##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 2, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission file number 1-11098
   SOLECTRON CORPORATION
 (Exact name of registrant as
    specified in its charter)
   Delaware

94-2447045(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)    847 Gibraltar Drive
 Milpitas, California 95035
 (Address of principal executive
    offices including zip code)
   (408) 957-8500
 (Registrants telephone
    number, including area code)
  þ o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
    one-to-one




---



##### 



SOLECTRON
    CORPORATION
  INDEX TO
    FORM 10-Q
  PART I.
    FINANCIAL INFORMATIONItem 1.


Financial
    Statements (unaudited)


4Condensed
    Consolidated Balance Sheets at March 2, 2007 and at
    August 25, 2006


4Condensed
    Consolidated Statements of Operations for the three and six
    months ended March 2, 2007 and February 24,
    2006


5Condensed
    Consolidated Statements of Comprehensive Income for the three
    and six months ended March 2, 2007 and February 24,
    2006


6Condensed
    Consolidated Statements of Cash Flows for the six months ended
    March 2, 2007 and February 24, 2006


7Notes to Condensed
    Consolidated Financial Statements (unaudited)


8Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


28Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


42Item 4.


Controls and
    Procedures


42PART II.
    OTHER INFORMATIONItem 1.


Legal
    Proceedings


43Item 1a.


Risk
    Factors


43Item 1b.


Unresolved Staff
    Comments


52Item 2.


Purchase of Equity
    Securities


52Item 6.


Exhibits


53Signatures


54EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




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##### Table of Contents



Cautionary
    Statement Regarding Forward-Looking Statements
  With the exception of historical facts, the statements
    contained in this quarterly report are forward-looking
    statements within the meaning of Section 27A of the
    Securities Act of 1933, as amended (the Securities
    Act), and Section 21E of the Securities Exchange Act
    of 1934, as amended (the Exchange Act), and are
    subject to the safe harbor provisions set forth in the Exchange
    Act. These forward-looking statements relate to matters
    including, but not limited to:
  
    anticipated sales and future operating results;
    our anticipation of the timing and amounts of our future
    obligations and commitments and our ability to meet those
    commitments;
    the calculations of taxes due and the adequacy of our reserves
    for potential tax liabilities and credits for open periods;
    our ability to successfully defend against proposed IRS
    adjustments to prior year income tax returns;
    the amount of available future cash and our belief that our cash
    and cash equivalents, short-term investments, lines of credit
    and cash to be generated from continuing operations will be
    sufficient for us to meet our obligations for the next twelve
    months;
    the adequacy of our restructuring provisions and adequacy and
    timing of our restructuring activities and their impact on our
    business or results of operations;
    the anticipated financial impact of recent and future
    acquisitions and divestitures and the adequacy of our provisions
    for indemnification obligations pursuant to such transactions;
    our ability to comply with the requirements of Section 404
    of the Sarbanes-Oxley Act of 2002;
    our exposure to foreign currency exchange rate fluctuations;
    our belief that our current or future environmental liability
    exposure related to our facilities will not be material to our
    business, financial condition or results of operations;
    the impact of any litigation;
    the impact of customer defaults or bankruptcies;
    our ability to implement our enterprise resource planning system
    and the impact of deficiencies in our IT systems;
    our characterization of the markets in which we do business,
    including our ability to earn increased margins in certain
    growth markets; and
    various other forward-looking statements contained in
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations.  We intend that our forward-looking statements be subject to
    the safe harbors created by the Exchange Act. The
    forward-looking statements are generally accompanied by words
    such as may, will, could,
    should, intend, anticipate,
    believe, estimate, expect,
    continue and other similar words and statements. Our
    forward-looking statements are based on current expectations,
    forecasts and assumptions and are subject to risks,
    uncertainties and changes in condition, significance, value and
    effect, including those discussed under the heading Risk
    Factors in this report and in our other reports filed with
    the Securities and Exchange Commission. Such risks,
    uncertainties and changes in condition, significance, value and
    effect could cause our actual results to differ materially from
    our anticipated outcomes. Although we believe that the
    assumptions underlying the forward-looking statements are
    reasonable, any of the assumptions could prove inaccurate.
    Therefore, we can give no assurance that the results implied by
    these forward-looking statements will be realized. The inclusion
    of forward-looking information should not be regarded as a
    representation by our company or any other person that the
    future events, plans or expectations contemplated by Solectron
    will be achieved. Furthermore, past performance in operations
    and share price is not necessarily indicative of future
    performance. We disclaim any intention or obligation to update
    or revise any forward-looking statements contained herein,
    whether as a result of new information, future events or
    otherwise.
 3




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  SOLECTRON
    CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS  March 2,


August 25,2007


2006(In millions)(Unaudited)ASSETSCurrent assets:Cash, cash equivalents and
    short-term investments*

$
1,085.6


$
1,180.5Accounts receivable, net


1,390.6



1,429.3Inventories


1,799.5



1,516.1Prepaid expenses and other current
    assets


343.4



225.8Total current assets


4,619.1



4,351.7Property and equipment, net


741.4



673.4Goodwill


155.9



155.2Other assets


124.8



193.3Total assets

$
5,641.2


$
5,373.6LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt

$
25.1


$
89.5Accounts payable


1,891.0



1,616.7Accrued employee compensation


145.5



170.4Accrued expenses and other current
    liabilities


478.7



427.6Total current liabilities


2,540.3



2,304.2Long-term debt


616.0



619.4Other long-term liabilities


36.7



36.3Total liabilities


3,193.0



2,959.9Commitments and contingenciesStockholders equity:Common stock


0.9



1.0Additional paid-in capital


7,593.4



7,585.2Accumulated deficit


(5,052.0
)


