<PAGE>   1

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


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 25, 2000.

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

COMMISSION FILE NUMBER 1-11098

                              SOLECTRON CORPORATION
             (Exact Name of Registrant as specified in its Charter)


                 Delaware                        94-2447045
      (State or other jurisdiction             (IRS Employer
    of Incorporation or Organization)       Identification Number)


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

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

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]  No [ ]

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

At March 31, 2000, 596,213,808 shares of Common Stock of the Registrant were
outstanding.


<PAGE>   2

SOLECTRON CORPORATION

INDEX TO FORM 10-Q


PART I.  FINANCIAL INFORMATION


<TABLE>
<S>                                                                         <C>
Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at
         February 29, 2000 and August 31, 1999                                  3

         Condensed Consolidated Statements of Income
         for the three months and six months ended
         February 29, 2000 and February 28, 1999                              4 - 5

         Condensed Consolidated Statements of Comprehensive
         Income for the three months and six months ended
         February 29, 2000 and February 28, 1999                                6

         Condensed Consolidated Statements of Cash Flows
         for the six months ended February 29, 2000
         and February 28, 1999                                                7 - 8

         Notes to Condensed Consolidated Financial
         Statements                                                           9 - 16

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 17 - 35

Item 3.  Quantitative and Qualitative Disclosures About
         Market Risk                                                           35


PART II. OTHER INFORMATION


Item 1.  Legal Proceedings                                                     36

Item 2.  Changes in Securities                                                 36

Item 3.  Defaults Upon Senior Securities                                       36

Item 4.  Submission of Matters to a Vote of Security Holders                   37

Item 5.  Other Information                                                     37

Item 6.  Exhibits and Reports on Form 8-K                                      38

Signature                                                                      39
</TABLE>



                                       2
<PAGE>   3

ITEM 1. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                             February 29,  August 31,
                                                 2000         1999
                                            ------------   ----------
<S>                                         <C>            <C>
ASSETS
Current assets:
  Cash, cash equivalents and
    short-term investments                    $1,469.3       $1,881.6
  Accounts receivable, net                     1,464.7        1,237.9
  Inventories                                  1,823.8        1,170.1
  Prepaid expenses and other
    current assets                               178.2          120.9
                                              --------       --------
    Total current assets                       4,936.0        4,410.5
Net property and equipment                       744.9          705.6
Other assets                                     240.9          203.2
                                              --------       --------
Total assets                                  $5,921.8       $5,319.3
                                              ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                             $   40.1       $   21.4
  Accounts payable                             1,294.7        1,013.7
  Accrued employee compensation                   86.6           97.5
  Accrued expenses                                62.5           44.0
  Other current liabilities                       67.4           70.4
                                              --------       --------
    Total current liabilities                  1,551.3        1,247.0
Long-term debt                                   955.4          922.6
Other long-term liabilities                       15.2            9.2
                                              --------       --------
    Total liabilities                          2,521.9        2,178.8
                                              --------       --------
Commitments

Stockholders' equity:
  Common stock                                     0.3            0.3
  Additional paid-in capital                   2,130.2        2,057.6
  Retained earnings                            1,369.6        1,171.1
  Accumulated other comprehensive losses        (100.2)         (88.5)
                                              --------       --------
     Total stockholders' equity                3,399.9        3,140.5
                                              --------       --------
Total liabilities and
  stockholders' equity                        $5,921.8       $5,319.3
                                              ========       ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4

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

<TABLE>
<CAPTION>
                                     Three Months Ended             Six Months Ended
                                  -----------------------       -----------------------
                                  Feb. 29,       Feb. 28,       Feb. 29,       Feb. 28,
                                    2000           1999           2000           1999
                                  --------       --------       --------       --------
<S>                               <C>            <C>            <C>            <C>
Net sales                         $2,859.7       $2,160.4       $5,635.3       $4,363.5
Cost of sales                      2,583.6        1,949.8        5,087.3        3,947.0
                                  --------       --------       --------       --------
  Gross profit                       276.1          210.6          548.0          416.5
Operating expenses:
  Selling, general and
    administrative                    98.9           84.3          201.3          166.6
  Research and
    Development                       14.3           10.3           29.0           20.7
  Acquisition and
    Restructuring costs               25.0             --           25.0             --
                                  --------       --------       --------       --------
      Operating income               137.9          116.0          292.7          229.2

Interest income                       20.4            6.5           43.4           12.8
Interest expense                     (11.3)          (9.4)         (22.2)         (15.0)
                                  --------       --------       --------       --------
Income before income taxes
  and cumulative effect
  of change in accounting
  principle                          147.0          113.1          313.9          227.0

Income tax expense                    47.1           34.7          100.5           72.6
                                  --------       --------       --------       --------
Income before cumulative
  effect of change in
  accounting principle                99.9           78.4          213.4          154.4

Cumulative effect of change
  in accounting principal
  for start-up costs, net of
  $1.6 income tax benefit               --             --           (3.5)            --
                                  --------       --------       --------       --------
     Net income                   $   99.9       $   78.4       $  209.9       $  154.4
                                  ========       ========       ========       ========
</TABLE>


                            (continued on next page)



                                       4
<PAGE>   5

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


<TABLE>
<CAPTION>
                                                   Three Months Ended         Six Months Ended
                                                  --------------------      ---------------------
                                                  Feb. 29,     Feb. 28,     Feb. 29,      Feb. 28,
                                                   2000         1999         2000          1999
                                                  -------      -------      -------       -------
<S>                                               <C>          <C>          <C>           <C>
Basic net income per share:
 Income before cumulative
  effect of change in
  accounting principle                            $  0.17      $  0.15      $  0.36       $  0.30

 Cumulative effect of change
  in accounting principle                              --           --        (0.01)           --
                                                  -------      -------      -------       -------
                                                  $  0.17      $  0.15      $  0.35       $  0.30
                                                  =======      =======      =======       =======
 Diluted net income per share:
 Income before cumulative
  effect of change in
  accounting principle                            $  0.16      $  0.14      $  0.35       $  0.28

 Cumulative effect of change
  in accounting principle                              --           --        (0.01)           --
                                                  -------      -------      -------       -------
                                                  $  0.16      $  0.14      $  0.34       $  0.28
                                                  =======      =======      =======       =======

Shares used to compute
net income per share:

     Basic                                          593.5        522.3        592.2         520.9
                                                  =======      =======      =======       =======

     Diluted                                        619.5        570.5        618.4         567.3
                                                  =======      =======      =======       =======
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>   6

                     SOLECTRON CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (In millions)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                        Three Months Ended         Six Months Ended
                                       --------------------       -------------------
                                       Feb. 29,     Feb. 28,     Feb. 29,     Feb. 28
                                         2000         1999         2000         1999
                                       -------       ------       ------       ------
<S>                                    <C>          <C>          <C>          <C>
Net income                              $ 99.9       $ 78.4       $209.9       $154.4

Other comprehensive income (loss):

Foreign currency translation
 adjustments, net of income
 tax benefit of $0.2 for
 three months and $0.6 for
 six months in fiscal 2000                 4.8        (72.9)       (10.9)       (70.7)
Unrealized loss on
 investments, net of income
 tax benefit of $0.4 for three
 months and $0.5 for six
 months in fiscal 2000                    (0.5)          --         (0.8)          --
                                        ------       ------       ------       ------
Comprehensive income                    $104.2       $  5.5       $198.2       $ 83.7
                                        ======       ======       ======       ======
</TABLE>



---------------
Accumulated foreign currency translation losses were $98.4 million at February
29, 2000 and $87.5 million at August 31, 1999. For fiscal year 1999, the foreign
currency translation loss primarily resulted from the devaluation of the
Brazilian real. Most of Solectron's foreign currency translation adjustment
amounts relate to investments which are permanent in nature. To the extent that
such amounts relate to investments which are permanent in nature, no adjustment
for income taxes is made. Accumulated unrealized losses on investments were $1.8
million at February 29, 2000 and $1.0 million at August 31, 1999.


