair value of tangible assets acquired |  | $ | 2.7  |  
|Liabilities assumed                    |  |   | (2.2 | )
|Goodwill                               |  |   | 34.7 |  
|                                       |  |   |      |  
|Amount paid for Spiders common stock  |  | $ | 35.2 |  
|                                       |  |   |      |  

Effective August 4, 2000, we acquired 100%
of the capital stock of AzCore Technologies, Inc.
(AzCore). The purchase price consisted of a
$5.8 million cash payment, net of cash acquired, made in
the third quarter of 2000 and additional contingent payments of
up to $8.0 million if AzCores products meet certain
milestones. Through 2002, approximately $5.5 million of
these payments had been made. In 2003, payments for an
additional $1.8 million were made, with the final
$0.7 million payment made in the first quarter of 2004. No
additional amounts will be paid related to the acquisition of
AzCore.

In connection with the acquisition, the
allocation of purchase price was as follows (in millions):

|                                              |  |   |      | 
|--------------------------------------------- |  | - | ---- | 
|Fair value of tangible assets acquired        |  | $ | 0.1  | 
|Goodwill                                      |  |   | 13.7 | 
|                                              |  |   |      | 
|Amount paid/accrued for AzCores common stock |  | $ | 13.8 | 
|                                              |  |   |      | 

All acquisitions were accounted for under the
purchase method of accounting. Accordingly, goodwill of
$34.7 million related to Spider and $13.7 million
related to AzCore was recorded, representing the excess of the
purchase price over the estimated fair value of the net assets
acquired and transaction costs.

Through December 28, 2001, the goodwill
related to the Spider and AzCore transactions was being
amortized on a straight-line basis over a period of six and
twenty years, respectively. The results of operations of the
companies have been included in Artesyns consolidated
financial statements from the dates of acquisition.



|   |                 
|-- | ----------------
|7. | Convertible Debt

On August 13, 2003, we completed the initial
placement to qualified institutional buyers of
$75.0 million of 5.5% Convertible Senior Subordinated Notes
due in 2010, and subsequently sold an additional
$15.0 million of notes on August 27, 2003. Net
proceeds from this placement were $86.3 million. The notes
bear interest at 5.5%, payable semi-annually on February 15
and August 15 of each year beginning on February 15,
2004, and will mature August 15, 2010. On or after
August 15, 2008, we may redeem some or all of the notes at
100% of their principal amount plus accrued and unpaid interest.
Holders of the notes may convert the notes into shares of our
common stock at any time prior to the maturity date of the notes
(unless previously redeemed or repurchased) at a conversion
price of $8.064 per share (equivalent to an initial conversion
rate of approximately 124.0079 shares per $1,000 principal
amount of notes), subject to adjustments for certain events as
set forth in the registration statement on Form S-3 filed
after the completion of the offering. The notes are not listed
on any securities exchange or included in any automated
quotation system. The notes are eligible for trading on the
PORTAL market of the National Association of Securities Dealers,
Inc. There are no financial covenant requirements associated
with the notes.

50



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


On January 15, 2002, we received an
investment by Finestar, an entity controlled by Mr. Bruce
Cheng, founder and chairman of Delta Electronics, a leading
global power supply, electronic component, and video display
manufacturer and one of our competitors. This investment
consisted of the issuance of a $50.0 million five-year
subordinated convertible note and a five-year warrant to
purchase up to 1.55 million shares of our common stock. We
attributed approximately $4.5 million of the value of the
transaction to the warrant, and were accreting the balance of
the debt, as required, back to the face value of the note when
the placement of the 5.5% convertible notes was completed. With
a portion of the net proceeds from the private placement, we
fully paid the convertible note held by Finestar, which resulted
in a $3.1 million loss on debt extinguishment in the third
quarter of 2003. Additionally, because the Finestar note has
been paid in full, the shares of common stock underlying the
convertible note are no longer issuable upon conversion or
subject to the registration statement on Form S-3 filed in
connection with the Finestar transaction.

In addition, the warrant we issued to Finestar
will remain outstanding. Due to the weighted average
anti-dilution protection feature in the original warrant
agreement with Finestar, the exercise price of the warrant was
adjusted to $10.83 per share from $11.50 per share in connection
with the convertible senior subordinated notes issued in August
2003. The $0.2 million change in the fair value of the
warrants was recorded as a cost of the convertible senior
subordinated debt issuance.



|   |               
|-- | --------------
|8. | Long-Term Debt

Long-term debt and capital lease obligations
consist of the following:

|                                    |                                                                                 |              |   |              |  |  |        |        | 
|----------------------------------- | ------------------------------------------------------------------------------- | ------------ | - | ------------ |  |  | ------ | ------ | 
|                                    |                                                                                 | December 26, |   | December 27,
|                                    |                                                                                 | 2003         |   | 2002        
|                                    |                                                                                 |              |   |             
|Senior revolving credit facility(a) |                                                                                 |              |   |              |  |  |        |       
|                                    | U.S. dollar denominated borrowings                                              |              | $ |             |  |  | $      | 23,000 | 
|                                    | Capital lease obligations(b)                                                    |              |   | 4            |  |  |        | 16     | 
|                                    |                                                                                 |              |   |              |  |  |        |       
|                                    |                                                                                 |              | 4 |              |  |  | 23,016 |       
|                                    | Less current maturities (included in accrued and
    other current liabilities) |              |   | 4            |  |  |        | 12     | 
|                                    |                                                                                 |              |   |              |  |  |        |       
|                                    | Long-term debt and capital lease obligations                                    |              | $ |             |  |  | $      | 23,004 | 
|                                    |                                                                                 |              |   |              |  |  |        |       



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On March 28, 2003, we entered into a
    five-year, $35.0 million credit facility with Fleet Capital
    Corporation. The asset-based facility replaced our prior
    revolving credit facility that was due to expire in March 2004.
    The facility bears interest at LIBOR plus 2.25% or the
    banks Prime Rate plus 0.5%, and adjusts in the future
    based on the level of availability under the facility plus our
    domestic cash on hand. While the availability on the facility is
    $35.0 million, the amount available to be borrowed could be
    limited based on our level of domestic accounts receivable and
    inventory, which is subject to changing business conditions. We
    are also subject to a financial covenant that only applies when
    the amount available to be borrowed plus cash deposited at Fleet
    Bank falls below a prescribed limit. We are also subject to
    other covenants and conditions. Up to $5.0 million of the
    facilitys capacity can be used for letters of credit. On
    December 26, 2003, the amount available to be borrowed was
    approximately $21.8 million, none of which was outstanding
    on December 26, 2003. Our asset-based facility is secured
    by our domestic assets, including a pledge of the stock of our
    domestic subsidiaries and 65% of the stock of certain of our
    foreign subsidiaries. On the date the credit agreement was
    completed, we used $19.0 million of cash on hand to pay off
    the amounts outstanding on our previous credit facility. The
    remaining unamortized balance of deferred financing costs
    capitalized in connection with the previous credit facility of
    $0.6 million was written off as a loss on debt
    extinguishment.

51



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(b) | Items under capital leases include equipment,
    furniture and leasehold improvements.

Future obligations related to the maturities of
long-term capital leases and convertible senior subordinated
notes are as follows ($000s):

|                    |  |                |   |                    |  |   |        | 
|------------------- |  | -------------- | - | ------------------ |  | - | ------ | 
|                    |  |                |   | 5.5%              
|                    |  |                |   | Convertible Senior
|Fiscal year         |  | Capital Leases |   | Subordinated Notes
|                    |  |                |   |                   
|2004                |  | $              | 4 |                    |  | $ |       | 
|2005                |  |                |  |                    |  |   |       | 
|2006                |  |                |  |                    |  |   |       | 
|2007                |  |                |  |                    |  |   |       | 
|2008 and thereafter |  |                |  |                    |  |   | 90,000 | 
|                    |  |                |   |                    |  |   |        | 
|                    |  | $              | 4 |                    |  | $ | 90,000 | 
|                    |  |                |   |                    |  |   |        | 



|   |             
|-- | ------------
|9. | Income Taxes

Our tax provision is based on the geographical
distribution of expected income, statutory rates and tax
planning available in various jurisdictions in which we operate.
Judgment is required in determining the worldwide provision for
income taxes, as well as realizable deferred tax assets and
liabilities. We adjust our income tax provision, when required,
for any changes that impact its underlying judgments and tax
positions. The components of the provision (benefit) for
income taxes consist of the following ($000s):

|                                           |         |      |        |        |   |      |         |        |   |   |        |        |  
|------------------------------------------ | ------- | ---- | ------ | ------ | - | ---- | ------- | ------ | - | - | ------ | ------ | -
|                                           |         | 2003 |        | 2002   |   | 2001
|                                           |         |      |        |        |   |     
|Current provision (benefit):               |         |      |        |        |   |      |         |        |   |   |        |       
|                                           | Federal |      | $      | (3,486 | ) |      | $       | (5,372 | ) |   | $      | 2,804  |  
|                                           | State   |      |        | (398   | ) |      |         | (614   | ) |   |        | 281    |  
|                                           | Foreign |      |        | 750    |   |      |         | 53     |   |   |        | (1,495 | )
|                                           |         |      |        |        |   |      |         |        |   |   |        |       
|Total current                              |         |      | (3,134 | )      |   |      | (5,933  | )      |   |   | 1,590  |       
|                                           |         |      |        |        |   |      |         |        |   |   |        |       
|Deferred provision (benefit):              |         |      |        |        |   |      |         |        |   |   |        |       
|                                           | Federal |      |        | 3,449  |   |      |         | (7,795 | ) |   |        | (553   | )
|                                           | State   |      |        | 477    |   |      |         | (764   | ) |   |        | (61    | )
|                                           | Foreign |      |        | (2,946 | ) |      |         | (4,267 | ) |   |        | (8,500 | )
|                                           |         |      |        |        |   |      |         |        |   |   |        |       
|Total deferred                             |         |      | 980    |        |   |      | (12,826 | )      |   |   | (9,114 | )     
|                                           |         |      |        |        |   |      |         |        |   |   |        |       
|Total provision (benefit) for income taxes |         | $    | (2,154 | )      |   | $    | (18,759 | )      |   | $ | (7,524 | )     
|                                           |         |      |        |        |   |      |         |        |   |   |        |       

Income taxes have not been provided on the
undistributed net earnings of our foreign subsidiaries of
approximately $55.2 million as of the end of 2003, as we do
not intend to repatriate such earnings.