(5,073.3
)Accumulated other comprehensive
    loss


(94.1
)


(99.2
)Total stockholders equity


2,448.2



2,413.7Total liabilities and
    stockholders equity

$
5,641.2


$
5,373.6     *
    
    Includes $16.8 million and $31.6 million of restricted
    cash balances as of March 2, 2007 and August 25, 2006,
    respectively, and $0 million and $22.9 million of
    short-term investments as of March 2, 2007 and
    August 25, 2006, respectively.   4




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##### Table of Contents



SOLECTRON
    CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006(In millions, except


(In millions, exceptper share data)


per share data)(Unaudited)


(Unaudited)Net sales

$
2,901.9


$
2,499.6


$
5,901.0


$
4,956.0Cost of sales


2,749.1



2,370.6



5,598.8



4,701.4Gross profit


152.8



129.0



302.2



254.6Operating expenses:Selling, general and administrative


116.7



104.3



226.5



211.7Restructuring and impairment costs


16.5



5.6



51.1



6.5Operating income


19.6



19.1



24.6



36.4Interest income


7.4



12.3



17.6



24.4Interest expense


(5.1
)


(6.9
)


(12.4
)


(13.6
)Other expense  net


(1.9
)


(1.9
)


(2.8
)


Operating income from continuing
    operations before income taxes


20.0



22.6



27.0



47.2Income tax expense


4.4



5.5



4.8



9.9Income from continuing operations


15.6



17.1



22.2



37.3Discontinued operations:(Loss) income from discontinued
    operations before income taxes, income taxes of $0


(0.3
)


13.3



(0.9
)


17.1(Loss) income from discontinued
    operations


(0.3
)


13.3



(0.9
)


17.1Net income

$
15.3


$
30.4


$
21.3


$
54.4Basic net income per share:Continuing operations

$
0.02


$
0.02


$
0.02


$
0.04Discontinued operations






0.01







0.02Basic net income per share

$
0.02


$
0.03


$
0.02


$
0.06Diluted net income per share:Continuing operations

$
0.02


$
0.02


$
0.02


$
0.04Discontinued operations






0.01







0.02Diluted net income per share

$
0.02


$
0.03


$
0.02


$
0.06Shares used to compute basic net
    income per share


896.0



908.8



895.3



917.3Shares used to compute diluted net
    income per share


899.4



909.7



898.0



918.1    5




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##### Table of Contents



SOLECTRON
    CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006(In millions)(Unaudited)Net income

$
15.3


$
30.4


$
21.3


$
54.4Net loss on derivative instruments


(0.1
)






(0.1
)


Other comprehensive income:Foreign currency translation
    adjustments, net


3.9



8.6



5.1



9.0Comprehensive income

$
19.1


$
39.0


$
26.3


$
63.4      6




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##### Table of Contents



SOLECTRON
    CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  Six Months EndedMarch 2,


February 24,2007


2006(In millions)(Unaudited)Cash flows from operating
    activities:Net income

$
21.3


$
54.4Adjustments to reconcile net income
    to net cash used in operating activities:Income (loss) from discontinued
    operations


0.9



(17.1
)Depreciation and amortization


83.4



87.5Impairment of property, equipment,
    goodwill and other long-term assets


3.8



10.3Stock-based compensation


13.8



10.2Changes in operating assets and
    liabilities:Accounts receivable, net of
    allowance


38.7



4.5Inventories


(283.4
)


(237.4
)Prepaid expenses and other assets


(121.4
)


(27.4
)Accounts payable


274.3



59.0Accrued expenses and other current
    liabilities


36.6



(14.0
)Net cash provided by (used) in
    operating activities of continuing operations


68.0



(70.0
)Net cash used in operating
    activities of discontinued operations


(2.5
)


(8.2
)Net cash provided by (used in)
    operating activities


65.5



(78.2
)Cash flows from investing
    activities:Change in restricted cash and cash
    equivalents


14.8



(18.0
)Sale of available for
    sale securities


22.9



11.3Purchase of facilities previously
    under synthetic lease


(13.2
)


Acquisitions, net of cash received


(12.9
)


Capital expenditures


(83.4
)


(109.7
)Proceeds from sale of property and
    equipment


19.1



4.4Receipts from discontinued
    operations






8.9Net cash used in investing
    activities of continuing operations


(52.7
)


(103.1
)Net cash provided by investing
    activities of discontinued operations






17.1Net cash used in investing
    activities


(52.7
)


(86.0
)Cash flows from financing
    activities of continuing operations:Net repayment on bank lines of
    credit and other debt arrangements


(3.7
)


(1.2
)Proceeds from issuance of debt






147.4Payments made to redeem ACES/Senior
    Notes


(64.3
)


Common stock repurchase


(10.0
)


(180.4
)Proceeds from stock issued under
    option and employee purchase plans


4.5



5.1Net cash used in financing
    activities of continuing operations


(73.5
)


(29.1
)Net cash provided by (used in)
    financing activities of discontinued operations


2.5



(8.9
)Net cash used in financing
    activities


(71.0
)


(38.0
)Effect of exchange rate changes on
    cash and cash equivalents


1.0



Net decrease in cash and cash
    equivalents


(57.2
)