See accompanying notes to condensed consolidated financial statements.



                                       6
<PAGE>   7

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

<TABLE>
<CAPTION>
                                                     Six Months Ended
                                                   --------------------
                                                   Feb. 29,     Feb. 28,
                                                     2000         1999
                                                   -------       ------
<S>                                                <C>          <C>
Cash flows from operating activities:
  Net income                                       $ 209.9      $ 154.4
  Adjustments to reconcile net income
   to net cash used in operating
   activities:
     Depreciation and amortization                   101.8         86.2
     Non-cash interest                                15.2          2.8
     Tax benefit associated with the
      exercise of stock options                       22.2         14.5
     Cumulative effect of change in accounting
      principle for start-up costs                     3.5           --
     Other                                            (2.8)        (1.4)
     Changes in operating assets and
     liabilities:
       Accounts receivable                          (264.0)      (245.1)
       Inventories                                  (642.6)      (153.8)
       Prepaid expenses and other
        current assets                               (38.5)       (16.0)
       Accounts payable                              319.8        113.0
       Accrued expenses and other
        current liabilities                            2.2         (2.1)
                                                    ------       ------
     Net cash used in operating
      activities                                    (273.3)       (47.5)
                                                    ------       ------
Cash flows from investing activities:
  Sales and maturities of short-term
   investments                                       547.4        231.0
  Purchases of short-term investments               (850.8)      (394.4)
  Acquisition of manufacturing locations             (68.5)      (100.5)
  Capital expenditures                              (191.5)      (227.2)
  Proceeds from sale of property and equipment        61.7         10.2
  Other                                              (15.0)        (4.3)
                                                    ------       ------
     Net cash used in investing
      activities                                    (516.7)      (485.2)
                                                    ------       ------
</TABLE>


                            (continued on next page)



                                       7
<PAGE>   8

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

<TABLE>
<CAPTION>
                                                  Six Months Ended
                                              -----------------------
                                              Feb. 29,       Feb. 28,
                                                2000           1999
                                              --------       --------
<S>                                           <C>            <C>
Cash flows from financing activities:
  Net proceeds from bank lines of credit          18.3           11.4
  Proceeds from long-term debt                    16.5          732.5
  Net proceeds from stock issued under
   option and employee purchase plans             60.3           40.0
  Repurchases of common stock                       --           (7.1)
  Other                                            9.0            6.3
                                              --------       --------
    Net cash provided by financing
    activities                                   104.1          783.1
                                              --------       --------
Effect of exchange rate changes on
 cash and cash equivalents                        (7.0)           6.9
                                              --------       --------
Net (decrease) increase in cash and
 cash equivalents                               (692.9)         257.3

Cash and cash equivalents at
 beginning of period                           1,416.8          300.7
                                              --------       --------
Cash and cash equivalents at
 end of period                                $  723.9       $  558.0
                                              ========       ========

SUPPLEMENTAL DISCLOSURES

Cash paid during the period:
   Income taxes                               $   64.1       $   51.4
   Interest                                   $    6.5       $   13.6
</TABLE>


     See accompanying notes to condensed consolidated financial statements.



                                       8
<PAGE>   9

SOLECTRON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated balance sheets as of February
29, 2000 and August 31, 1999, and the related unaudited condensed consolidated
statements of income for the three- and six-month periods ended February 29,
2000 and February 28, 1999, and the unaudited condensed consolidated statements
of comprehensive income for the three- and six-month periods ended February 29,
2000 and February 28, 1999, and the unaudited condensed consolidated statements
of cash flows for the six months ended February 29, 2000 and February 28, 1999
have been prepared on substantially the same basis as the annual consolidated
financial statements. Management believes the financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's financial position, operating results and
cash flows for the periods presented. The results of operations for the three-
and six- month periods ended February 29, 2000 are not necessarily indicative of
results to be expected for the entire year. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended August 31, 1999
included in the Company's Annual Report to Stockholders.

For clarity of presentation, the Company has indicated its second fiscal quarter
as ending on February 29, 2000, and February 28, 1999, and its fiscal year as
ending on August 31, 1999. In fact, the Company's second quarter of fiscal 2000
ended on February 25, 2000, its second quarter of fiscal 1999 ended on February
26, 1999 and its 1999 fiscal year ended on August 27, 1999.

On November 30, 1999, Solectron Corporation (Solectron) acquired SMART Modular
Technologies, Inc. (SMART). Each share of SMART common stock was exchanged for
0.51 of a share of Solectron common stock. Solectron issued approximately 47.6
million shares (postsplit) of Solectron common stock. The acquisition was
accounted for as a pooling of interests. Accordingly, the Company's historical
financial statements have been restated retroactively to include the financial
results of SMART. SMART's fiscal year was from November 1 to October 31. Since
the fiscal years for Solectron and SMART differed, SMART changed its fiscal year
end to coincide with Solectron's beginning in fiscal 2000. As SMART's results of
operations from September 1, 1999 to October 31, 1999 are included in SMART's
1999 fiscal year end results as well as in its first quarter of fiscal 2000, net
income of $11.5 million for such period has been recorded as an adjustment to
retained earnings. The restated financial information includes certain
adjustments for the elimination of net sales, cost of sales and income taxes
related to shipments between SMART and Solectron as well as for certain
reclassifications to conform with Solectron's financial statement presentation.
There were no adjustments necessary to conform the accounting policies of the
combining companies.

NOTE 2 - INVENTORIES

Inventories consisted of (in millions):

<TABLE>
<CAPTION>
                                 February 29,        August 31,
                                     2000               1999
                                 -----------        -----------
<S>                              <C>                <C>
          Raw materials             $1,371.2           $  841.2
          Work-in-process              299.1              232.6
          Finished goods               153.5               96.3
                                 -----------        -----------
          Total                     $1,823.8           $1,170.1
                                 ===========        ===========
</TABLE>



                                       9
<PAGE>   10

NOTE 3 - NET INCOME PER SHARE

Share and per-share data presented reflect the two-for-one stock split effective
March 8, 2000. The following table sets forth the computation of basic and
diluted net income per share for the three- and six- month periods ended
February 29, 2000 and February 28 1999.

<TABLE>
<CAPTION>
                                        Three Months Ended         Six Months Ended
                                       --------------------      ---------------------
                                       Feb. 29,     Feb. 28,     Feb. 29,      Feb. 28,
                                        2000         1999         2000          1999
                                       -------      -------      -------       -------
                                             (in millions, except per share data)
<S>                                    <C>          <C>          <C>           <C>
Net income before cumulative
  effect of change in
  accounting principle                 $  99.9      $  78.4      $ 213.4       $ 154.4

Cumulative effect of change
  in accounting principle,
  net of taxes                              --           --         (3.5)           --

Interest expense from
  convertible subordinated
  notes, net of taxes                       --          2.5           --           4.9
                                       -------      -------      -------       -------
Net income - diluted                   $  99.9      $  80.9      $ 209.9       $ 159.3
                                       =======      =======      =======       =======

Weighted average shares - basic          593.5        522.3        592.2         520.9

Common shares issuable upon
  exercise of stock options               26.0         21.0         26.2          19.2

Common shares issuable
  upon assumed conversion of
  convertible subordinated notes            --         27.2           --          27.2
                                       -------      -------      -------       -------
Weighted average shares - diluted        619.5        570.5        618.4         567.3
                                       =======      =======      =======       =======

Basic net income per share:
 Income before cumulative
   effect of change in
   accounting principle                $  0.17      $  0.15      $  0.36       $  0.30

 Cumulative effect of change
   in accounting principle                  --           --        (0.01)           --
                                       -------      -------      -------       -------
Net     income per share               $  0.17      $  0.15      $  0.35       $  0.30
                                       =======      =======      =======       =======

Diluted net income per share:
  income before cumulative
  effect of change in
  accounting principle                 $  0.16      $  0.14      $  0.35       $  0.28

 Cumulative effect of change
   in accounting principle                  --           --        (0.01)           --
                                       -------      -------      -------       -------

     Net income per share              $  0.16      $  0.14      $  0.34       $  0.28
                                       =======      =======      =======       =======
</TABLE>



                                       10
<PAGE>   11

For the three- and six-month periods ended February 29, 2000, options to
purchase 1.3 million shares of the Company's common stock with exercise prices
greater than the average fair market values of its common stock for such periods
at $41.29 and $39.82, respectively, were not included in the calculation because
the effect would have been antidilutive.