The components of our loss before benefit for
income taxes consist of the following ($000s):

|                                           |  |      |         |      |  |      |          |   |  |   |         |  
|------------------------------------------ |  | ---- | ------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                           |  | 2003 |         | 2002 |  | 2001
|                                           |  |      |         |      |  |     
|U.S.                                       |  | $    | (5,552  | )    |  | $    | (64,821  | ) |  | $ | (6,224  | )
|Foreign                                    |  |      | (12,224 | )    |  |      | (62,760  | ) |  |   | (33,063 | )
|                                           |  |      |         |      |  |      |          |   |  |   |         |  
|Total loss before benefit for income taxes |  | $    | (17,776 | )    |  | $    | (127,581 | ) |  | $ | (39,287 | )
|                                           |  |      |         |      |  |      |          |   |  |   |         |  

52



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The reconciliation of our effective tax benefit
rate to the U.S. federal statutory income tax rate is as follows:

|                                                |  |      |       |      |  |      |       |   |  |  |       |  
|----------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                |  | 2003 |       | 2002 |  | 2001
|                                                |  |      |       |      |  |     
|U.S. federal statutory tax rate                 |  |      | 35.0% |      |  |      | 35.0% |   |  |  | 35.0% |  
|Foreign tax effects                             |  |      | (30.4 | )    |  |      | (14.8 | ) |  |  | (15.4 | )
|Permanent items                                 |  |      | 3.1   |      |  |      | (1.4  | ) |  |  | 1.9   |  
|Goodwill impairment                             |  |      |      |      |  |      | (6.1  | ) |  |  |      |  
|State income tax effect, net of federal benefit |  |      | (0.6  | )    |  |      | 0.8   |   |  |  | (0.4  | )
|Tax credits                                     |  |      | 4.3   |      |  |      | 1.2   |   |  |  |      |  
|Other                                           |  |      | 0.7   |      |  |      |      |   |  |  | (1.9  | )
|                                                |  |      |       |      |  |      |       |   |  |  |       |  
|Effective income tax benefit rate               |  |      | 12.1% |      |  |      | 14.7% |   |  |  | 19.2% |  
|                                                |  |      |       |      |  |      |       |   |  |  |       |  

Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of our
deferred tax assets and deferred tax liabilities as of
December 26, 2003 and December 27, 2002 are as follows
($000s):

|                                   |                                  |      |        |         |   |   |        |         |  
|---------------------------------- | -------------------------------- | ---- | ------ | ------- | - | - | ------ | ------- | -
|                                   |                                  | 2003 |        | 2002   
|                                   |                                  |      |        |        
|Current Deferred Tax Assets        |                                  |      |        |         |   |   |        |        
|                                   | Inventory valuation reserves     |      | $      | 4,173   |   |   | $      | 5,277   |  
|                                   | Other accrued liabilities        |      |        | 6,780   |   |   |        | 8,723   |  
|                                   | Allowance for doubtful accounts  |      |        | 573     |   |   |        | 810     |  
|                                   | Net operating loss carryforwards |      |        |        |   |   |        | 856     |  
|                                   | Other                            |      |        |        |   |   |        | 568     |  
|                                   |                                  |      |        |         |   |   |        |        
|                                   |                                  | $    | 11,526 |         |   | $ | 16,234 |        
|                                   |                                  |      |        |         |   |   |        |        
|Long-Term Deferred Tax Assets      |                                  |      |        |         |   |   |        |        
|                                   | Lease liabilities                |      | $      | 2,177   |   |   | $      | 4,473   |  
|                                   | Other accrued liabilities        |      |        | 556     |   |   |        | 570     |  
|                                   | Net operating loss carryforwards |      |        | 27,260  |   |   |        | 21,733  |  
|                                   | Tax credit carryover             |      |        | 1,633   |   |   |        | 550     |  
|                                   | Goodwill                         |      |        |        |   |   |        | 2,210   |  
|                                   | Valuation allowance              |      |        | (12,415 | ) |   |        | (10,733 | )
|                                   |                                  |      |        |         |   |   |        |        
|                                   |                                  | $    | 19,211 |         |   | $ | 18,803 |        
|                                   |                                  |      |        |         |   |   |        |        
|Long-Term Deferred Tax Liabilities |                                  |      |        |         |   |   |        |        
|                                   | Property, plant & equipment      |      | $      | 3,804   |   |   | $      | 2,994   |  
|                                   | Foreign liabilities              |      |        |        |   |   |        | 1,845   |  
|                                   | Goodwill                         |      |        | 1,210   |   |   |        | 943     |  
|                                   | Other                            |      |        | 679     |   |   |        | 678     |  
|                                   |                                  |      |        |         |   |   |        |        
|                                   |                                  | $    | 5,693  |         |   | $ | 6,460  |        
|                                   |                                  |      |        |         |   |   |        |        

The valuation allowances as of December 26,
2003, and December 27, 2002, are primarily associated with
foreign net operating loss carry-forwards related to certain
Artesyn subsidiaries. Management has established a valuation
allowance where it believes that it is more likely than
not that it will not realize these deferred tax assets
based on historical tax positions, tax planning

53



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


strategies and expectations about future taxable
income. The valuation allowance increased $1.7 million,
$7.8 million and $0.6 million during 2003, 2002 and
2001, respectively.

Approximately $18.5 million of our net
operating loss carryforwards expire through fiscal 2007 and
$9.3 million through 2023. Certain foreign net operating
loss carryforwards totaling approximately $106.7 million
have an indefinite life. Approximately $64.6 million of our
net operating loss carryforwards are offset by a valuation
allowance (millions).

|               |       |                |      |            |  |  |               |  | 
|-------------- | ----- | -------------- | ---- | ---------- |  |  | ------------- |  | 
|               |       | Net Operating  |      |           
|Country        |       | Loss Available |      | Expiration
|               |       |                |      |           
|United States  |       | $              | 9.3  |            |  |  | 2023          | 
|Austria        |       |                | 60.6 |            |  |  | No expiration | 
|Hungary        |       |                | 18.5 |            |  |  | 2005-2007     | 
|Germany        |       |                | 4.1  |            |  |  | No expiration | 
|United Kingdom |       |                | 11.4 |            |  |  | No expiration | 
|Ireland        |       |                | 25.1 |            |  |  | No expiration | 
|Netherlands    |       |                | 5.5  |            |  |  | No expiration | 
|               |       |                |      |            |  |  |               | 
|               | Total |                | $    | 134.5      |  |  |               |  | 
|               |       |                |      |            |  |  |               | 

The number of years that are open for tax audit
vary depending on the tax jurisdiction. A number of years may
elapse before a particular matter is audited and finally
resolved. While it is often difficult to predict the final
outcome or the timing of resolution of any particular tax
matter, we believe that our financial statements reflect the
probable outcome of known tax contingencies.



|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies



| |                  
| | -----------------
| | Legal Proceedings

On February 8, 2001, VLT, Inc. and Vicor
Corporation filed a suit against us in the United States
District Court of Massachusetts alleging that we have infringed
and are infringing on U.S. Reissue Patent No. 36,098
entitled Optimal Resetting of The Transformers Core
in Single Ended Forward Converters. By agreement, Vicor
Corporation subsequently withdrew as plaintiff. VLT has alleged
that it is the owner of the patent and that we have
manufactured, used or sold electronic power converters with
reset circuits that fall within the claims of the patent. The
suit requests that we pay damages, including royalties, lost
profits, interest, attorneys fees and increased damages
under 35 U.S.C. § 284. We have challenged the validity
of the patent and have denied the infringement claims. Following
factual discovery, the Court entertained briefs and arguments
relating to the interpretation of the relevant patent claims in
the VLT action and three other related cases filed by VLT
against other defendants. On January 3, 2003, the Court
issued four opinions construing relevant language from the
claims. Based on the district courts claim construction
rulings, we reached an agreement with VLT on a stipulated
judgment, which the court entered on May 31, 2003.