(202.2
)Cash and cash equivalents of
    continuing operations at beginning of period


1,126.0



1,682.8Cash and cash equivalents of
    discontinued operations at beginning of period






Total cash and cash equivalents at
    beginning of period


1,126.0



1,682.8Cash and cash equivalents of
    continuing operations at end of period


1,068.8



1,480.6Cash and cash equivalents of
    discontinued operations at end of period






Total cash and cash equivalents at
    end of period

$
1,068.8


$
1,480.6SUPPLEMENTAL
    DISCLOSURESNon-cash investing activities:Purchase price of facilities
    previously under synthetic lease

$
81.1Cancellation of receivable as
    payment for facilities

$
(74.5
)    7




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##### Table of Contents



SOLECTRON
    CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements

(Unaudited)  NOTE 1 
    Basis of Presentation and Recent Accounting
    Pronouncements
  Basis
    of Presentation
  Form 10-K
    53-week
    Research
    and Development Expenses
    Recent
    Accounting Pronouncements
   8




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##### Table of Contents



No. 06-03, 06-03). 06-03 06-03 06-03
  Reclassifications
    NOTE 2 
    Stock-Based Compensation
   9




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##### Table of Contents



No. FAS 123R-3
    Stock
    Options
      Three Months Ended

Six Months EndedMarch 2,

February 24,

March 2,

February 24,Stock Options

2007

2006

2007

2006Expected volatility

58%

59%

58%

52%  59%Dividends Yield

zero

zero

zero

zeroExpected life

5.15 years

4.32 years

4.43 years to 5.15 years

4.32 years to 4.91 yearsRisk-free rate

4.53%

4.35%

4.53% to 4.57%

4.26% to 4.35%   Three Months Ended

Six Months EndedMarch 2,

February 24,

March 2,

February 24,Employee Stock Purchase Plan

2007

2006

2007

2006Weighted-average volatility

30%  58%

30%

30%  58%

30%  44%Dividends Yield

zero

zero

zero

zeroExpected life

6 months

6 months

6 months

6 monthsRisk-free rate

4.95%

4.43%

4.95%

3.94%  4.43%  10




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##### Table of Contents



Stock


WeightedOption


AverageAwards


ExerciseOutstanding


PriceBalance, August 25, 2006


45,012,363


$
9.09Granted


718,233


$
3.21Exercised


13,700


$
2.09Forfeited


334,327


$
3.80Cancelled


1,902,567


$
28.73Balance, November 24, 2006


43,480,002


$
8.17Exercisable at November 24,
    2006


35,139,930


$
9.22Balance, November 24, 2006


43,480,002


$
8.17Granted


7,389,068


$
3.49Exercised


7,740


$
2.35Forfeited


429,754


$
3.97Cancelled


1,295,618


$
10.80Balance, March 2, 2007


49,135,958


$
7.44Exercisable at March 2, 2007


35,501,315


$
8.91         Employee
    Stock Purchase Plan
   11




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##### Table of Contents



Restricted
    Stock Awards and Discounted Stock Options
      NOTE 3 
    Stock Repurchase
    NOTE 4 
    Inventories
    March 2,


August 25,2007


2006Raw materials

$
1,141.3


$
1,127.0Work-in-process


175.1



202.2Finished goods


483.1



186.9Total

$
1,799.5


$
1,516.1    12




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##### Table of Contents



NOTE 5 
    Accounts Receivable, Net
    March 2,


August 25,2007


2006Accounts receivable

$
1,397.6


$
1,443.8Less: Allowance for doubtful
    accounts


7.0



14.5Accounts receivable, net

$
1,390.6


$
1,429.3   NOTE 6 
    Property and Equipment, Net
    March 2,


August 25,2007


2006Land

$
61.8


$
43.5Buildings and improvements


412.3



367.1Leasehold improvements


86.0



100.8Furniture, fixtures, equipment and
    other


1,073.2



1,040.0Computer equipment and software


347.3



338.31,980.6



1,889.7Less: Accumulated depreciation and
    amortization


1,239.2



1,216.3Property and equipment, net

$
741.4


$
673.4   NOTE 7 
    Debt
  8.00% Senior
    Subordinated Notes due 2016
   13




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##### Table of Contents



0.5% Convertible
    Senior Notes due 2034
          7.375% Senior
    Notes
    Adjustable
    Conversion-Rate Equity Securities (ACES)
       14




---



##### Table of Contents



Liquid
    Yield Option Notes
    (LYONstm )
  tm tm
  tm tm
  Credit
    Facility
  sub-limit.
  NOTE 8 
    Derivative Instruments
     15




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##### Table of Contents



NOTE 9 
    Commitments and Contingencies
  Future
    Minimum Lease Obligations
    Payments Due by PeriodShort-

Q3 08-Total

Term

Q4 08

FY09

FY10

FY11

FY12

Thereafter(In millions)Operating leases

$
143.1


$
34.4


$
14.6


$
26.0


$
20.8


$
13.9


$
11.1


$
22.3   Legal
    Proceedings
      Environmental
    Liability
      SOP 96-1
 16




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##### Table of Contents



clean-ups
  NOTE 10 
    Taxes
             17




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##### Table of Contents



NOTE 11 
    Segment Information and Geographic Information
        Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Geographic net sales:United States