Prior to fiscal 2000, the fiscal years of Solectron and SMART differed.
Solectron's condensed consolidated statements of income for the three- and
six-month periods ended February 28, 1999 were combined with SMART's condensed
consolidated statements of income three- and six-month periods ended April 30,
1999. For Solectron, options to purchase 1.3 million shares of Solectron's
common stock with exercise prices greater than the average fair market values of
its common stock at $20.60 and $16.93, respectively, for the three- and
six-month periods ended February 28, 1999 were not included in the calculation
because the effect would have been antidilutive. For SMART, options to purchase
2.9 million and 1.5 million shares of SMART's common stock with exercise prices
greater than the average fair market values of its common stock at $14.89 and
$18.76, respectively, for the three- and six-month periods ended April 30, 1999
were not included in the calculation because the effect would have been
antidilutive.

In addition, the calculation above did not include the 24.7 million common
shares issuable upon conversion of the zero-coupon senior convertible notes as
they would have been antidilutive.

NOTE 4 - COMMITMENTS

Solectron leases various facilities under operating lease agreements. The
facility leases expire at various dates through 2014. All such leases require
Solectron to pay property taxes, insurance and normal maintenance costs.
Payments of some leases are periodically adjusted based on LIBOR rates. Certain
leases for Solectron's facilities, including Milpitas, Fremont and San Jose,
California; Everett, Washington; Suwanee, Georgia; and Columbia, South Carolina,
provide Solectron with an option at the end of the lease term of either
acquiring the property at its original cost or arranging for the property to be
acquired. For these leases, Solectron is contingently liable under a first loss
clause for a decline in market value of such leased facilities up to 85% of the
original costs, or approximately $170 million in total as of February 29, 2000,
in the event Solectron does not purchase the properties at the end of the
respective lease terms. Under such agreements, the Company must also maintain
compliance with financial covenants similar to its $100 million unsecured
multicurrency revolving credit facility.

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

NOTE 5 - SEGMENT INFORMATION

The Company is transitioning its operations into three strategic business units
- manufacturing and operations, technology solutions, and global services, and
is gradually moving away from the management reporting structure by geography.
Each business unit has its own president and support staff. Solectron's
management uses an internal management reporting system, which provides
important financial data, to evaluate performance and allocate resources on
these three business units. Intersegment adjustments were related primarily to
intersegment sales that were generally recorded at prices that approximated
arm's length transactions. Certain corporate expenses were allocated to these
operating segments and were included for performance evaluation. Some
amortization expenses were also allocated to these operating segments, but the
related intangible assets were not allocated. The accounting policies for the
segments were the same as for Solectron taken as a whole.



                                       11
<PAGE>   12

Segment information by business units and geography for the three- and six-month
periods ended February 29, 2000 and February 28, 1999, was as follows:

Segment Information by Business Units

<TABLE>
<CAPTION>
                                      Three Months Ended              Six Months Ended
                                    -----------------------       -----------------------
                                    Feb. 29,       Feb. 28,       Feb. 29,       Feb. 28,
                                      2000           1999           2000           1999
                                    --------       --------       --------       --------
                                                       (in millions)
<S>                                 <C>            <C>            <C>            <C>
Net sales:
 Manufacturing and operations       $2,495.3       $1,889.9       $4,940.2       $3,812.4
 Technology solutions                  358.5          292.7          676.2          590.0
 Global services                        27.9             --           54.4             --
 Intersegment adjustments              (22.0)         (22.2)         (35.5)         (38.9)
                                    --------       --------       --------       --------
                                    $2,859.7       $2,160.4       $5,635.3       $4,363.5
                                    ========       ========       ========       ========

Depreciation and amortization:
 Manufacturing and operations       $   34.0       $   36.7       $   69.8       $   73.8
 Technology solutions                    6.1            5.1           13.0           10.7
 Global services                         2.0             --            8.2             --
 Corporate                               5.7            0.7           10.8            1.7
                                    --------       --------       --------       --------
                                    $   47.8       $   42.5       $  101.8       $   86.2
                                    ========       ========       ========       ========

Interest income:
 Manufacturing and operations       $    1.5       $    1.4       $    3.9       $    3.8
 Technology solutions                    1.6            1.6            3.2            3.6
 Global services                          --             --             --             --
 Corporate                              24.2            7.2           48.5           12.2
 Intersegment adjustments               (6.9)          (3.7)         (12.2)          (6.8)
                                    --------       --------       --------       --------
                                    $   20.4       $    6.5       $   43.4       $   12.8
                                    ========       ========       ========       ========

Interest expense:
 Manufacturing and operations       $    7.6       $    4.6       $   13.2       $    7.9
 Technology solutions                    0.2            0.2            0.6            0.5
 Global services                          --             --             --             --
 Corporate                              10.3            8.4           20.6           13.4
 Intersegment adjustments               (6.8)          (3.8)         (12.2)          (6.8)
                                    --------       --------       --------       --------
                                    $   11.3       $    9.4       $   22.2       $   15.0
                                    ========       ========       ========       ========

Pre-tax income:
 Manufacturing and operations       $  141.7       $  104.3       $  293.1       $  212.6
 Technology solutions                    4.3 a         19.4           23.4 a         36.9
 Global services                         0.1 a           --            3.6 a           --
 Corporate                               0.9 a        (10.6)         (11.3)a,b      (22.5)
                                    --------       --------       --------       --------
                                    $  147.0       $  113.1       $  308.8       $  227.0
                                    ========       ========       ========       ========
</TABLE>



                                       12
<PAGE>   13

<TABLE>
<CAPTION>
                                  Three Months Ended       Six Months Ended
                                  -------------------     -------------------
                                  Feb. 29,    Feb. 28,    Feb. 29,    Feb. 28,
                                    2000        1999        2000        1999
                                  -------     -------     -------     -------
                                                (in millions)
<S>                               <C>         <C>         <C>         <C>
Capital expenditures:
 Manufacturing and operations      $ 70.0      $100.6      $158.1      $198.6
 Technology solutions                 5.0         3.1        13.7         8.1
 Global services                      1.3          --         7.0          --
 Corporate                            5.2         2.1        12.7        20.5
                                   ------      ------      ------      ------
                                   $ 81.5      $105.8      $191.5      $227.2
                                   ======      ======      ======      ======
</TABLE>


<TABLE>
<CAPTION>
                                  February 29,   August 31,
                                     2000           1999
                                  -----------    ---------
                                        (in millions)
<S>                               <C>            <C>
Total assets:
 Manufacturing and operations     $ 3,994.2      $ 3,265.8
 Technology solutions                 581.7          556.7
 Global services                       53.2           42.4
 Corporate                          3,217.9        2,717.0
 Intersegment adjustments          (1,925.2)      (1,262.6)
                                  ---------      ---------
                                  $ 5,921.8      $ 5,319.3
                                  =========      =========
</TABLE>