In the stipulated judgment, VLT agreed that,
under the district courts construction, most of the
products that were originally accused of infringement
(representing over 90% of the accused sales volume) did not
infringe the patent. In exchange, we have agreed that, under the
district courts claim construction, the patent is valid
and enforceable, and one category of products (representing less
than 10% of the accused sales) did infringe the patent, prior to
its expiration in February of 2002. Due to the patent
expiration, the parties agree that no current Artesyn products
can infringe on the patent.

The respective parties each disagree with certain
aspects of the district courts claim construction, and the
stipulated judgment allowed the parties to appeal the
construction to the United States

54



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Court of Appeals for the Federal Circuit in
Washington, DC. Both parties have now filed such appeals. On
appeal, we are seeking a different claim construction that would
invalidate the patent, thereby exonerating all of our products.
VLT has asked the appellate court to reverse aspects of the
judgment so that it can seek to recapture our sales that did not
infringe under the stipulated judgment. We have agreed with VLT
that if the appellate court changes the claim construction the
parties then will be free to argue their respective positions
about patent validity or invalidity, enforceability or
unenforceability, and infringement or non-infringement, with
respect to all of the accused products. At this time, no
determination of the outcome of the appeals or any proceedings
after the appeals can be reasonably estimated. Although we
believe that we have a strong defense to the claims asserted by
VLT, if we eventually were found liable to pay all of the
damages requested by VLT, such a payment could have a material
adverse effect on our business, operating results and financial
condition. Alternatively, if the judgment is affirmed on appeal,
then the remaining issue will be an accounting of damages that
we owe to VLT on the limited sales of the remaining category of
its products that infringe under the stipulated judgment. The
parties have not agreed as to the standard or amount of damages
that would be owed in that event, but we believe that such
damages would not have a material adverse effect on our
consolidated results of operations, cash flows or financial
position.

We are a party to various other legal
proceedings, which have arisen in the ordinary course of
business. While the results of these matters cannot be predicted
with certainty, we believe that losses, if any, resulting from
the ultimate resolution of these matters will not have a
material adverse effect on our consolidated results of
operations, cash flows or financial position.



| |                     
| | --------------------
| | Purchase Commitments

We have long-term relationships pertaining to the
purchase of certain raw materials with various suppliers as of
December 26, 2003. These purchase commitments are not
expected to exceed Artesyns usage requirements.



| |                  
| | -----------------
| | Lease Obligations

We are obligated under non-cancelable operating
leases for facilities and equipment that expire at various dates
through 2009 and thereafter and contain renewal options. Future
minimum annual rental obligations as of December 26, 2003
are as follows ($000s):

|                    |  |           |        | 
|------------------- |  | --------- | ------ | 
|                    |  | Operating
|Fiscal Year         |  | Leases   
|                    |  |          
|2004                |  | $         | 9,514  | 
|2005                |  |           | 7,326  | 
|2006                |  |           | 1,941  | 
|2007                |  |           | 1,032  | 
|2008                |  |           | 945    | 
|2009 and thereafter |  |           | 1,670  | 
|                    |  |           |        | 
|                    |  | $         | 22,428 | 
|                    |  |           |        | 

Rental expense under operating leases amounted to
$10.2 million, $10.6 million and $9.6 million in
fiscal years 2003, 2002 and 2001, respectively. Sublease income
was $0.2 million, $2.6 million and $2.6 million
for fiscal years 2003, 2002 and 2001, respectively.

A lease liability has been recorded for several
leased facilities no longer deployed in our operations,
including facilities in Broomfield, Colorado; Milpitas,
California and Framingham, Massachusetts. The future contracted
lease obligations have been accrued for as part of our
restructuring

55



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


reserve. The aggregate minimum annual rental
obligations and sublease income under these leases have been
included in the lease commitments table presented above. The
total of these liabilities, which are included in current and
long-term accrued liabilities, was $8.9 million at
December 26, 2003.

11.     Stock-Based
Compensation Plans



| |                           
| | --------------------------
| | Employee Stock Option Plan

During 2000, we established the 2000 Performance
Equity Plan, or PEP, under which we reserved
4,400,000 shares of common stock for granting of either
incentive or nonqualified stock options to key employees and
officers. This was essentially an extension of the 1990
Performance Equity Plan, pursuant to which no options could be
granted after 2000. Options that terminate or expire under the
1990 Plan are available for re-grant under the PEP. Under the
current plan, non-qualified stock options have been granted at
prices not less than the fair market value of the underlying
common stock on the date of each grant as determined by our
Board of Directors. The maximum term of the options is
10 years, although all options granted subsequent to 1997
have been granted with a 5-year term. The options granted in
2003 become exercisable in stages upon the passage of time
ranging from eighteen to thirty-six months from the date of
grant. The vesting of certain options can also be restricted
based on the level of our stock price.



| |                                        
| | ---------------------------------------
| | Outside Directors Stock Option
    Plan

In 1990, we established the 1990 Outside
Directors Stock Option Plan, which was last amended in 2003.
Under the current provisions of this plan, 1,000,000 shares
of common stock are reserved for granting of non-qualified stock
options to our directors who are not employees at exercise
prices not less than the fair market value of the underlying
common stock on the date of each grant. Upon election or
appointment to the Board of Directors and each year he or she is
elected thereafter, outside directors receive options to
purchase 10,000 shares of common stock provided that they
own a specified number of shares of common stock of Artesyn
based on a formula set forth in the plan or as of a previous
grant date. The options granted under the Outside Directors plan
fully vest on the one-year anniversary of the date of grant and
are for a ten-year term.

56



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The following table summarizes activity under all
stock option plans for fiscal years 2003, 2002 and 2001:

|                                                                   |  |         |            |           |  |         |       |           |  |         |            |           |  |   |       |  |  |   |           |   |  |   |       | 
|------------------------------------------------------------------ |  | ------- | ---------- | --------- |  | ------- | ----- | --------- |  | ------- | ---------- | --------- |  | - | ----- |  |  | - | --------- | - |  | - | ----- | 
|                                                                   |  |         |            |           |  |        
|                                                                   |  | 2003    |            | 2002      |  | 2001   
|                                                                   |  |         |            |           |  |        
|                                                                   |  |         |            | Weighted- |  |         |       | Weighted- |  |         |            | Weighted-
|                                                                   |  |         |            | average   |  |         |       | average   |  |         |            | average  
|                                                                   |  |         |            | Exercise  |  |         |       | Exercise  |  |         |            | Exercise 
|                                                                   |  | Options |            | Price     |  | Options |       | Price     |  | Options |            | Price    
|                                                                   |  |         |            |           |  |         |       |           |  |         |            |          
|Options outstanding, beginning of
    year                         |  |         | 7,050,064  |           |  | $       | 12.87 |           |  |         | 7,160,755  |           |  | $ | 14.62 |  |  |   | 5,378,978 |   |  | $ | 18.14 | 
|Options granted                                                    |  |         | 1,008,200  |           |  |         | 6.29  |           |  |         | 1,231,200  |           |  |   | 4.34  |  |  |   | 2,813,850 |   |  |   | 8.58  | 
|Options exercised                                                  |  |         | (70,750    | )         |  |         | 2.87  |           |  |         | (136,003   | )         |  |   | 5.74  |  |  |   | (159,763  | ) |  |   | 5.54  | 
|Options canceled                                                   |  |         | (1,056,155 | )         |  |         | 14.79 |           |  |         | (1,205,888 | )         |  |   | 15.25 |  |  |   | (872,310  | ) |  |   | 18.59 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |            |           |  |   |       |  |  |   |           |   |  |   |       | 
|Options outstanding, end of year                                   |  |         | 6,931,359  |           |  | $       | 11.68 |           |  |         | 7,050,064  |           |  | $ | 12.87 |  |  |   | 7,160,755 |   |  | $ | 14.62 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |            |           |  |   |       |  |  |   |           |   |  |   |       | 
|Options exercisable, end of year                                   |  |         | 3,887,284  |           |  | $       | 15.81 |           |  |         | 3,323,544  |           |  | $ | 17.65 |  |  |   | 3,274,021 |   |  | $ | 16.04 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |            |           |  |   |       |  |  |   |           |   |  |   |       | 
|Weighted-average fair value of options granted
    during the year |  | $       | 3.90       |           |  |         |       |           |  | $       | 2.95       |           |  |   |       |  |  | $ | 5.74      |   |  |   |       | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |            |           |  |   |       |  |  |   |           |   |  |   |       | 