$
822.7


$
808.5


$
1,745.2


$
1,605.2Other North and Latin America


528.7



385.6



981.2



743.6Europe


392.2



288.8



752.1



602.7Malaysia


483.6



515.3



1,080.0



1,012.1China


344.3



279.1



727.0



538.6Other Asia Pacific


330.4



222.3



615.5



453.8$
2,901.9



2,499.6


$
5,901.0


$
4,956.0     18




---



##### Table of Contents



March 2,


August 25,2007


2006Long-lived assets:United States

$
191.0


$
292.0Other North and Latin America


157.9



167.7Europe


124.2



142.6Asia Pacific


268.3



287.5$
741.4


$
889.8     Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Computing & Storage


34.0
%


32.8
%


32.9
%


33.3
%Networking


20.9
%


27.0
%


23.6
%


26.3
%Communications


20.7
%


18.3
%


20.2
%


18.3
%Consumer


11.9
%


9.5
%


11.4
%


9.1
%Industrial


8.4
%


8.0
%


8.2
%


8.1
%Automotive


1.9
%


2.7
%


1.8
%


3.1
%Other


2.2
%


1.7
%


1.9
%


1.8
%Total


100.0
%


100.0
%


100.0
%


100.0
%     Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Cisco Systems


14.1
%


18.1
%


16.5
%


17.4
%Nortel Networks



*


11.7
%



*


11.0
%Hewelett-Packard


10.6
%



*


10.0
%


*     (*)
    Less than 10%    NOTE 12 
    Restructuring and Impairment
   19




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##### Table of Contents



No. 94-3,
  Overview
    of Restructuring Plans
  Fiscal
    Year 2007 Restructuring Plan
    
    Close or consolidate approximately 700,000 square feet of
    facilities in Western Europe and North America.
    Reducing approximately 1,200 to 1,400 employees at the
    facilities being closed or consolidated. Although there may be a
    potential decrease from the original plan estimate of 1,400
    employees, severance costs will still be in the range provided.
    Impair certain long-lived assets (primarily buildings and
    leasehold improvements) in connection with the facilities being
    vacated and equipment made excess or obsolete to the extent that
    we would be unable to recover their carrying value upon sales to
    third parties.       20




---



##### Table of Contents



Fiscal
    Year 2007 Phase 2 Restructuring Plan
    
    Close or consolidate approximately 400,000 square feet of
    facilities in Western Europe and North America.
    Reduce approximately 1,300 to 1,500 employees at the facilities
    being closed or consolidated.
    Impair certain long-lived assets (primarily buildings and
    leasehold improvements) in connection with the facilities being
    vacated and equipment made excess or obsolete to the extent that
    we would be unable to recover their carrying value upon sales to
    third parties.    Fiscal
    Year 2005 Restructuring Plan
    
    Closing the Companys facilities in Hillsboro, Oregon;
    Winnipeg, Canada; Lincoln, California; Turnhout, Belgium; and
    Munich, Germany.
    Eliminating approximately 2,500 positions (1) at the
    facilities being closed; (2) at the Companys
    facilities in Bordeaux, France; Dunfermline, Scotland;
    Guadalajara, Mexico; Jaguariuna, Brazil; and other facilities;
    and (3) within the Companys material procurement and
    sales organizations in Europe and North America. These actions
    included the elimination of certain positions, the migration of
    certain functional activities to facilities in lower cost
    geographies and the outsourcing of certain activities.
    Impairing certain long-lived assets (primarily building and
    leasehold improvement) in connection with the facilities being
    vacated and equipment made obsolete to the extent that Solectron
    would be unable to recover their carrying value upon sales to
    third parties.    Fiscal
    Year 2004 Restructuring Plan
   21




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##### Table of Contents



Legacy
    Restructuring Plans
        Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006


NatureLoss on disposal of and impairment
    of equipment and facilities, net

$
3.3


$
5.1



4.7


$
8.5


non-cashIntangible asset impairment
    charge, net














1.9


non-cashTotal impairment of equipment,
    facilities and intangibles


3.3



5.1



4.7



10.4Severance and benefit costs
    (reversal)


7.9



(2.8
)


37.5



(9.9
)

cashNet adjustment to facility lease
    loss accrual


4.7



2.1



7.9



4.5


cashNet adjustment to equipment lease
    loss accrual






0.1







0.1


cashOther exit costs


0.6



1.1



1.0



1.4


cashTotal cash restructuring


13.2



0.5



46.4



(3.9
)Total cash and non-cash
    restructuring and impairment

$
16.5


$
5.6


$
51.1


$
6.5  22




---



##### Table of Contents



Restructuring
    Accrual
    Severance


Lease Facilitiesand Benefits


and Equipment


Other


TotalBalance of accrual at
    August 25, 2006

$
7.1


$
23.1


$
0.1


$
30.3Q1 FY07 Provision


29.8



2.9



0.4



33.1Q1 FY07 Provision adjustments


(0.2
)










(0.2
)Q1 FY07 Cash payments


(3.3
)


(9.7
)


(0.5
)


(13.5
)Balance of accrual at
    November 24, 2006


33.4



16.3







49.7Q2 FY07 Provision


8.4



4.2



0.6



13.2Q2 FY07 Provision adjustments


(0.5
)


0.4







(0.1
)Q2 FY07 Cash payments


(12.0
)


(4.1
)


(0.5
)