Segment Information by Geography


<TABLE>
<CAPTION>
                                  Three Months Ended            Six Months Ended
                               -----------------------       -----------------------
                               Feb. 29,       Feb. 28,       Feb. 29,       Feb. 28,
                                 2000           1999           2000           1999
                               --------       --------       --------       --------
                                                 (in millions)
<S>                            <C>            <C>            <C>            <C>
Net sales:
 Americas                      $2,084.8       $1,518.7       $4,176.5       $3,047.9
 Europe                           456.9          418.6          882.1          805.0
 Asia                             457.4          262.2          819.9          575.2
 Intersegment adjustments        (139.4)         (39.1)        (243.2)         (64.6)
                               --------       --------       --------       --------
                               $2,859.7       $2,160.4       $5,635.3       $4,363.5
                               ========       ========       ========       ========
Depreciation and amortization:
 Americas                      $   28.7       $   26.1       $   61.3       $   49.9
 Europe                             7.2            7.1           15.3           15.5
 Asia                               6.2            8.6           14.4           19.1
 Corporate                          5.7            0.7           10.8            1.7
                               --------       --------       --------       --------
                               $   47.8       $   42.5       $  101.8       $   86.2
                               ========       ========       ========       ========
</TABLE>



                                       13
<PAGE>   14

<TABLE>
<CAPTION>
                                                   Three Months Ended         Six Months Ended
                                                  --------------------      --------------------
                                                  Feb. 29,     Feb. 28,     Feb. 29,     Feb. 28,
                                                    2000         1999         2000         1999
                                                  -------      -------      -------      -------
                                                                   (in millions)
<S>                                               <C>          <C>          <C>          <C>
Interest income:
 Americas                                          $  3.9       $  6.3       $  9.5       $ 12.6
 Europe                                               0.3          0.3          1.7          1.4
 Asia                                                 0.5          0.3          1.2          0.7
 Corporate                                           24.2          7.2         48.5         12.2
 Intersegment adjustments                            (8.5)        (7.6)       (17.5)       (14.1)
                                                   ------       ------       ------       ------
                                                   $ 20.4       $  6.5       $ 43.4       $ 12.8
                                                   ======       ======       ======       ======

Interest expense:
 Americas                                          $  7.6       $  6.6       $ 15.3       $ 11.6
 Europe                                               1.7          2.0          3.5          3.9
 Asia                                                 0.2          0.1          0.3          0.2
 Corporate                                           10.3          8.4         20.6         13.4
 Intersegment adjustments                            (8.5)        (7.7)       (17.5)       (14.1)
                                                   ------       ------       ------       ------
                                                   $ 11.3       $  9.4       $ 22.2       $ 15.0
                                                   ======       ======       ======       ======

Pre-tax income:
 Americas                                          $103.8       $100.6       $235.5       $195.2
 Europe                                              20.7         12.0         40.8         24.3
 Asia                                                30.3         19.6         58.9         39.3
 Corporate                                           (7.8)       (19.1)       (26.4)       (31.8)
                                                   ------       ------       ------       ------
                                                   $147.0a      $113.1       $308.8a,b    $227.0
                                                   ======       ======       ======       ======

Capital expenditures:
 Americas                                          $ 40.3       $ 70.6       $112.7       $131.0
 Europe                                              20.1         16.6         38.6         29.7
 Asia                                                15.9         16.5         27.5         46.0
 Corporate                                            5.2          2.1         12.7         20.5
                                                   ------       ------       ------       ------
                                                   $ 81.5       $105.8       $191.5       $227.2
                                                   ======       ======       ======       ======
</TABLE>


<TABLE>
<CAPTION>
                              February 29,   August 31,
                                 2000           1999
                              -----------    ---------
                                     (in millions)
<S>                           <C>            <C>
Total assets:
 Americas                     $ 3,255.0       $2,896.7
 Europe                           788.7          559.2
 Asia                             666.6          497.3
 Corporate                      2,466.4        2,317.9
 Intersegment adjustments      (1,254.9)        (951.8)
                              ---------       --------
                              $ 5,921.8       $5,319.3
                              =========       ========
</TABLE>



                                       14
<PAGE>   15

---------------
Note: The differences in pre-tax income for Corporate between business units and
geographic reporting are due to the classification of world wide headquarters
operations.

a.   Reflects acquisition costs of $16.5 million and $3.8 million recorded in
     technology solutions and corporate; and restructuring costs of $2.8 million
     and $1.9 million recorded in technology solutions and global services.

b.   Includes $5.1 million for cumulative effect of change in accounting
     principle for start-up costs.


NOTE 6 - POOLING OF INTERESTS

On November 30, 1999, Solectron completed its acquisition of SMART which is a
designer and manufacturer of memory modules and memory cards, embedded computers
and I/O products. Under the terms of the agreement, each share of SMART common
stock was exchanged for 0.51 shares of Solectron common stock. Solectron issued
approximately 47.6 million shares (postsplit) of Solectron common stock and
assumed all stock options held by SMART employees. The acquisition is accounted
for as a pooling of interests. Accordingly, the accompanying historical
financial data have been restated to include SMART.

Acquisition costs of $20.3 million related to the merger of SMART included
$17.5 million of investment banker fees, together with other costs such as,
legal fees, accounting fees, registration fees and other incidentals. Total
restructuring costs of $4.7 million related to the consolidation of certain
facilities as a result of the mergers with SMART and Sequel, Inc. These
restructuring transaction costs were comprised of lease exit costs of
approximately $2.4 million, severance costs of approximately $0.9 million,
fixed asset write-offs of $1.4 million and other incidental costs. As of
February 29, 2000, liabilities related to these restructuring activities,
totaling approximately $3.5 million, are expected to be paid out by the end of
the calendar year 2000.

NOTE 7 - PENDING ACQUISITIONS OF MANUFACTURING ASSETS AND BUSINESS

On January 5, Solectron announced its intent to purchase Alcatel's manufacturing
business and assets in Aguadilla, Puerto Rico and Longview, Texas, respectively.
Solectron completed the acquisition of Alcatel's manufacturing business in
Aguadilla, Puerto Rico on March 31, 2000. The acquisition of Alcatel's
manufacturing assets in Longview, Texas, is expected to be closed in June 2000
and is subject to various conditions of closing. As part of the proposed
agreement, Solectron will assume full manufacturing responsibility for Alcatel's
build-to-order (BTO) radio frequency (RF) communication systems and will provide
a full range of manufacturing services to Alcatel for the next three years
including NPI management of RF systems and BTO systems build. Alcatel is a world
leader in building next-generation networks and end-to-end data voice solutions.

On February 28, 2000, Solectron signed a letter of intent to acquire AMERICOM
Wireless Services (AMERICOM) in its entirety, a privately held corporation which
specializes in wireless handset repair and refurbishment and outsourced
technical customer support services. As part of the transaction, Solectron will
gain specialized repair and testing equipment and assume responsibility for
AMERICOM's business operations in Los Angeles, California; Louisville, Kentucky;
Baltimore, Maryland; and Dallas, Texas; as well as AMERICOM's field technicians
and support operations throughout the United States. The acquisition is expected
to be completed by the end of May 2000. Completion of the transaction is subject
to applicable government approvals and various conditions of closing.