The following table summarizes information about
stock options outstanding at December 26, 2003:

|                         |  |                     |           |                     |  |           |      |         |  |           |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | --------- | ---- | ------- |  | --------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |                     |           |                     |  |          
|                         |  | Options Outstanding |           |                    
|                         |  |                     |           | Options Exercisable
|                         |  |                     |           | Weighted-           |  |           |      |        
|                         |  |                     |           | average             |  | Weighted- |      |         |  | Weighted-
|                         |  |                     |           | Remaining           |  | average   |      |         |  | average  
|                         |  |                     |           | Contractual Life    |  | Exercise  |      |         |  | Exercise 
|Range of Exercise Prices |  | Options             |           | (Years)             |  | Price     |      | Options |  | Price    
|                         |  |                     |           |                     |  |           |      |         |  |          
|$1.42                    |  |                     | 5,000     |                     |  |           | 3.77 |         |  | $         | 1.42  |  |  |  |          |  |  | $ |      | 
|1.82   2.65             |  |                     | 799,500   |                     |  |           | 3.63 |         |  |           | 2.58  |  |  |  | 12,000    |  |  |   | 2.64  | 
|2.69   3.60             |  |                     | 467,250   |                     |  |           | 3.13 |         |  |           | 3.02  |  |  |  | 263,000   |  |  |   | 2.70  | 
|3.61   5.37             |  |                     | 887,400   |                     |  |           | 2.78 |         |  |           | 5.31  |  |  |  | 444,325   |  |  |   | 5.33  | 
|5.50   6.97             |  |                     | 790,000   |                     |  |           | 4.52 |         |  |           | 6.94  |  |  |  | 21,125    |  |  |   | 6.21  | 
|7.19   7.28             |  |                     | 196,900   |                     |  |           | 5.60 |         |  |           | 7.24  |  |  |  | 161,900   |  |  |   | 7.25  | 
|7.50   9.19             |  |                     | 902,800   |                     |  |           | 2.44 |         |  |           | 9.03  |  |  |  | 408,000   |  |  |   | 9.17  | 
|10.09  16.00            |  |                     | 747,154   |                     |  |           | 3.17 |         |  |           | 13.17 |  |  |  | 499,304   |  |  |   | 14.30 | 
|16.44  19.94            |  |                     | 699,565   |                     |  |           | 2.57 |         |  |           | 18.09 |  |  |  | 699,565   |  |  |   | 18.09 | 
|20.13  43.13            |  |                     | 1,435,790 |                     |  |           | 1.78 |         |  |           | 24.51 |  |  |  | 1,378,065 |  |  |   | 24.31 | 
|                         |  |                     |           |                     |  |           |      |         |  |           |       |  |  |  |           |  |  |   |       | 
|                         |  |                     | 6,931,359 |                     |  |           | 2.95 |         |  | $         | 11.68 |  |  |  | 3,887,284 |  |  | $ | 15.81 | 
|                         |  |                     |           |                     |  |           |      |         |  |           |       |  |  |  |           |  |  |   |       | 



| |                              
| | -----------------------------
| | Employee Stock Purchase Plans

In May 1996, the Board of Directors established
an employee stock purchase plan that allowed substantially all
employees to purchase shares of our common stock. Under the
terms of the plan, eligible employees were able to purchase
shares of common stock through the accumulation of payroll
deductions. This program ended on December 28, 2001.
Employees purchased 87,093 shares on the open market
pursuant to the plan in 2001.

57



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The following shares of common stock have been
reserved for future issuance as of December 26, 2003 (000s):

|                                                                 |  |        |        | 
|---------------------------------------------------------------- |  | ------ | ------ | 
|Description                                                      |  | Shares
|                                                                 |  |       
|Conversion of Convertible Senior Subordinated
    Notes          |  |        | 11,161 | 
|Conversion of common stock warrants outstanding                  |  |        | 1,550  | 
|Available for issuance pursuant to stock options
    outstanding |  |        | 6,931  | 
|Available for future grant under stock options
    plans         |  |        | 654    | 
|Available for issuance for 401(k) plan matching
    obligations  |  |        | 704    | 
|                                                                 |  |        |        | 
|                                                                 |  |        | 21,000 | 
|                                                                 |  |        |        | 



|    |                       
|--- | ----------------------
|12. | Employee Benefit Plans

We provide retirement benefits to our employees
through the Artesyn Technologies, Inc. Employees Thrift
and Savings Plan (the Plan), pursuant to which
employees may elect to purchase Company common stock or make
other investment elections. As allowed under Section 401(k)
of the Internal Revenue Code, the Plan provides tax deferred
salary deductions for eligible employees. The Plan permits
substantially all United States employees to contribute up to
20% of their base compensation (as defined) to the Plan, limited
to a maximum amount as set by the Internal Revenue Service.
Artesyn may, at the discretion of the Board of Directors, make a
matching contribution to the Plan. Costs charged to operations
for matching contributions were approximately $0.9 million,
$0.9 million and $1.0 million for 2003, 2002 and 2001,
respectively.

Substantially all employees of our Austrian
subsidiary are entitled to benefit payments upon termination.
The benefit payments are based primarily on the employees
salaries and the number of years of service. At
December 28, 2001, we had recorded a liability of
$1.4 million related to this plan. During 2002, a
substantial portion of this reserve was reclassified as a
restructuring reserve related to the announced closure of our
Kindberg, Austria manufacturing facility. The remaining
liability at December 26, 2003 of $0.5 million relates
to employees that have remained employed by Artesyn after the
closure of the Kindberg facility. We recorded $0.1 million,
$0.2 million and $0.1 million in severance expense
during 2003, 2002 and 2001, respectively, related to this plan.



|    |                                                 
|--- | ------------------------------------------------
|13. | Business Segments and Geographic
    Information

We are organized in two industry segments, Power
Conversion and Communications Products. Power Conversion is
engaged in the business of designing and manufacturing power
supplies and power conversion products for the
telecommunications, wireless infrastructure, networking and
computing markets. Those same markets are serviced by the
Communications Products segment, which provides WAN interfaces,
CPU boards and protocol software. Artesyn sells products
directly to Original Equipment Manufacturers and also to a
network of industrial and retail distributors throughout the
world. Our principal markets are in the United States, Europe
and Asia-Pacific, with the United States and Europe being the
largest based on sales. Sales are made in U.S. dollars and
certain European currencies. Other below represents
the results of Artesyn Solutions, which was sold during 2001.

58



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


The table below presents information about
reportable segments. ($000s)

|                              |                                   |       |   |         |         |      |   |         |          |   |   |         |         |  
|----------------------------- | --------------------------------- | ----- | - | ------- | ------- | ---- | - | ------- | -------- | - | - | ------- | ------- | -
|                              |                                   | 2003  |   | 2002    |         | 2001
|                              |                                   |       |   |         |         |     
|Sales                         |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              | Power Conversion                  |       | $ | 314,412 |         |      | $ | 318,961 |          |   | $ | 392,357 |        
|                              | Communications Products           |       |   | 42,459  |         |      |   | 31,868  |          |   |   | 55,805  |        
|                              | Other                             |       |   |        |         |      |   |        |          |   |   | 45,806  |        
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              |                                   | Total |   | $       | 356,871 |      |   | $       | 350,829  |   |   | $       | 493,968 |  
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|Operating Income (Loss)       |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              | Power Conversion                  |       | $ | (15,774 | )       |      | $ | (98,660 | )        |   | $ | (60,938 | )      
|                              | Communications Products           |       |   | 6,190   |         |      |   | (21,909 | )        |   |   | (4,904  | )      
|                              | Other                             |       |   |        |         |      |   |        |          |   |   | 2,589   |        
|                              | Gain on Sale of Artesyn Solutions |       |   |        |         |      |   |        |          |   |   | 31,308  |        
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              |                                   | Total |   | $       | (9,584  | )    |   | $       | (120,569 | ) |   | $       | (31,945 | )
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|Year-End Assets               |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              | Power Conversion                  |       | $ | 220,973 |         |      | $ | 245,945 |          |   | $ | 332,437 |        
|                              | Communications Products           |       |   | 44,763  |         |      |   | 39,310  |          |   |   | 62,698  |        
|                              | Corporate                         |       |   | 50,940  |         |      |   | 18,332  |          |   |   | 31,348  |        
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              |                                   | Total |   | $       | 316,676 |      |   | $       | 303,587  |   |   | $       | 426,483 |  
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|Capital Expenditures          |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              | Power Conversion                  |       | $ | 6,008   |         |      | $ | 4,883   |          |   | $ | 25,949  |        
|                              | Communications Products           |       |   | 1,053   |         |      |   | 306     |          |   |   | 2,252   |        
|                              | Other/ Corporate                  |       |   | 20      |         |      |   | 41      |          |   |   | 562     |        
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              |                                   | Total |   | $       | 7,081   |      |   | $       | 5,230    |   |   | $       | 28,763  |  
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|Depreciation and Amortization |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              | Power Conversion                  |       | $ | 20,433  |         |      | $ | 23,733  |          |   | $ | 24,171  |        
|                              | Communications Products           |       |   | 1,836   |         |      |   | 2,081   |          |   |   | 8,242   |        
|                              | Other                             |       |   |        |         |      |   |        |          |   |   | 1,330   |        
|                              | Corporate                         |       |   | 668     |         |      |   | 1,164   |          |   |   | 680     |        
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        
|                              |                                   | Total |   | $       | 22,937  |      |   | $       | 26,978   |   |   | $       | 34,423  |  
|                              |                                   |       |   |         |         |      |   |         |          |   |   |        