(16.6
)Balance of accrual at
    March 2, 2007

$
29.3


$
16.8


$
0.1


$
46.2     Restructuring
    Activity by Plan
    Fiscal


Fiscal


Fiscal


Legacy2007 Plan


2005 Plan


2004 Plan


Plans


TotalBalance of accrual at
    August 25, 2006

$



$
7.1


$
2.1


$
21.1


$
30.3Q1 FY 2007 Provision


29.6



0.7



0.7



2.1



33.1Q1 FY 2007 Provision adjustments






(0.1
)






(0.1
)


(0.2
)Q1 FY 2007 Cash payments


(3.1
)


(0.8
)


(0.2
)


(9.4
)


(13.5
)Balance of accrual at
    November 24, 2006

$
26.5


$
6.9


$
2.6


$
13.7


$
49.7Q1 2007 Non-cash items

















$
1.4Q2 FY 2007 Provision


11.8



0.9



0.3



0.2



13.2Q2 FY 2007 Provision adjustments


0.4



(0.1
)


(0.1
)


(0.3
)


(0.1
)Q2 FY 2007 Cash payments


(6.8
)


(6.3
)


(0.5
)


(3.0
)


(16.6
)Balance of accrual at
    March 2, 2007

$
31.9


$
1.4


$
2.3


$
10.6


$
46.2Q2 2007 Non-cash items

















$
3.3  23




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##### Table of Contents



NOTE 13 
    Goodwill and Intangible Assets
    GoodwillBalance at August 25, 2006

$
155.2Acquisitions


0.4Goodwill adjustments


0.3Balance at March 2, 2007

$
155.9     Intellectual


CustomerSupply


Property


RelationshipsAgreements


Agreements


and Other


TotalMarch 2, 2007Gross amount

$
95.9


$
81.9


$
72.5


$
250.3Accumulated amortization


(85.0
)


(74.8
)


(64.7
)


(224.5
)Carrying value

$
10.9


$
7.1


$
7.8


$
25.8August 25, 2006Gross amount

$
85.5


$
80.3


$
72.6


$
238.4Accumulated amortization


(85.4
)


(73.3
)


(63.4
)


(222.1
)Carrying value

$
0.1


$
7.0


$
9.2


$
16.3         NOTE 14 
    Discontinued Operations
     24




---



##### Table of Contents



Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Net sales

$



$



$



$
Cost of sales














Gross profit














Operating expense
    (income)  net


0.3



(6.5
)


0.9



(8.2
)Operating (loss) income


(0.3
)


6.5



(0.9
)


8.2Other income  net






6.8







8.9(Loss) income before income taxes,
    income taxes of $0


(0.3
)


13.3



(0.9
)


17.1(Loss) income from discontinued
    operations, net of tax

$
(0.3
)

$
13.3


$
(0.9
)

$
17.1           NOTE 15 
    Net Income Per Share Calculation
     25




---



##### Table of Contents



Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Basic earnings per share:Income from continuing operations

$
15.6


$
17.1


$
22.2


$
37.3Shares used in computation:Weighted average ordinary shares
    outstanding


896.0



908.8



895.3



917.3Basic earnings per share

$
0.02


$
0.02


$
0.02


$
0.04Diluted earnings per share:Income from continuing operations

$
15.6


$
17.1


$
22.2


$
37.3Shares used in computation:Weighted average ordinary shares
    outstanding


896.0



908.8



895.3



917.3Employee stock options


0.1



0.2



0.1



0.2Restricted stock


3.3



0.7



2.6



0.6Weighted average number of shares


899.4



909.7



898.0



918.1Diluted earnings per share

$
0.02


$
0.02


$
0.02


$
0.04     Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Anti-dilutive securities:Employee stock options


49.4



40.2



46.7



30.8Shares issuable upon conversion of
    LYONS


0.2



0.2



0.2



0.2Shares issuable upon conversion of
    0.5% notes


0.3



0.3



0.3



0.3Total anti-dilutive shares


49.9



40.7



47.2



31.3  26




---



##### Table of Contents



NOTE 16 
    Related Party Transactions
    NOTE 17 
    Guarantee of Subsidiary Notes
    NOTE 18 
    Subsequent Events
       27




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
      Summary
    of Results and Key Performance Indicators
    Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Net sales

$
2,901.9


$
2,499.6


$
5,901.0


$
4,956.0Gross profit


152.8



129.0



302.2



254.6Selling, general and
    administrative expense


116.7



104.3



226.5



211.7Income from continuing operations


15.6



17.1



22.2



37.3     Three Months EndedMarch 2,


November 24,


August 25,


May 26,


February 24,2007


2006


2006


2006


2006Inventory turns


6.5 turns



7.3 turns



7.3 turns



7.2 turns



7.4 turnsDays sales outstanding (DSO)


45 days



44 days



43 days



42 days



44 daysDays payable outstanding (DPO)


59 days



52 days



53 days



54 days



54 daysCash-to-cash
    cycle (C2C)


42 days



41 days



39 days



38 days



40 daysCapital expenditures (in millions)

$
50.0


$
33.4


$
40.9


$
46.0


$
50.2   14-week
 28




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
  Form 10-K
  Revenue
    Recognition
  out-of-warranty
  No. 01-09,
    No. 99-19,
 29




---



##### Table of Contents



Inventory
    Valuation
    Allowance
    for Doubtful Accounts
    Goodwill
   30




---



##### Table of Contents



Impairment
    of Long-Lived and Intangible Assets
    Restructuring
    and Related Impairment Costs
      No. 94-3,
 31