NOTE 8 - SUBSEQUENT EVENTS

On March 1, 2000, Solectron completed the acquisition of the complex systems
manufacturing assets of Ericsson Telecom AB's telecommunications infrastructure
equipment operations in Longuenesse, France, and Ostersund, Sweden. As part of
the



                                       15
<PAGE>   16
agreement, Solectron will provide a complete range of integrated supply-chain
solutions to Ericsson Telecom AB. This includes supply-base management, early
prototyping, New Product Introduction (NPI) management, complex printed circuit
board (PCB) assembly, configure-to-order and build-to-order complex systems
assembly, and global services.

Effective March 8, 2000, Solectron had a two-for-one stock split effected in the
form of stock dividend and issued to the holders of record as of February 23,
2000. Share and per-share data presented reflect such stock split transaction.

On April 4, 2000, Solectron signed a definitive agreement to acquire certain
Nortel Networks' NPI prototyping, PCB and telephone set ("telset") assembly
assets in North America and Asia. The companies are also discussing the
divestiture or outsourcing of certain manufacturing and repair operations in
Europe. Under the terms of the agreement, and the proposed agreements, Solectron
will pay approximately $900 million to assume the operations contemplated in
these agreements. The companies also agreed to enter into a multi-year supply
agreement, with the option to renew. Solectron will provide NPI prototyping,
manufacturing and repair services for Nortel Networks' optical, carrier,
enterprise and wireless products. As a result of the agreement for North America
and Asia, Solectron will be gaining NPI prototyping and manufacturing
capabilities in Calgary, Canada, and Research Triangle Park, North Carolina; and
manufacturing capabilities in Monterrey, Mexico, and Istanbul, Turkey. Under the
terms proposed for Europe, Solectron would acquire NPI prototyping and
manufacturing operations in Monkstown, Northern Ireland, and manufacturing and
repair capabilities in Cwmcarn, Wales. In addition, Solectron has submitted an
offer to acquire certain PCB assembly and telset assets of Matra-Nortel
Communications S.A.S. in France. In addition to the acquired locations,
Solectron will be transferring other Nortel Networks products to Solectron
locations to align the global supply chain with Nortel Networks' cost-to-market
and time-to-market strategies. As part of the agreement, Solectron will be
setting up a new operating unit comprised of the acquired Nortel Networks sites.
This operating unit will be a part of the manufacturing and operations business
unit, and will be focused on maintaining continuity of supply and enhancing
competitive performance to Nortel Networks, while the sites transition to the
Solectron business model. It is expected that the transactions will be closed in
North America by the end of the second quarter of calendar year 2000; in Europe,
by the end of the second quarter or beginning of the third quarter of calendar
year 2000; and in Asia, in the third quarter of calendar year 2000. All
transactions are subject to customary conditions and regulatory approvals. In
addition, the transaction with Matra-Nortel Communications S.A.S. is subject to
the employee consultation processes in Europe.



                                       16
<PAGE>   17

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

Certain statements contained in the following Management's Discussion and
Analysis of Financial Condition and Results of Operations, including, without
limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute forward-looking
statements which involve risks and uncertainties. Solectron's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those factors set forth
under "Trends and Uncertainties" below.

GENERAL

Solectron provides electronics manufacturing services to original equipment
manufacturers (OEMs) who design and sell networking equipment, workstations,
personal and notebook computers, computer peripherals, telecommunications
equipment or other electronic equipment. These OEMs include Cisco Systems, Inc.,
Ericsson Telecom AB, Hewlett-Packard Company, Inc., Compaq Computer Corporation,
and International Business Machines Corporation (IBM). These companies contract
with Solectron to build their products or to obtain other related services from
Solectron.

Solectron furnishes integrated supply-chain solutions that span the entire
product life cycle from technology solutions, to manufacturing and operations,
to global services. These services include the following range of services:

-    Product design and manufacturing;
-    New Product Introduction management;
-    Materials purchasing and management;
-    Prototyping;
-    Printed circuit board assembly (the process of placing components on an
     electrical printed circuit board that controls the processing functions of
     a personal computer or other electronic equipment);
-    Systems assembly (for example, building complete systems such as mobile
     telephones and testing them to ensure functionality);
-    Distribution;
-    Product repair; and
-    Warranty services.

Solectron's performance of these services allows its customers to remain
competitive by focusing on their core competencies of sales, marketing, and
research and development. We have manufacturing facilities in the Americas,
Europe and Asia. This geographic presence gives our customers access to
manufacturing services in the locations where they need to be close to their
expanding markets for faster product delivery.

During 1997, Solectron established a strategic, global manufacturing partnership
with Ericsson Telecom AB's Business Area Infocom Systems. We established a New
Product Introduction (NPI) center in Sweden and transferred production from
certain Ericsson Telecom AB (Ericsson) plants worldwide to our manufacturing
sites around the world. In October 1997, we acquired certain assets, primarily
equipment and inventory, of Ericsson's printed circuit board (PCB) assembly
operation located in Sao Paulo, Brazil.

In April 1998, Solectron acquired NCR Corporation's (NCR) manufacturing assets
in Columbia, South Carolina; Duluth, Georgia; and Dublin, Ireland. Under the
terms of the agreement, NCR outsourced the manufacturing of certain computer
components to Solectron for at least five years. The site in Duluth was
subsequently merged with the Braselton, Georgia, site into a newly constructed
manufacturing facility in Suwanee, Georgia, in October 1999. The Braselton site
was originally acquired from Mitsubishi in October 1998.



                                       17
<PAGE>   18

In June 1998, Solectron acquired International Business Machines Corporation's
(IBM) Electronic Card Assembly and Test (ECAT) manufacturing assets in
Charlotte, North Carolina, and non-exclusive rights to certain IBM intellectual
property. Under the terms of the agreement, we will provide PCB assembly
services to IBM in North America for the next three years. In addition, IBM has
made available to Solectron intellectual property rights covering a wide
spectrum of technologies and capabilities. IBM also provided to Solectron
failure analysis and characterization tools for process development and
manufacturing, including fault detection and isolation.

In October 1998, Solectron acquired the wireless telephone manufacturing assets
of Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular Mobile
Telephone (CMT) division in Braselton, Georgia. MCEA was a subsidiary of
Mitsubishi Electric Corporation (Mitsubishi). Under the terms of the agreement,
we will provide MCEA-CMT with a full range of manufacturing services for five
years, including NPI management, PCB assembly and full systems assembly for
MCEA's branded and private-label cellular products sold in North America. In
October 1999, we combined the operations of Braselton and Duluth into a newly
constructed manufacturing facility in Suwanee, Georgia.

In February 1999, Solectron acquired IBM's Electronic Card Assembly and Test
(ECAT) manufacturing assets in Austin, Texas, and non-exclusive rights to
certain IBM intellectual property. Under the terms of the agreement, for the
next three years we will provide PCB assembly for motherboards used in IBM's
mobile computer products manufactured worldwide. This includes physical design,
early prototyping, new product launch, PCB assembly and test, volume production,
end-of-life support, field return services and life cycle management. We will
also provide IBM's worldwide design teams a full range of integrated NPI
services which involve pre-manufacturing support, such as design and layout,
component and concurrent engineering, test development, prototype, procurement
and assembly.

In July 1999, Solectron issued common stock to acquire Sequel, Inc. (Sequel).
Sequel was a privately held corporation specializing in notebook computer and
liquid crystal display repair service and support. We have assumed
responsibility for Sequel's business operations in San Jose, California;
Memphis, Tennessee; and Reading, United Kingdom. We have also assumed Sequel's
ownership in joint-venture operations in Japan and Taiwan. The acquisition is
expected to enable us to expand our global support services capabilities by
adding quick-turn service operations, customer service centers and help-desk
support for the end-users of Solectron-built products.