59



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Information about our operations by geographical
region is shown below. Sales are attributed to geographical
areas based on selling location. Long-lived assets consist of
property, plant and equipment, net, at year-end ($000s):

|                        |                         |      |         |         |  |      |         |         |  |   |         |         | 
|----------------------- | ----------------------- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                        |                         | 2003 |         | 2002    |  | 2001
|                        |                         |      |         |         |  |     
|Sales                   |                         |      |         |         |  |      |         |         |  |   |         |        
|United States           |                         | $    | 223,695 |         |  | $    | 221,355 |         |  | $ | 334,430 |        
|Austria                 |                         |      | 37,982  |         |  |      | 56,303  |         |  |   | 73,408  |        
|Ireland                 |                         |      | 19,024  |         |  |      | 20,534  |         |  |   | 46,543  |        
|Hong Kong               |                         |      | 67,253  |         |  |      | 45,401  |         |  |   | 30,972  |        
|Other foreign countries |                         |      | 8,917   |         |  |      | 7,236   |         |  |   | 8,615   |        
|                        |                         |      |         |         |  |      |         |         |  |   |         |        
|                        | Total sales             |      | $       | 356,871 |  |      | $       | 350,829 |  |   | $       | 493,968 | 
|                        |                         |      |         |         |  |      |         |         |  |   |         |        
|Long-Lived Assets       |                         |      |         |         |  |      |         |         |  |   |         |        
|United States           |                         | $    | 15,843  |         |  | $    | 16,335  |         |  | $ | 27,449  |        
|Austria                 |                         |      | 1,893   |         |  |      | 6,839   |         |  |   | 10,125  |        
|Ireland                 |                         |      | 2,967   |         |  |      | 6,519   |         |  |   | 6,848   |        
|Hong Kong               |                         |      | 32,026  |         |  |      | 35,767  |         |  |   | 45,575  |        
|Other foreign countries |                         |      | 11,481  |         |  |      | 13,171  |         |  |   | 13,294  |        
|                        |                         |      |         |         |  |      |         |         |  |   |         |        
|                        | Total long-lived assets |      | $       | 64,210  |  |      | $       | 78,631  |  |   | $       | 103,291 | 
|                        |                         |      |         |         |  |      |         |         |  |   |         |        
|Net Assets              |                         |      |         |         |  |      |         |         |  |   |         |        
|United States           |                         | $    | 43,940  |         |  | $    | 23,382  |         |  | $ | 54,714  |        
|Austria                 |                         |      | 16,175  |         |  |      | 24,244  |         |  |   | 40,543  |        
|Ireland                 |                         |      | 2,925   |         |  |      | 14,303  |         |  |   | 32,441  |        
|Hong Kong               |                         |      | 31,021  |         |  |      | 35,918  |         |  |   | 61,237  |        
|Other foreign countries |                         |      | 19,976  |         |  |      | 25,599  |         |  |   | 30,310  |        
|                        |                         |      |         |         |  |      |         |         |  |   |         |        
|                        | Net assets              |      | $       | 114,037 |  |      | $       | 123,446 |  |   | $       | 219,245 | 
|                        |                         |      |         |         |  |      |         |         |  |   |         |        

14.     Issuance of
Common Stock

We issued 80,836 and 295,535 shares of
common stock in the first quarter of 2004 and 2003,
respectively, in order to fulfill the commitment made by the
Board of Directors to match the contributions of employees
participating in our 401(k) savings plan, pursuant to which
employees may elect to purchase our common stock or make other
investment elections. The shares issued were registered pursuant
to a shelf registration of 1,000,000 shares of common stock
filed with the Securities and Exchange Commission on
Form S-8 (Commission File Number 333-120854) on
January 31, 2003.

60



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##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


15.     Supplemental
Cash Flow Disclosures

|                                                 |                                                                     |      |   |       |  |      |   |       |  |  |   |       | 
|------------------------------------------------ | ------------------------------------------------------------------- | ---- | - | ----- |  | ---- | - | ----- |  |  | - | ----- | 
|                                                 |                                                                     | 2003 |   | 2002  |  | 2001
|                                                 |                                                                     |      |   |       |  |     
|Cash paid during the year for:                   |                                                                     |      |   |       |  |      |   |       |  |  |   |      
|                                                 | Interest                                                            |      | $ | 1,410 |  |      | $ | 3,816 |  |  | $ | 7,029 | 
|                                                 |                                                                     |      |   |       |  |      |   |       |  |  |   |      
|                                                 | Income taxes                                                        |      | $ | 102   |  |      | $ | 387   |  |  | $ | 192   | 
|                                                 |                                                                     |      |   |       |  |      |   |       |  |  |   |      
|Non-cash investing and financing
    activities: |                                                                     |      |   |       |  |      |   |       |  |  |   |      
|                                                 | Property and equipment acquired under capital
    lease obligations |      | $ |      |  |      | $ |      |  |  | $ | 11    | 
|                                                 |                                                                     |      |   |       |  |      |   |       |  |  |   |      

No federal income tax was paid in 2003 and 2002
due to Artesyns net taxable losses during these years.
Information with regard to Artesyns acquisitions, which
are accounted for under the purchase method of accounting, is as
follows:

|                                                               |                               |      |   |       |  |      |   |       |  |   |     |        | 
|-------------------------------------------------------------- | ----------------------------- | ---- | - | ----- |  | ---- | - | ----- |  | - | --- | ------ | 
|                                                               |                               | 2003 |   | 2002  |  | 2001
|                                                               |                               |      |   |       |  |     
|Fair value of non-cash assets acquired, net of
    liabilities |                               | $    |  |       |  | $    |  |       |  | $ | 106 |       
|                                                               | Goodwill                      |      |   |      |  |      |   | 1,967 |  |   |     | 10,243 | 
|                                                               | Deferred acquisition payments |      |   | 4,259 |  |      |   | 2,368 |  |   |     |       | 
|                                                               |                               |      |   |       |  |      |   |       |  |   |     |       
|                                                               | Cost, net of cash acquired    |      | $ | 4,259 |  |      | $ | 4,335 |  |   | $   | 10,349 | 
|                                                               |                               |      |   |       |  |      |   |       |  |   |     |       

16.     Sale of
Artesyn Solutions, Inc.

During the fourth quarter of 2001, we sold our
component repair and logistics business, Artesyn Solutions,
Inc., to Solectron Global Services, Inc. The purchase price for
the sale was $33.5 million, which is reflected in fiscal
2001 as a source of cash from investing activities. A
substantial portion of the proceeds from the sale was used to
reduce the then outstanding balance on our senior revolving
credit facility. Included in Total Operating Expenses in fiscal
2001 is the pre-tax gain on the sale of the subsidiary of
$31.3 million.

17.     Amortization
and Impairment of Goodwill

We adopted Statement of Financial Accounting
Standards No. 142 on December 29, 2001. Under SFAS
No. 142, we assess goodwill using a two-step approach on an
annual basis, in August of each year, or more frequently if
indicators of impairment exist. SFAS No. 142 states that
potential impairment exists if the fair value of a reporting
unit is less than the carrying value of the assets of that unit.
The amount of the impairment to recognize, if any, is calculated
as the amount by which the carrying value of goodwill exceeds
its implied fair value. Our initial application of SFAS
No. 142 did not indicate an impairment existed.

During 2002, due to adverse business conditions
in our end markets, operating performance was lower than was
initially anticipated. In addition, our stock price had fallen
dramatically during the year, indicating our implied value had
declined. Based on these trends, our earnings forecasts were
revised and we performed an updated assessment of impairment of
goodwill. As a result of this assessment, we recognized an
impairment loss in the Power Conversion segment of
$35.0 million and a loss in the Communications Products
segment of $16.9 million during the third quarter of 2002.
The fair value of each reporting unit was determined by an
independent third-party using the present value of expected
future cash flows. Our 2003 annual assessment under SFAS
No. 142 was performed in August 2003, and no additional
impairment was recognized. As of December 26, 2003, the
balance of goodwill was $20.8 million, and was primarily
recorded on the books of our

61



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Communications Products segment. We will continue
to assess the impairment of goodwill in accordance with SFAS
No. 142 in future periods.

The reporting units on which the goodwill
assessment was performed were determined to be at our segment
level. There were no further distinctions made because there
were no business units below the segment level where discrete
financial information is available, that were regularly reviewed
by segment management and exhibited separate economic
characteristics from the other components of the operating
segment.

As discussed in Note 1, upon our adoption of
SFAS No. 142, goodwill is no longer subject to
amortization. The following table is a reconciliation between
net loss, as reported, and net loss excluding goodwill
amortization for 2001, prior to the adoption of SFAS
No. 142 (000s, except per share data):

|                           |                                                        |      |   |         |  
|-------------------------- | ------------------------------------------------------ | ---- | - | ------- | -
|                           |                                                        | 2001
|                           |                                                        |     
|Reconciliation to Net Loss |                                                        |      |   |        
|                           | Net loss, as reported                                  |      | $ | (31,763 | )
|                           | Amortization of goodwill                               |      |   | 8,081   |  
|                           | Tax effect                                             |      |   | (269    | )
|                           |                                                        |      |   |        
|                           | Net loss excluding effect of goodwill amortization     |      | $ | (23,951 | )
|                           |                                                        |      |   |        
|Adjusted loss per share    |                                                        |      |   |        
|                           | Weighted average common shares  basic
    and diluted |      |   | 38,229  |  
|                           |                                                        |      |   |        
|                           | Loss per share  basic and diluted                     |      | $ | (0.63   | )
|                           |                                                        |      |   |        

18.     Related Party
Transactions

Stephen A. Ollendorff, a director of the Company,
was Of Counsel to the law firm of Kirkpatrick & Lockhart LLP
during all fiscal years presented. Kirkpatrick & Lockhart
LLP acted as counsel for the Company in fiscal years 2003, 2002
and 2001 and received fees of approximately $1.7 million,
$2.5 million and $1.4 million, respectively, in such
fiscal years for various legal services rendered to our Company.