---



##### Table of Contents



Income
    Taxes
         32




---



##### Table of Contents



Loss
    Contingencies
    Stock-Based
    Compensation
            Results
    of Operations
  53-week
 33




---



##### Table of Contents



Three Months Ended


Six Months EndedMarch 2, 2007


February 24, 2006


March 2, 2007


February 24, 2006Net sales


100.0
%


100.0
%


100.0
%


100.0
%Cost of sales


94.7



94.8



94.9



94.9Gross profit


5.3



5.2



5.1



5.1Operating expenses:Selling, general and administrative


4.0



4.2



3.8



4.3Restructuring and impairment costs


0.6



0.2



0.9



0.1Operating income


0.7



0.8



0.4



0.7Interest income


0.3



0.5



0.3



0.5Interest expense


(0.2
)


(0.3
)


(0.2
)


(0.2
)Other (expense) income 
    net


(0.1
)


(0.1
)






Operating income from continuing
    operations before income taxes


0.7



0.9



0.5



1.0Income tax expense


0.2



0.2



0.1



0.2Income from continuing operations


0.5
%


0.7
%


0.4
%


0.8
%Discontinued operations:(Loss) income from discontinued
    operations






0.5







0.3Income tax expense














(Loss) income from discontinued
    operations



%


0.5
%



%


0.3
%Net income


0.5
%


1.2
%


0.4
%


1.1
%   Net
    Sales  Continuing Operations
   34




---



##### Table of Contents



Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Computing & Storage


34.0
%


32.8
%


32.9
%


33.3
%Networking


20.9
%


27.0
%


23.6
%


26.3
%Communications


20.7
%


18.3
%


20.2
%


18.3
%Consumer


11.9
%


9.5
%


11.4
%


9.1
%Industrial


8.4
%


8.0
%


8.2
%


8.1
%Automotive


1.9
%


2.7
%


1.8
%


3.1
%Other


2.2
%


1.7
%


1.9
%


1.8
%Total


100.0
%


100.0
%


100.0
%


100.0
%   International
    Sales  Continuing Operations
    Major
    Customers  Continuing Operations
    Three Months Ended


Six Months EndedMarch 2,


February 24,


March 2,


February 24,2007


2006


2007


2006Cisco Systems


14.1
%


18.1
%


16.5
%


17.4
%Nortel Networks



*


11.7
%



*


11.0
%Hewelett-Packard


10.6
%



*


10.0
%


*     (*)
    
    Less than 10%     35




---



##### Table of Contents



Gross
    Profit  Continuing Operations
        Selling,
    General and Administrative (SG&A) Expenses 
    Continuing Operations
    Restructuring
    and Impairment  Continuing Operations
        Fiscal
    Year 2007 Restructuring Plan
    
    Closing or consolidating approximately 700,000 square feet
    of facilities in Western Europe and North America.
    Reducing approximately 1,200 to 1,400 employees at the
    facilities being closed or consolidated. Although there may be a
    potential decrease from the original plan estimate of 1,400
    employees, severance costs will still be in the range provided. 36




---



##### Table of Contents




    Impair certain long-lived assets (primarily buildings and
    leasehold improvements) in connection with the facilities being
    vacated and equipment made excess or obsolete to the extent that
    we would be unable to recover their carrying value upon sales to
    third parties.          Fiscal
    Year 2007 Phase 2 Restructuring Plan
    
    Close or consolidate approximately 400,000 square feet of
    facilities in Western Europe and North America.
    Reducing approximately 1,300 to 1,500 employees at the
    facilities being closed or consolidated.
    Impair certain long-lived assets (primarily buildings and
    leasehold improvements) in connection with the facilities being
    vacated and equipment made excess or obsolete to the extent that
    we would be unable to recover their carrying value upon sales to
    third parties.        Interest
    Income  Continuing Operations
   37




---



##### Table of Contents



Interest
    Expense  Continuing Operations
    Other
    Expense  net  Continuing
    Operations
    Income
    Taxes  Continuing Operations
           38




---



##### Table of Contents



Liquidity
    and Capital Resources
  Cash
    Six Months EndedMarch 2, 2007


February 24, 2006Net cash provided by (used) in
    operating activities of continuing operations

$
68.0


$
(70.0
)Net cash used in operating
    activities of discontinued operations


(2.5
)


(8.2
)Net cash provided by (used) in
    operating activities

$
65.5


$
(78.2
)Net cash used in investing
    activities of continuing operations

$
(52.7
)

$
(103.1
)Net cash provided by investing
    activities of discontinued operations






17.1Net cash used in investing
    activities

$
(52.7
)

$
(86.0
)Net cash used in financing
    activities of continuing operations

$
(73.5
)

$
(29.1
)Net cash provided by (used in)
    financing activities of discontinued operations


2.5



(8.9
)Net cash used in financing
    activities

$
(71.0
)

$
(38.0
)        39




---



##### Table of Contents



Debt
  sub-limit.
        Restricted
    Cash
   40




---



##### Table of Contents



Off-Balance
    Sheet Arrangements and Contractual Obligations
      Contractual
    Obligations and Commitments
      Payment Due by PeriodShort-


Q308-Total


Term


Q408


FY09


FY10


FY11


FY12


Thereafter(In millions)Debt(1)