In August 1999, Solectron acquired the manufacturing assets of Trimble
Navigation Limited (Trimble) in Sunnyvale, California, and assumed full
manufacturing responsibility of Trimble's Global Positioning System (GPS) and
related radio frequency (RF) technology products for the next three years.
Trimble is a leader in RF products enabled by GPS technology. We also acquired
certain intellectual property rights related to RF technology. Under the terms
of the agreement, we will provide Trimble a full range of integrated services
across the entire product life cycle including design consultation, prototyping,
NPI management, and volume PCB and systems assembly.



                                       18
<PAGE>   19

In September 1999, Solectron announced the acquisition of manufacturing assets
in several phases of IBM's Netfinity server operations in Greenock, Scotland. In
addition, we acquired certain IBM intellectual property rights included in the
design and manufacture of PC server motherboards. Under the terms of the
agreement, we assumed NPI and manufacturing responsibility for the PCB
assemblies used in IBM's Netfinity server lines which were formerly manufactured
at IBM's Greenock operations. We will provide IBM full-service NPI management
which includes a full range of premanufacturing services, specifically component
and concurrent engineering, test development, prototype, procurement and
assembly. We will also provide IBM for the next three years fully integrated PCB
assembly services including early prototyping, new product launch, assembly and
test, volume production, end-of-life support and life cycle management. The
volume PCB assembly services will be transferred from IBM's Greenock facility to
our existing global manufacturing operations. In addition, we have established a
new, full-service NPI center in Port Glasgow, Scotland, to support the IBM
design teams.

In October 1999, Solectron signed a definitive agreement with Acer, Inc. (Acer),
a core unit of the Acer Group, the world's third-largest PC manufacturer, to
form a strategic alliance to provide global design, manufacturing and service
solutions for OEM-branded personal computers, servers and workstations. As a
result of the alliance, it is expected that customers will be able to access the
extensive technology, motherboard and system-level design services, and global
supply-base, manufacturing, distribution, logistics and global services
operations of both companies to further streamline their global supply chain.
Solectron and Acer plan to leverage their combined resources, including
facilities, systems and personnel, to provide the industry's first fully
integrated, global and optimized end-to-end design, manufacturing and services
solution. The companies will manage this alliance under a joint management
matrix.

In November 1999, Solectron acquired NULOGIX Technical Services, Inc. (NULOGIX),
a wholly owned subsidiary of IBM Canada, in its entirety. NULOGIX is located in
Vaughan, Canada, and specializes in repair, remanufacturing and refurbishment.
With this acquisition, we expect to be able to provide the Canadian market a
full range of value-added global service solutions. These services include
product repair, upgrades, remanufacturing and maintenance through factory and
fast-hub service centers located around the world; help-desk support through
customer call centers for end-users; logistics and parts management; returns
processing; warehousing; engineering change management; and end-of-life
manufacturing.

On November 30, 1999, Solectron completed its acquisition of SMART Modular
Technologies, Inc (SMART) and was accounted for as a pooling of interests. SMART
is a designer and manufacturer of memory modules and memory cards, embedded
computers, and I/O products. Through the acquisition, Solectron has gained a
manufacturing presence in Aguada, Puerto Rico, and additional manufacturing
capacity through SMART's facilities in Fremont, California; Penang, Malaysia;
and East Kilbride, Scotland. In addition, Solectron has gained design centers in
Fremont, California; Bangalore, India; Boston, Massachusetts; and Ayr, Scotland.
The acquisition enables Solectron to expand its service capabilities and
infrastructure by integrating SMART and Force into the technology business unit.
In addition, Solectron is benefiting from the business purchase transaction of
Compaq Computer Corporation's embedded and real-time product business in
Fremont, California and Scotland by SMART in August 1999.

On February 28, 2000, Solectron signed a letter of intent to acquire AMERICOM
Wireless Services (AMERICOM) in its entirety, a privately held corporation which
specializes in wireless handset repair and refurbishment and outsourced
technical customer support services. As part of the transaction, Solectron will
gain specialized repair and testing equipment and assume responsibility for
AMERICOM's business operations in Los Angeles, California; Louisville, Kentucky;
Baltimore, Maryland; and Dallas, Texas; as well as AMERICOM's field technicians
and support



                                       19
<PAGE>   20

operations throughout the United States. The acquisition is expected to be
completed by the end of May 2000. Completion of the transaction is subject to
applicable government approvals and various conditions of closing.

In March 2000, Solectron completed the acquisition of the complex systems
manufacturing assets of Ericsson's telecommunications infrastructure equipment
operations in Longuenesse, France, and Ostersund, Sweden. As part of the
agreement, Solectron will provide a complete range of integrated supply-chain
solutions to Ericsson. This includes supply-base management, early prototyping,
NPI management, complex PCB assembly, configure-to-order and build-to-order
complex systems assembly, and global services.

On March 31, 2000, Solectron completed the acquisition of Alcatel's
manufacturing business in Aguadilla, Puerto Rico. Solectron originally announced
its intent to purchase Alcatel's manufacturing business and assets in Aguadilla,
Puerto Rico and Longview, Texas, respectively. The acquisition of Alcatel's
manufacturing assets in Longview is expected to be closed in June 2000 and is
subject to various conditions of closing. Alcatel is a world leader in building
next-generation networks and end-to-end data voice solutions. As part of the
acquisition of Alcatel's manufacturing business in Aguadilla, Solectron will
assume full manufacturing responsibility for Alcatel's PCB products focused on
the networking and telecommunication industries. Additionally, Solectron will
provide a full range of manufacturing services to Alcatel for the next three
years including prototyping and high-volume PCB assembly. Under the proposed
agreement for Longview, Solectron will assume full manufacturing responsibility
for Alcatel's build-to-order (BTO) RF communication systems and will also
provide a full range of manufacturing services to Alcatel for the next three
years including NPI management of RF systems and BTO systems build.

On April 4, 2000, Solectron signed a definitive agreement to acquire certain
Nortel Networks' NPI prototyping, PCB and telephone set ("telset") assembly
assets in North America and Asia. The companies are also discussing the
divestiture or outsourcing of certain manufacturing and repair operations in
Europe. Under the terms of the agreement, and the proposed agreements, Solectron
will pay approximately $900 million to assume these operations contemplated in
these agreements. The companies also agreed to enter into a multi-year supply
agreement, with the option to renew. Solectron will provide NPI prototyping,
manufacturing and repair services for Nortel Networks' optical, carrier,
enterprise and wireless products. As a result of the agreement for North America
and Asia, Solectron will be gaining NPI prototyping and manufacturing
capabilities in Calgary, Canada, and Research Triangle Park, North Carolina; and
manufacturing capabilities in Monterrey, Mexico, and Istanbul, Turkey. Under the
terms proposed in Europe, Solectron would acquire NPI prototyping and
manufacturing operations in Monkstown, Northern Ireland, and manufacturing and
repair capabilities in Cwmcarn, Wales. In addition, Solectron has submitted an
offer to acquire certain PCB assembly and telset assets of Matra-Nortel
Communications S.A.S. in France. In addition to the acquired locations,
Solectron will be transferring other Nortel Networks products to Solectron
locations to align the global supply chain with Nortel Networks' cost-to-market
and time-to-market strategies. As part of the agreement, Solectron will be
setting up a new operating unit comprised of the acquired Nortel Networks sites.
This operating unit will be a part of the manufacturing and operations business
unit, and will be focused on maintaining continuity of supply and enhancing
competitive performance to Nortel Networks, while the sites transition to the
Solectron business model. It is expected that the transactions will be closed in
North America by the end of the second quarter of calendar year 2000; in Europe,
by the end of the second quarter or beginning of the third quarter of calendar
year 2000; and in Asia, in the third quarter of calendar year 2000. All
transactions are subject to customary conditions and regulatory approvals. In
addition, the transaction with Matra-Nortel Communications S.A.S. is subject to
the employee consultation processes in Europe.