62



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


19.     Selected
Consolidated Quarterly Data (Unaudited)

Data in the table below is presented on the basis
of a 13-week period ($000s, except per share data):

|                              |      |         |        |         |  |         |         |         |  |   |         |      |  |   |         |      | 
|----------------------------- | ---- | ------- | ------ | ------- |  | ------- | ------- | ------- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                              |      | First   |        | Second  |  | Third   |         | Fourth 
|                              |      | Quarter |        | Quarter |  | Quarter |         | Quarter
|                              |      |         |        |         |  |         |         |        
|Fiscal 2003                   |      |         |        |         |  |         |         |         |  |   |         |      |  |   |         |     
|Sales                         |      | $       | 81,856 |         |  | $       | 87,644  |         |  | $ | 88,035  |      |  | $ | 99,336  |     
|Gross profit                  |      |         | 13,390 |         |  |         | 15,346  |         |  |   | 18,237  |      |  |   | 22,281  |     
|Net income (loss)             |      |         | (7,459 | )       |  |         | (4,155  | )       |  |   | (5,244  | )    |  |   | 1,236   | (a) 
|Per share  basic and diluted |      |         | (0.19  | )       |  |         | (0.11   | )       |  |   | (0.14   | )    |  |   | 0.03    |     
|Stock price per common share  |      |         |        |         |  |         |         |         |  |   |         |      |  |   |         |     
|                              | High |         |        | 4.05    |  |         |         | 6.00    |  |   |         | 9.00 |  |   |         | 9.50 | 
|                              | Low  |         |        | 2.60    |  |         |         | 2.74    |  |   |         | 5.42 |  |   |         | 7.01 | 
|Fiscal 2002                   |      |         |        |         |  |         |         |         |  |   |         |      |  |   |         |     
|Sales                         |      | $       | 90,505 |         |  | $       | 90,895  |         |  | $ | 86,020  |      |  | $ | 83,409  |     
|Gross profit (loss)           |      |         | 11,242 |         |  |         | 12,034  |         |  |   | 9,421   |      |  |   | (3,131  | )   
|Net loss                      |      |         | (7,357 | )       |  |         | (10,149 | )       |  |   | (55,671 | )(c) |  |   | (35,645 | )(b)
|Per share  basic and diluted |      |         | (0.19  | )       |  |         | (0.26   | )       |  |   | (1.45   | )    |  |   | (0.93   | )   
|Stock price per common share  |      |         |        |         |  |         |         |         |  |   |         |      |  |   |         |     
|                              | High |         |        | 11.05   |  |         |         | 9.28    |  |   |         | 6.55 |  |   |         | 4.45 | 
|                              | Low  |         |        | 7.90    |  |         |         | 5.00    |  |   |         | 1.55 |  |   |         | 1.03 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The fourth quarter of 2003 reflects increased
    revenue and the effect of cost reductions from restructuring
    actions largely completed in prior quarters. For additional
    information, please refer to Management Discussion and Analysis
    of Financial Condition and Results of Operations located
    elsewhere in this annual report on Form 10-K.
|   
|(b) | Fourth quarter 2002 includes inventory charges
    related to excess and obsolete inventory of $15.5 million
    and restructuring expenses of $17.8 million.                                                                                                                                                                                                    



|    |                                                          
|--- | ---------------------------------------------------------
|(c) | Includes goodwill impairment charge of
    $51.9 million.

The sum of the quarterly earnings (loss) per
share amounts differs from those reflected in the accompanying
Consolidated Statements of Operations due to the weighting of
common and common equivalent shares outstanding during each of
the respective periods.

63



---



##### 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

The current report on Form 8-K filed
May 14, 2002 is incorporated herein by reference. This
report included Item 4 for the reporting of a change in the
Registrants Certifying Accountant, then Arthur Andersen
LLP, and Item 7(c)16 letter addressing the change.



|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

As of December 26, 2003 our management, with
the participation of the Chief Executive Officer and the Chief
Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15(b)
promulgated under the Securities Exchange Act of 1934, as
amended. Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as of
December 26, 2003, our disclosure controls and procedures
were effective in ensuring that material information required to
be disclosed in the reports that we file under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms, including ensuring that such
material information is accumulated and communicated to
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure. During the period covered by this
report, there have been no changes in our internal control over
financial reporting.

PART III



|         |                                     
|-------- | ------------------------------------
|Item 10. | Directors and Executive
    Officers

The information called for by Item 10 is
incorporated herein by reference to our definitive proxy
statement for the 2004 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than
120 days after the close of the fiscal year ended
December 26, 2003.

We have adopted the Artesyn Technologies, Inc.
Code of Business Conduct and Ethics, a code of ethics that
applies to our directors, officers and employees, including our
Chief Executive Officer, Chief Financial Officer, Treasurer,
Corporate Controller and other finance organization employees.
The Code of Ethics is publicly available on our website at
www.artesyn.com. Any substantive amendments to the Code of
Ethics or grant of any waiver from a provision of the Code to
our Chief Executive Officer, Chief Financial Officer, Treasurer,
or the Corporate Controller will be disclosed on our website or
in a report on Form 8-K.



|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The information called for by Item 11 is
incorporated by reference to our definitive proxy statement for
the 2004 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission not later than 120 days
after the close of the fiscal year ended December 26, 2003.



|         |                                                           
|-------- | ----------------------------------------------------------
|Item 12. | Security Owners and Beneficial Ownership by
    Management

The information called for by Item 12 is
incorporated herein by reference to our definitive proxy
statement for the 2004 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than
120 days after the close of the fiscal year ended
December 26, 2003.



|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The information called for by that portion of
Item 13 is incorporated herein by reference to our
definitive proxy statement for the 2004 Annual Meeting of
Stockholders to be filed with the Securities and Exchange
Commission not later than 120 days after the close of the
fiscal year ended December 26, 2003.

64



---



##### 





|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accounting Fees and
    Services

The information called for by Item 14 is
incorporated herein by reference to our definitive proxy
statement for the 2004 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission not later than
120 days after the close of the fiscal year ended
December 26, 2003.

PART IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K



| |     |                                                                     
| | --- | --------------------------------------------------------------------
| | (a) | Financial Statements, Financial Statement
    Schedules and Exhibits



| |                         
| | ------------------------
| | (1) Financial Statements

The following consolidated financial statements
of Artesyn Technologies, Inc. and subsidiaries are filed as part
of this Form 10-K:

|                                                                           |  |      |    | 
|-------------------------------------------------------------------------- |  | ---- | -- | 
|Description                                                                |  | Page
|                                                                           |  |     
|Report of Independent Certified Public Accountants                         |  |      | 35 | 
|Report of Independent Certified Public Accountants                         |  |      | 36 | 
|Consolidated Balance Sheets                                                |  |      | 37 | 
|Consolidated Statements of Operations                                      |  |      | 38 | 
|Consolidated Statements of Shareholders
    Equity and Comprehensive Loss |  |      | 39 | 
|Consolidated Statements of Cash Flows                                      |  |      | 40 | 
|Notes to Consolidated Financial Statements                                 |  |      | 41 | 



| |                                  
| | ---------------------------------
| | (2) Financial Statement Schedules

The following information is filed as part of
this Form 10-K:

|                                                                               |  |  |    | 
|------------------------------------------------------------------------------ |  |  | -- | 
|Report of predecessor Independent Certified
    Public Accountants On Schedule |  |  | 69 | 
|Schedule II  Valuation and
    Qualifying Accounts                            |  |  | 70 | 

Schedules other than the one listed above have
been omitted because they are either not required or not
applicable, or because the required information has been
included in the consolidated financial statements or notes
thereto.



| |                                                        
| | -------------------------------------------------------
| | (3) Exhibits Required by Item 601 of
    Regulation S-K

|          |   |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------- | - | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit # |   | Description
|          |   |            
|          | 3 | .1          |  | By-laws of the Company, as amended, effective
    October 16, 1990  incorporated by reference to
    Exhibit 3.2 of Registrants Registration Statement on
    Form S-4, filed with the Commission on September 25,
    1997, as amended.                                                                                                                                                                                                                 
|          | 3 | .2          |  | Articles of Amendment to Articles of
    Incorporation of the Company, as amended on December 22,
    1998  incorporated by reference to Exhibit 3.4
    of Registrants Annual Report on Form 10-K for the
    fiscal year ended January 1, 1999.                                                                                                                                                                                                        
|          | 4 | .1          |  | Amended and Restated Rights Agreement, dated as
    of November 21, 1998, between the Company and The Bank of
    New York as Rights Agent, including the form of Right
    Certificate and the Summary of Rights to Purchase Preferred
    Shares attached thereto as Exhibits B and C,
    respectively  incorporated by reference to
    Exhibit 4.1 of Registrants Current Report on
    Form 8-K filed with the Commission on December 22,
    1998.
|          | 4 | .2          |  | Purchase agreement between the Registrant, Lehman
    Brothers Inc. and Stephens Inc., dated August 7, 2003
    -incorporated by reference to Exhibit 4.1 of
    Registrants Form S-3 Registration Statement
    (Commission file number 333-109053) filed with the commission on
    September 23, 2003.                                                                                                                                                 