$
641.1


$
25.1


$
6.2


$
0.5


$
8.3


$
451.0


$



$
150.0Interest expense on long-term debt


118.5



15.0



7.4



14.5



14.5



13.1



12.0



42.0Operating lease


143.1



34.4



14.6



26.0



20.8



13.9



11.1



22.3Operating leases for restructured
    facilities and equipment


23.4



11.3



2.4



3.6



3.2



1.9



0.6



0.4Purchase obligations(2)


159.3



157.3







1.4



0.6











$
1,085.4


$
243.1


$
30.6


$
46.0


$
47.4


$
479.9


$
23.7


$
214.7     (1)
    
    Total debt includes capital lease commitments of
    $1.9 million.(2)
    
    We have various purchase commitments for materials, supplies and
    services incurred during the normal course of business.    Discontinued
    Operations
   41




---



##### Table of Contents



Three Months Ended


Six Months EndedMarch 2, 2007


February 24, 2006


March 2, 2007


February 24, 2006Net sales

$



$



$



$
Cost of sales














Gross profit














Operating expense
    (income)  net


0.3



(6.5
)


0.9



(8.2
)Operating (loss) income


(0.3
)


6.5



(0.9
)


8.2Other income  net






6.8







8.9(Loss) income before income taxes,
    income taxes of $0


(0.3
)


13.3



(0.9
)


17.1(Loss) income from discontinued
    operations, net of tax

$
(0.3
)

$
13.3


$
(0.9
)

$
17.1         Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk    Item 4.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures. Rules 13a-15(e) 15d-15(e)
 42




---



##### Table of Contents



Changes in internal control over financial
    reporting.
 PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings      Item 1a.
    Risk
    factors    Most
    of our sales come from a small number of customers; if we lose
    any of these customers, our net sales could decline
    significantly.
    Our
    customers may cancel their orders, change production quantities
    or locations, or delay production.
   43




---



##### Table of Contents



Our
    business has low operating margins and any increase in cost of
    sales or operating expenses could have a material adverse effect
    on our profitability.
    We may
    not be able to sell excess or obsolete inventory to customers or
    third parties, which could have a material adverse impact on our
    consolidated financial condition.
     44




---



##### Table of Contents



We are
    exposed to risks associated with operating
    internationally.
    
    adverse movement of foreign currencies against the
    U.S. dollar in which our results are reported;
    import and export duties, and value added taxes;
    import and export regulation changes that could erode our profit
    margins or restrict exports or imports;
    potential restrictions on the transfer of funds;
    government and license requirements governing the transfer of
    technology and products abroad;
    disruption of local labor supply or transportation services;
    inflexible employee contracts in the event of business downturns;
    potential disruption related to organized labor stoppages;
    the burden and cost of compliance with import and export
    regulations and foreign laws;
    economic and political risks in emerging or developing economies;
    risks of conflict and terrorism that could disrupt our or our
    customers and suppliers businesses; and
    increased risk of improper payments or inappropriate business
    activities.    Possible
    fluctuation of operating results from quarter to quarter and
    factors out of our control could affect the market price of our
    securities.
    
    differences in the profitability of the types of manufacturing
    services we provide. For example, high velocity and low
    complexity printed circuit boards and systems assembly services
    have typically lower gross profit than low volume/complex
    printed circuit boards and systems assembly services;
    our ability to maximize the hours of use of our equipment and
    facilities is dependent on the duration of the production run
    time for each job and customer;
    the amount of automation that we can use in the manufacturing
    process for cost reduction varies, depending upon the complexity
    of the product being made;
    our customers demand for our products and their ability to
    take delivery of our products and to make timely payments for
    delivered products;
    our ability to optimize the ordering of inventory as to timing
    and amount to avoid holding inventory in excess of immediate
    production needs;
    our ability to offer technologically advanced, cost-effective,
    quick response manufacturing services;
    our ability to drive down manufacturing costs in accordance with
    customer and market requirements, which is dependent upon our
    ability to apply Lean Six Sigma operating principles; 45




---



##### Table of Contents




    fluctuations in the availability and pricing of components;
    timing of expenditures in anticipation of increased sales;
    cyclicality in our target markets;
    fluctuations in our market share;
    fluctuations in currency exchange rates;
    expenses and disruptions associated with acquisitions and
    divestitures;
    announcements of operating results and business conditions by
    our customers;
    announcements by our competitors relating to new customers,
    technological innovation or new services;
    economic developments in the electronics industry as a whole;
    credit rating and stock analyst downgrades;
    our ability to successfully implement changes to our enterprise
    resource planning systems;
    political and economic developments in countries in which we
    have operations; and
    general market conditions.    If we
    incur more restructuring-related charges than currently
    anticipated, our consolidated financial condition and results of
    operations may suffer.
    Failure
    to attract and retain key personnel and skilled associates could
    hurt our operations.
    We
    depend on limited or sole source suppliers for critical
    components. The inability to obtain sufficient components as
    required, and under favorable purchase terms, would harm our
    business.
   46




---



##### Table of Contents



We
    potentially bear the risk of price increases associated with
    shortages in electronics components.
    Our
    net sales could decline if our competitors provide comparable
    manufacturing services and improved products at a lower
    cost.
    We
    depend on the continuing trend of OEMs to
    outsource.
    Our
    strategic relationships with major customers create
    risks.
   47