On April 6, 2000, Solectron announced the completion of acquisition for the
manufacturing assets of Premisys Communications, Inc., a wholly owned subsidiary
of



                                       20
<PAGE>   21

Zhone Technologies, Inc. (Zhone). Zhone is a communications equipment provider
integrating expertise in voice, video and data communications. Under the
proposed agreement, Solectron will become Zhone's virtual supply-chain partner
and will sign a five-year commitment with Zhone to provide product life cycle
management services, including NPI through repair and end-of-life services.

RESULTS OF OPERATIONS

The electronics industry is subject to rapid technological change, product
obsolescence and price competition. These and other factors affecting the
electronics industry, or any of Solectron's major customers in particular, could
materially harm Solectron's results of operations. See "Trends and
Uncertainties" for factors relating to possible fluctuation of operating results
and our competitors. In addition, Solectron acquired SMART effective November
30, 1999 and accounted for the acquisition as a pooling of interests.
Accordingly, the Company's historical financial statements have been restated
retroactively to include the financial results of SMART. SMART's fiscal year was
from November 1 to October 31. Because the fiscal years for Solectron and SMART
differed, SMART changed its fiscal year end to coincide with Solectron's
beginning in fiscal 2000.

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



                                       21
<PAGE>   22

<TABLE>
<CAPTION>
                                Three Months Ended         Six Months Ended
                                -------------------      --------------------
                                Feb. 29,    Feb. 28,     Feb. 29,     Feb. 28,
                                 2000         1999         2000         1999
                                ------        -----      -------        -----
<S>                             <C>         <C>          <C>          <C>
Net sales                        100.0%       100.0%       100.0%       100.0%
Cost of sales                     90.3         90.3         90.3         90.5
                                 -----        -----        -----        -----
  Gross profit                     9.7          9.7          9.7          9.5
Operating expenses:
  Selling, general and
    administrative                 3.5          3.9          3.6          3.8
  Research and
    Development                    0.5          0.5          0.5          0.5
  Acquisition and
    restructuring costs            0.9           --          0.4           --
                                 -----        -----        -----        -----
      Operating income             4.8          5.3          5.2          5.2

Interest income                    0.7          0.3          0.8          0.3
Interest expense                  (0.4)        (0.4)        (0.4)        (0.3)
                                 -----        -----        -----        -----
Income before income taxes
  and cumulative effect
  of change in accounting
  principle                        5.1          5.2          5.6          5.2

Income tax expense                 1.6          1.6          1.8          1.7
                                 -----        -----        -----        -----
Income before cumulative
  effect of change in
  accounting principle             3.5          3.6          3.8          3.5

Cumulative effect of change
  in accounting principal
  for start-up costs                --           --         (0.1)          --
                                 -----        -----        -----        -----
     Net income                    3.5%         3.6%         3.7%         3.5%
                                 =====        =====        =====        =====
</TABLE>

NET SALES

Net sales for the three- and six-month periods of fiscal 2000 were $2.9 billion
and $5.6 billion, respectively, and increased 32.4% and 29.1%, respectively,
over the same periods in fiscal 1999. The growth in sales was primarily
attributable to strong demand from our customers worldwide and acquisitions made
during fiscal 1999 and the first quarter of fiscal 2000. However, the demand
increases were hindered by component shortages, seasonal softness and
end-of-life products.

Solectron has three business units including manufacturing and operations,
technology solutions, and global services. Our core business group,
manufacturing and operations, provided approximately 87% of net sales for the
three- and six-month periods in fiscal 2000 and 1999. Our newly established
technology solutions group consisting of SMART and Force contributed
approximately 12% of net sales for the three- and six-month periods in fiscal
2000 compared to 13% for the same periods in fiscal 1999. The new global
services unit contributed 1% of net sales for the three- and six-month periods
in fiscal 2000.



                                       22
<PAGE>   23

Manufacturing and Operations

Net sales from our worldwide manufacturing operations group grew to $2.5 billion
and $4.9 billion, respectively, for the three- and six-month periods in fiscal
2000 compared to the same periods in fiscal 1999. These increases were 32.0% and
29.6% over the comparable periods of fiscal 1999. The increase in net sales was
principally due to strong demand growth from our customers and acquisitions
including manufacturing assets of Mitsubishi in October 1998, IBM ECAT in
Austin, Texas in February 1999, Trimble in August 1999, and IBM's Netfinity
server operations in Greenock, Scotland in September 1999.

Within the Americas, the Milpitas site in California, Mexico site and Charlotte
site in North Carolina were the largest contributors primarily due to new
projects from our customers. However, the sales in Americas were constrained by
the shortage of components. The sales growth in Milpitas site continued despite
the planned transfer of personal computer PCB programs and computer peripherals
systems assembly programs to Mexico and networking business to Penang.

In Europe, net sales increase in the three- and six-month periods of fiscal 2000
over the same period of fiscal 1999 was principally due to higher demand from
our mobile phone and telecommunications customers. The recent acquisition of the
manufacturing assets of IBM's Netfinity server operations in Greenock, Scotland
in September 1999 also contributed incremental net sales for the three- and
six-month periods in fiscal 2000. In addition, the recently expanded Romania
site started ramping up its production to meet demand.

In Asia, net sales growth was primarily due to demand growth in mobile phones,
networking and personal computer projects for the three- and six-month periods
in fiscal 2000 compared to the same periods of fiscal 1999. Additionally, the
China site experienced ramp-up in production to meet demand growth. Our Penang
site in Malaysia continues to benefit from the transfer of networking business
from Milpitas, California.

Technology Solutions

Net sales from our new technology solutions operations, including SMART and
Force, grew 22.5% and 14.6% for the three- and six-month periods, respectively,
over the same periods of fiscal 1999. The growth was principally due to an
increase in the average memory densities incorporated into SMART's standard
memory products and sales increase of communication card products and embedded
computer modules. In addition, the acquired embedded and real-time product line
in Puerto Rico during August 1999 from Compaq Computer Corporation also
contributed to the increase in net sales. The increase in net sales was
partially offset by seasonal declines in pricing.

Global Services

This newly established group reported net sales of $27.9 million and $54.4
million, respectively, for the three- and six-month periods of fiscal 2000. Net
sales benefited from the business acquisitions of Sequel in July 1999 and
NULOGIX in November 1999.

Concentration of Sales - The operations in Milpitas, California, contributed a
substantial portion of Solectron's net sales and operating income during fiscal
1999, 1998 and 1997. In recent years, management has undertaken deliberate
actions to achieve improved global load balancing by transferring certain
projects from the Milpitas site to other sites worldwide. However, the
performance of the Milpitas operation is expected to continue to be a
significant factor in the overall financial performance of Solectron. Any
adverse material change to the customer base, product mix, efficiency or other
attributes of this site could materially harm Solectron's consolidated results
of operations.



                                       23
<PAGE>   24

International Sales - In the first half of fiscal 2000, international locations
contributed 40.5% of consolidated net sales compared to 38.5% in the same period
of fiscal 1999. As a result of Solectron's international sales and facilities,
Solectron's operations are subject to the risks of doing business abroad. While
these dynamics have not materially harmed Solectron's results of operations, we
cannot assure that there will not be such an impact in the future. See "Trends
and Uncertainties" for factors pertaining to our international sales and
fluctuations in the exchange rates of foreign currency for further discussion of
potential adverse effects in operating results associated with the risks of
doing business abroad.

Net Sales to Major Customers - Several of our customers accounted for 10% or
more of our net sales in the three- and six-month periods of fiscal 2000 and
1999. The following table details these customers and the percentage of net
sales attributed to them.