65



---



##### 



|          |    |             |  |                                                                                                                                                                                                                                                                                                                                                            
|--------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit # |    | Description
|          |    |            
|          | 4  | .3          |  | Indenture between the Registrant and The Bank of
    New York, dated August 13, 2003  incorporated by
    reference to Exhibit 4.2 of Registrants Form S-3
    Registration Statement (Commission file number 333-109053) filed
    with the commission on September 23, 2003.                                                                           
|          | 4  | .4          |  | Resale Registration Rights Agreement between the
    Registrant, Lehman Brothers Inc. and Stephens Inc. dated
    August 13, 2003  incorporated by reference to
    Exhibit 4.3 of Registrants Form S-3 Registration
    Statement (Commission file number 333-109053) filed with the
    commission on September 23, 2003.                              
|          | 10 | .1          |  | Lease for facilities of Boschert, Incorporated
    located in Milpitas, California  incorporated by
    reference to Exhibit 10.14 of Registrants Annual
    Report on Form 10-K for the fiscal year ended
    January 3, 1986.                                                                                                                          
|          | 10 | .2          |  | Letter Amendment to Lease of Boschert,
    Incorporated facilities, dated January 9, 1991, located in
    Milpitas, California  incorporated by reference to
    Exhibit 10.8 of Registrants Annual Report on
    Form 10-K for the fiscal year ended December 28, 1990.                                                                                 
|          | 10 | .3          |  | Sublease for facilities of Boschert, Incorporated
    located in Milpitas, California  incorporated by
    reference to Exhibit 10.8 of Registrants Annual
    Report on Form 10-K for the fiscal year ended
    January 1, 1988.                                                                                                                        
|          | 10 | .4          |  | Sublessee Estoppel Certificate to sublease for
    facilities of Boschert, Incorporated, dated February 4,
    1991, located in Milpitas, California  incorporated
    by reference to Exhibit 10.10 of Registrants Annual
    Report on Form 10-K for the fiscal year ended
    December 28, 1990.                                                      
|          | 10 | .5          |  | Employment Agreement, dated as of January 1,
    2000, by and between Artesyn Technologies, Inc., a Florida
    Corporation, and Joseph M. ODonnell 
    incorporated by reference to Exhibit 10.1 of the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2000.                                                        
|          | 10 | .6          |  | Employment Agreement, dated as of January 1,
    2000, by and between Artesyn Technologies, Inc., a Florida
    Corporation, and Richard J. Thompson  incorporated by
    reference to Exhibit 10.2 of the Registrants
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 2000.                                                        
|          | 10 | .7          |  | Grant Agreement, dated October 26, 1994, by
    and among the Industrial Development Authority of Ireland, Power
    Products Ltd. and Computer Products, Inc. 
    incorporated by reference to Exhibit 10.43 of
    Registrants Annual Report on Form 10-K for the fiscal
    year ended December 30, 1994.                                            
|          | 10 | .8          |  | Performance Equity Plan as amended 
    incorporated by reference to Exhibit 10.46 of
    Registrants Annual Report on Form 10-K for the fiscal
    year ended December 29, 1995.                                                                                                                                                                        
|          | 10 | .9          |  | 2000 Performance Equity Plan 
    incorporated by reference to Exhibit 4.1 of
    Registrants registration statement of Form S-8 filed
    with the Commission April 23, 2001.                                                                                                                                                                           
|          | 10 | .10         |  | Agreement by and between Superior
    Investments I, Inc. and the Company, dated January 22,
    1996, regarding the leasing of certain premises and real
    property located in Broomfield, Colorado 
    incorporated by reference to Exhibit 10.27 to
    Form 10-K of Zytec Corporation for the year ended
    December 31, 1995. (File No. 0-22428).
|          | 10 | .11         |  | Third Addendum to Lease Agreement between Zytec
    Corporation and Superior Investments I, Inc., dated
    May 23, 1997  incorporated by reference to
    Exhibit 10.2 to Form 10-Q of Zytec Corporation for the
    quarter ended June 29, 1997.                                                                                                        
|          | 10 | .12         |  | Fourth Addendum to Lease Agreement between Zytec
    Corporation and Superior Investments I, Inc., dated
    June 27, 1997  incorporated by reference to
    Exhibit 10.3 to Form 10-Q of Zytec Corporation for the
    quarter ended June 29, 1997.                                                                                                      
|          | 10 | .13         |  | 1990 Outside Directors Stock Option Plan as
    amended May 8, 2003  incorporated by reference
    to Exhibit 10 of Registrants Form 10-Q filed
    with the Commission on August 4, 2003.                                                                                                                                                               

66



---



##### 



|          |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit # |    | Description
|          |    |            
|          | 10 | .14         |  | Outside Directors Retirement Plan effective
    October 17, 1989, as amended January 25, 1994,
    August 15, 1996, January 29, 1998 and October 28,
    1999, incorporated by reference to Exhibit 10.31 of the
    Registrants Annual Report on Form 10-K for the period
    ended December 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|          | 10 | .15         |  | Stock Purchase Agreement, dated July 31,
    2000, by and among Artesyn Technologies, Inc., Artesyn North
    America, Inc., and AzCore Technologies, Inc. 
    incorporated by reference to Exhibit 10.1 of the
    Registrants Quarterly Report on Form 10-Q for the
    quarterly period ended September 29, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|          | 10 | .16         |  | Share Purchase Agreement, dated March 10,
    2000, by and among Artesyn Communications Products UK Ltd., and
    Zozma Investments Limited, and David Noble 
    incorporated by reference to Exhibit 10.33 of
    Registrants Annual Report of Form 10-K for the period
    ended December 29, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|          | 10 | .17         |  | Stock Purchase Agreement, dated January 12,
    2001, by and among Artesyn Communications Products, Inc. and
    Real-Time Digital, Inc.  incorporated by reference to
    Exhibit 10.1 of the Registrants Quarterly Report on
    Form 10-Q for the quarterly period ended March 30,
    2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | 10 | .18         |  | Securities Purchase Agreement dated
    January 14, 2002, by and between Artesyn Technologies, Inc.
    and Finestar International Limited  incorporated by
    reference to Exhibit 4.1 of the Registrants Current
    Report on Form 8-K/A, filed with the Commission on
    January 24, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|          | 10 | .19         |  | 3% Convertible Note, due January 15, 2007,
    issued by Artesyn Technologies, Inc. to Finestar International
    Limited  incorporated by reference to
    Exhibit 4.2 of the Registrants Current Report on
    Form 8-K/A, filed with the Commission on January 24,
    2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|          | 10 | .20         |  | Warrant to Purchase Shares of Common Stock of
    Artesyn Technologies, Inc., dated January 15, 2002, issued
    by Artesyn Technologies, Inc. to Finestar International
    Limited  incorporated by reference to
    Exhibit 4.3 of Registrants Current Report on
    Form 8-K/A, filed with the Commission on January 24,
    2002.                                                                                                                                                                                                                                                                                                                                                                                                                
|          | 10 | .21         |  | Registration Rights Agreement dated
    January 15, 2002, by and between Artesyn Technologies, Inc.
    and Finestar International Limited  incorporated by
    reference to Exhibit 4.4 of the Registrants Current
    Report on Form 8-K/A, filed with the Commission on
    January 24, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|          | 10 | .22         |  | Stock Purchase Agreement, dated November 20,
    2001, by and among Artesyn Solutions, Inc., Artesyn North
    America, Inc. and Solectron Global Services, Inc. 
    incorporated by reference to Exhibit 10.40 of the
    Registrants Annual Report on Form 10-K filed with the
    Commission on March 8, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|          | 10 | .23         |  | Amendment to Stock Purchase Agreement dated
    November 20, 2001, by and among Artesyn Solutions, Inc.,
    Artesyn North America, Inc. and Solectron Global Services,
    Inc.  incorporated by reference to Exhibit 10.41
    of the Registrants Annual Report on Form 10-K filed
    with the Commission on March 8, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                        
|          | 10 | .24         |  | Waiver and Second Amendment to Credit Agreement,
    dated as of December 3, 2001, by and among Artesyn
    Technologies Inc., a Florida corporation, as a borrower, Artesyn
    Cayman LP, a Cayman Islands exempted limited partnership,
    Artesyn North America, Inc., a Delaware corporation, and Artesyn
    Technologies Communications Products, Inc., a Wisconsin
    corporation, as the initial Subsidiary Borrowers, the financial
    institutions party to the Credit Agreement, as Lenders and Bank
    of America, N.A., as Administrative Agent, Swing Line Lender and
    L/C Issuer.  incorporated by reference to
    Exhibit 10.42 of the Registrants Annual Report on
    Form 10-K filed with the Commission on March 8, 2002.
|          | 10 | .25         |  | Waiver of selected entitlements related to
    Registration Rights Agreement by and between Artesyn
    Technologies, Inc., a Florida corporation, and Finestar
    International Limited, a British Virgin Islands
    corporation.  incorporated by reference to
    Exhibit 10.1 of Registrants Quarterly report on
    Form 10-Q filed with the Commission on May 8, 2002.                                                                                                                                                                                                                                                                                                                                                                        