---



##### Table of Contents




    we may pay a purchase price to the divesting OEMs that exceeds
    the value we are ultimately able to realize from the future
    business of the OEM;
    the integration into our business of the acquired assets and
    facilities may be time-consuming and costly;
    we, rather than the divesting OEM, would bear the risk of excess
    capacity;
    we may not achieve anticipated cost reductions and efficiencies;
    we may be unable to meet the expectations of the OEM as to
    volume, product quality, timeliness and cost reductions; and
    if demand for the OEMs products declines, the OEM may
    reduce its volume of purchases, and we may not be able to
    sufficiently reduce the expenses of operating the facility or
    use the facility to provide services to other OEMs, and we might
    find it appropriate to close, rather than continue to operate,
    the facility, and any such actions would require us to incur
    significant restructuring
    and/or
    impairment charges.    Business
    disruptions could seriously harm our future revenue and
    financial condition and increase our costs and
    expenses.
    If we
    are unable to manage future acquisitions, and cost-effectively
    run our operations, our profitability could be adversely
    affected.
   48




---



##### Table of Contents



If we
    have a material weakness in our internal controls over financial
    reporting, investors could lose confidence in the reliability of
    our financial statements, which could result in a decrease in
    the value of our securities.
    If our
    products are subject to warranty or liability claims, we may
    incur significant costs.
      We may
    not have sufficient insurance coverage for certain of the risks
    and liabilities we assume in connection with the products and
    services we provide to our customers.
    Our
    design and engineering services may result in additional
    exposure to product liability, intellectual property
    infringement and other claims.
   49




---



##### Table of Contents



Notwithstanding
    our divestiture of certain businesses in recent years, we remain
    subject to certain indemnification obligations for a period of
    time after completion of the divestitures.
    We are
    exposed to fluctuations in foreign currency exchange rates and
    interest rate fluctuations.
        Failure
    to comply with environmental regulations could harm our
    business.
       50




---



##### Table of Contents



Our
    ongoing implementation of new enterprise resource planning (ERP)
    software and systems may cause disruptions in our business
    operations.
    We may
    not be able to adequately protect or enforce our intellectual
    property rights and could become involved in intellectual
    property disputes.
      Rating
    downgrades may make it more expensive for us to borrow
    money.
    Unanticipated
    changes in our tax rates or in our exposure to additional tax
    liabilities could affect our operating results and financial
    condition.
   51




---



##### Table of Contents



We
    have received an examination report from the Internal Revenue
    Service proposing a tax deficiency in certain of our tax
    returns, and the outcome may have a material adverse effect on
    our results of operations and cash flows.
      Item 1b.
    Unresolved
    Staff Comments    Item 2.
    Purchase
    of Equity Securities   52




---



##### Table of Contents



Item 6.
    Exhibits  INDEX TO
    EXHIBITS
  ExhibitNo

Exhibit Description3
.1*

Certificate of Incorporation of
    the Registrant, as amended3
.2**

Amended and Restated Bylaws of the
    Registrant10
.1

Remuneration for CEO Search
    Committee of Registrants Board of Directors10
.2

Amended and Restated Employment
    Agreement dated March 14, 2007 by and between Registrant
    and Paul Tufano10
.3***

Executive Retention Arrangement31
.1

Certification of Chief Executive
    Officer Pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 200231
.2

Certification of Chief Financial
    Officer Pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 200232
.1

Certification of Chief Executive
    Officer Pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Incorporated by reference from Exhibit 3.1 filed with
    Registrants
    Form 10-Q
    for the quarter ended February 28, 2001, Exhibit 3.1
    filed with Registrants
    Form 10-Q
    for the quarter ended February 25, 2000, and
    Exhibit 3.1 filed with Registrants
    Form 10-Q
    for the quarter ended February 26, 1999.**
    
    Incorporated by reference from Exhibit 3.2 filed with
    Registrants
    Form 10-Q
    for the quarter ended November 28, 2003.***
    
    Incorporated by reference from Registrants Report on
    Form 8-K
    filed on March 2, 2007. 53




---



##### Table of Contents



SOLECTRON
    CORPORATION
  SIGNATURES
    (Registrant)
  By:
    /s/  PAUL
    J. TUFANO   Chief Financial Officer
 (Principal Financial Officer)
  By:
    /s/  WARREN
    J. LIGAN  Warren J. Ligan
 Senior Vice President and Chief Accounting Officer
 (Principal Accounting Officer)
   54




---



##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNo

Exhibit Description3
.1*

Certificate of Incorporation of
    the Registrant, as amended3
.2**

Amended and Restated Bylaws of the
    Registrant10
.1

Remuneration for CEO Search
    Committee of Registrants Board of Directors10
.2

Amended and Restated Employment
    Agreement dated March 14, 2007 by and between Registrant
    and Paul Tufano10
.3***

Executive Retention Arrangement31
.1

Certification of Chief Executive
    Officer Pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 200231
.2

Certification of Chief Financial
    Officer Pursuant to Section 302(a) of the Sarbanes-Oxley
    Act of 200232
.1

Certification of Chief Executive
    Officer Pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Incorporated by reference from Exhibit 3.1 filed with
    Registrants
    Form 10-Q
    for the quarter ended February 28, 2001, Exhibit 3.1
    filed with Registrants
    Form 10-Q
    for the quarter ended February 25, 2000, and
    Exhibit 3.1 filed with Registrants
    Form 10-Q
    for the quarter ended February 26, 1999.**
    
    Incorporated by reference from Exhibit 3.2 filed with
    Registrants
    Form 10-Q
    for the quarter ended November 28, 2003.***
    
    Incorporated by reference from Registrants Report on
    Form 8-K
    filed on March 2, 2007. 55