67



---



##### 



|          |    |             |  |                                                                                                                                                                                                                                                                                                                                                                       
|--------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit # |    | Description
|          |    |            
|          | 10 | .26         |  | Loan and Security Agreement dated March 28,
    2003 by and among Fleet Capital Corporation, Artesyn
    Technologies, Inc. and certain of its subsidiaries 
    incorporated by reference to Exhibit 10.1 of the
    Registrants current report on Form 8-K, filed with
    the Commission April 3, 2003.                                                          
|          | 10 | .27         |  | Promissory Note Payoff Agreement, dated
    August 1, 2003, by and between ARTESYN TECHNOLOGIES INC., a
    Florida Corporation, and FINESTAR INTERNATIONAL LIMITED, a
    British Virgin Islands corporation  incorporated by
    reference to Exhibit 10.1 of the Registrants
    quarterly report on Form 10-Q filed with the Commission on
    November 7, 2003.
|          | 10 | .28         |  | Supplemental agreement made the 5th day of
    September 2003 between the INDUSTRIAL DEVELOPMENT AGENCY
    (IRELAND), ARTESYN INTERNATIONAL LIMITED, and ARTESYN
    TECHNOLOGIES, INC.  incorporated by reference to
    Exhibit 10.2 of the Registrants quarterly report on
    Form 10-Q filed with the Commission on November 7,
    2003.                     
|          | 21 |             |  | List of subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                  
|          | 23 | .1          |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                         
|          | 31 | .1          |  | Certification by the Chief Executive Officer
    pursuant to pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                           
|          | 31 | .2          |  | Certification by the Chief Financial Officer
    pursuant to pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                           
|          | 32 | .1          |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted,
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                       
|          | 32 | .2          |  | Certification by the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted,
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                       

(b) Reports on Form 8-K



| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | During the thirteen week period ended
    December 26, 2003, we filed the following current reports
    on Form 8-K:
|
| | a) On October 21, 2003, we announced 2003
    third quarter financial results.                                      

68



---



##### 



REPORT OF PREDECESSOR INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

ON SCHEDULE


To Artesyn Technologies, Inc.:

We have audited in accordance with auditing
standards generally accepted in the United States, the
consolidated financial statements of Artesyn Technologies, Inc.
and subsidiaries and have issued our report thereon dated
January 21, 2002. Our audits were made for the purpose of
forming an opinion on those consolidated financial statements
taken as a whole. The schedule listed in Item 15(a)(2) is
the responsibility of the Companys management and is
presented for purposes of complying with the Securities and
Exchange Commission rules and is not part of the basic
consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of
the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.



| |                    
| | -------------------
| | ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,

January 22, 2002.


This is a copy of the report on schedule
previously issued by Arthur Andersen LLP in connection with
Artesyns Annual Report on Form 10-K for the year
ended December 28, 2001. This audit report has not been
reissued by Arthur Andersen LLP in connection with this filing
on Form 10-K. The schedule listed under Item 14 in the
previous year is listed under Item 15 in this report.

We will not be able to obtain the written consent
of Arthur Andersen LLP as required by Section 7 of the
Securities Act of 1933 for any periodic report or registration
statement we may file in the future. Accordingly, investors will
not be able to sue Arthur Andersen LLP pursuant to
section 11(a)(4) of the Securities Act with respect to any
such filings and, therefore, ultimate recovery from Arthur
Andersen LLP may also be limited as a result of Arthur Andersen
LLPs financial condition or other matters resulting from
the various civil and criminal lawsuits against that firm.

69



---



##### 



SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

For the Years Ended on the Friday Nearest
December 31 ($000s)

|                                            |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        |  | 
|------------------------------------------- | -------------------- | ---------- | ------ | ---------- |  | ---------- | ------ | ----------- |  | ---------- | - | ------ |  |  | -- | - |  | - | ------ |  |  | - | ------ |  | 
|                                            |                      |            |        |            |  |            |        |            
|COLUMN A                                    |                      | COLUMN B   |        | COLUMN C   |  | COLUMN D   |        | COLUMN E   
|                                            |                      |            |        |            |  |            |        |            
|                                            |                      |            |        |            |  |            |        |            
|                                            |                      |            |        | Additions  |  | Deductions |        |            
|                                            |                      |            |        |            |  |            |        |            
|                                            |                      | Balance at |        | Charged to |  | Charged to |        |             |  | Balance at
|                                            |                      | Beginning  |        | Costs &    |  | Other      |        |             |  | End of    
|Description                                 |                      | of Period  |        | Expenses   |  | Accounts   |        | Description |  | Amount     |   | Period
|                                            |                      |            |        |            |  |            |        |             |  |            |   |       
|Fiscal Year 2003:                           |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|Reserve deducted from asset                 |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|                                            | To which it applies: |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        |  | 
|Accounts Receivable allowances              |                      | $          | 3,121  |            |  | $          | 1,418  |             |  |            |  |        |  |  | (1 | ) |  | $ | 1,708  |  |  | $ | 2,831  | 
|Inventory valuation reserve                 |                      |            | 39,451 |            |  |            | 1,874  |             |  |            |  |        |  |  | (1 | ) |  |   | 17,625 |  |  |   | 23,700 | 
|Valuation allowance for deferred tax assets |                      |            | 10,733 |            |  |            | 1,682  |             |  |            |  |        |  |  |    |   |  |   |       |  |  |   | 12,415 | 
|Fiscal Year 2002:                           |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|Reserve deducted from asset                 |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|                                            | To which it applies: |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        |  | 
|Accounts Receivable allowances              |                      | $          | 4,140  |            |  | $          | 356    |             |  |            |  |        |  |  | (1 | ) |  | $ | 1,375  |  |  | $ | 3,121  | 
|Inventory valuation reserve                 |                      |            | 37,212 |            |  |            | 25,818 |             |  |            |  |        |  |  | (1 | ) |  |   | 23,579 |  |  |   | 39,451 | 
|Valuation allowance for deferred tax assets |                      |            | 2,910  |            |  |            | 7,823  |             |  |            |  |        |  |  |    |   |  |   |       |  |  |   | 10,733 | 
|Fiscal Year 2001:                           |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|Reserve deducted from asset                 |                      |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        | 
|                                            | To which it applies: |            |        |            |  |            |        |             |  |            |   |        |  |  |    |   |  |   |        |  |  |   |        |  | 
|Accounts Receivable allowances              |                      | $          | 3,571  |            |  | $          | 2,059  |             |  |            |  |        |  |  | (1 | ) |  | $ | 1,490  |  |  | $ | 4,140  | 
|Inventory valuation reserve                 |                      |            | 23,844 |            |  |            | 31,722 |             |  |            |  |        |  |  | (1 | ) |  |   | 18,354 |  |  |   | 37,212 | 
|Valuation allowance for deferred tax assets |                      |            | 2,342  |            |  |            | 568    |             |  |            |  |        |  |  |    |   |  |   |       |  |  |   | 2,910  | 



---



|    |                                     
|--- | ------------------------------------
|(1) | The reduction relates to charge-offs

70



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                           
| | --------------------------
| | ARTESYN TECHNOLOGIES, INC.
| | (Company)                 



| |     |                        
| | --- | -----------------------
| | By: | /s/ JOSEPH M. ODONNELL

| |                                          
| | -----------------------------------------
| |                                          
| | Joseph M. ODonnell                      
| | Chairman of the Board,                   
| | President and Chief Executive
    Officer

Dated: March 10, 2004

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

|                                               |  |                                                                                |  |      |                | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------ |  | ---- | -------------- | 
|Signature                                      |  | Title                                                                          |  | Date
|                                               |  |                                                                                |  |     
|/s/ JOSEPH M. ODONNELLJoseph M. ODonnell     |  | Chairman of the Board, President and Chief
    Executive Officer, and Director |  |      | March 10, 2004 | 
|                                              
|/s/ RICHARD J. THOMPSONRichard J. Thompson     |  | Vice President  Finance, Chief
    Financial Officer, and Secretary           |  |      | March 10, 2004 | 
|                                              
|/s/ EDWARD S. CROFTEdward S. Croft, III        |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ LAWRENCE J. MATTHEWSLawrence J. Matthews   |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ STEPHEN A. OLLENDORFFStephen A. Ollendorff |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ PHILLIP A. O REILLYPhillip A. OReilly     |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ BERT SAGERBert Sager                       |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ A. EUGENE SAPP, JR.A. Eugene Sapp, Jr.     |  | Director                                                                       |  |      | March 10, 2004 | 
|                                              
|/s/ RONALD D. SCHMIDTRonald D. Schmidt         |  | Director                                                                       |  |      | March 10, 2004 | 

71



---



##### 



|                               |  |          |  |      |                | 
|------------------------------ |  | -------- |  | ---- | -------------- | 
|Signature                      |  | Title    |  | Date
|                               |  |          |  |     
|/s/ LEWIS SOLOMONLewis Solomon |  | Director |  |      | March 10, 2004 | 
|                              
|/s/ JOHN M. STEELJohn M. Steel |  | Director |  |      | March 10, 2004 | 

72



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##### 



INDEX TO EXHIBITS

|        |      |             |  |                                                                                                                                                                
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 21   |             |  | List of subsidiaries of the Company.                                                                                                                           
|        | 23.1 |             |  | Consent of Ernst & Young LLP.                                                                                                                                  
|        | 31.1 |             |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                    
|        | 31.2 |             |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                    
|        | 32.1 |             |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
|        | 32.2 |             |  | Certification by the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.

73