<TABLE>
<CAPTION>
                                              Three Months Ended          Six Months Ended
                                            ----------------------     ----------------------
                                            Feb. 29,      Feb. 28,     Feb. 29,      Feb. 28,
                                              2000          1999         2000          1999
                                            -------         ------     -------         ------
<S>                                         <C>           <C>          <C>           <C>
Cisco Systems, Inc. (Cisco)                    12%           10%           12%            *
Ericsson Telecom AB (Ericsson)                 11%            *             *             *
Compaq Computer Corporation (Compaq)           10%           14%           10%           14%
Hewlett-Packard Company (HP)                    *            10%            *            10%
</TABLE>

----------------
*    Less than 10%.

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

Solectron's top ten customers accounted for approximately 71% and 75% of
consolidated net sales in the first half of fiscal 2000 and 1999, respectively.
We are dependent upon continued revenues from Cisco, Compaq, HP, and Ericsson as
well as our other top ten customers. We cannot guarantee that these or any other
customers will not increase or decrease as a percentage of consolidated net
sales either individually or as a group. Consequently, any material decrease in
sales to these or other customers could materially harm Solectron's results of
operations.

Solectron believes that its ability to continue achieving growth will depend
upon growth in sales to existing customers for their current and future product
generations, successful marketing to new customers, and future geographic
expansion. Customer contracts can be canceled and volume levels can be changed
or delayed. The timely replacement of delayed, canceled or reduced orders with
new business cannot be assured. In addition, we cannot assure that any of
Solectron's current customers will continue to utilize Solectron's services.
Because of these factors, we cannot assure that Solectron's historical revenue
growth rate will continue. See "Trends and Uncertainties" for a discussion of
certain factors affecting the management of growth, geographic expansion, and
potential fluctuations in sales and results of operations.

GROSS PROFIT

The gross margin percentage increased to 9.7% for the first half of fiscal 2000
period from 9.5% for the same period of fiscal 1999. The increase was primarily
attributable to higher sales volume, sales of more profitable products,
manufacturing efficiency and cost reduction, partially offset by the negative
impacts from product mix and non-linear production due to component shortages
and integration of new projects.



                                       24
<PAGE>   25

For our worldwide manufacturing operations, we anticipate that a larger
percentage of our sales may be derived from systems-build projects which
generally yield lower profit margins than PCB assembly. For our technology
solutions business, we expect that a majority of our sales from SMART may
continue to be derived from turnkey projects which typically yield lower profit
margins than the consignment projects. In addition, factors affecting SMART
profit margins include the mix between sales of specialty memory modules,
standard memory modules, communication card products and embedded computer
modules as well as changes in average memory densities used in memory products.
Currently, a significant majority of SMART's net sales are derived from the
sales of standard memory modules which typically have lower profit margins than
its specialty memory modules.

In the foreseeable future, Solectron's overall gross margin is expected to
depend primarily on product mix, production efficiencies, utilization of
manufacturing capacity, start-up and integration costs of new and acquired
businesses, percentage of sales derived from systems-build and turnkey projects,
pricing within the electronics industry, component costs, and the cost structure
at individual sites. Over time, gross margins at the individual sites and for
Solectron as a whole may continue to fluctuate. Increases in the systems-build
business or turnkey projects, additional costs associated with new projects, and
price erosion within the electronics industry could harm our gross margin.

In addition, we have recently experienced component shortages. While the
component availability fluctuates from time to time and is still subject to lead
time and other constraints, this could possibly limit our revenue growth and
might have a negative impact on our revenue projections for the foreseeable
future. Because of these factors and others discussed under "Trends and
Uncertainties" below, we cannot assure that Solectron's gross margin will not
fluctuate or decrease in future periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In absolute dollars, selling, general and administrative (SG&A) expenses
increased 17.3% and 20.8%, respectively, for the three- and six-month periods of
fiscal 2000 over the same periods of fiscal 1999. As a percentage of net sales,
SG&A expenses were 3.5% and 3.6%, respectively, for the three- and six-month
periods in the fiscal 2000, and 3.9% and $3.8% for the comparable periods in
fiscal 1999, respectively. The decline in SG&A expenses for the fiscal 2000
periods reflects our on-going efforts to manage operating expenses relative to
sales growth and gross margin levels. We anticipate SG&A expenses will increase
in terms of absolute dollars in the future, and may possibly increase as a
percentage of revenue, as we continue to invest in our infrastructure such as
marketing, sales, supply-base management as well as continuing investment in
information systems to support the increased size and complexity of our
business.

RESEARCH AND DEVELOPMENT EXPENSES

With the exception of our SMART and Force Computers operations, Solectron's
research and development (R&D) activities have been focused primarily on the
development of prototype and engineering design capabilities, fine pitch
interconnecting technologies (which include ball-grid array, tape-automated
bonding, multichip modules, chip-on-flex, chip-on-board and flip chip),
high-reliability environmental stress test technology and the implementation of
environmentally friendly assembly processes such as VOC-free and no-clean.
SMART's and Force's R&D efforts are concentrated on new product development and
improvement of product designs through improvements in functionality and the use
of microprocessors in embedded applications.

As a percentage of net sales, R&D expenses remained at 0.5% for the three- and
six month periods in fiscal 2000 and 1999. In absolute dollars, R&D expenses
were $14.3



                                       25
<PAGE>   26

million and $29.0 million, respectively, in the second quarter and first half of
fiscal 2000 compared to $10.3 million and $20.7 million in the same periods of
fiscal 1999. The increases in R&D expenses in the fiscal 2000 periods compared
to fiscal 1999 periods was primarily due to increased R&D effort at SMART and
Force and new R&D projects initiated at various sites. We expect that R&D
expenses will increase in absolute dollars in the future and may increase as a
percentage of net sales as SMART and Force will continue to invest in their R&D
efforts and additional R&D projects are undertaken at certain sites.

ACQUISITION AND RESTRUCTURING COSTS

Acquisition costs of $20.3 million related to the merger of SMART included
$17.5 million of investment banker fees, together with other costs such as,
legal fees, accounting fees, registration fees and other incidentals. Total
restructuring costs of $4.7 million related to the consolidation of certain
facilities as a result of the mergers with SMART and Sequel, Inc. These
restructuring transaction costs were comprised of lease exit costs of
approximately $2.4 million, severance costs of approximately $0.9 million,
fixed asset write-offs of $1.4 million and other incidental costs. As of
February 29, 2000, liabilities related to these restructuring activities,
totaling approximately $3.5 million, are expected to be paid out by the end of
the calendar year 2000.

NET INTEREST INCOME (EXPENSE)

Net interest income was $9.1 million for the second quarter of fiscal 2000
compared to net interest expense of $2.9 million in the same period of fiscal
1999. For the first half of fiscal 2000, net interest income was $21.2 million
compared to $2.2 million of net interest expense for the comparable period of
fiscal 1999. The net interest income in the fiscal 2000 periods primarily
resulted from interest income earned on undeployed cash and investments,
partially offset by interest expense on our 4% yield zero-coupon convertible
senior notes and 7 3/8% senior notes. In the first half of fiscal 2000, we
capitalized approximately $0.6 million of interest expense related to the costs
of computer software developed for internal use. We expect to utilize more of
the undeployed cash during fiscal 2000 in order to fund anticipated future
growth. See "Trends and Uncertainties" for factors relating to management growth
and potential fluctuations in operating results.

INCOME TAXES

For the first half of fiscal 2000, income taxes increased to $100.5 million from
$72.6 million in the fiscal 1999 period. The increase was primarily due to
increased income before income taxes. In general, the effective income tax rate
is largely a function of the balance between income from domestic and
international operations. Solectron's international operations, taken as a
whole, have been taxed at a lower rate than those in the United States,
primarily due to the tax holiday granted to Solectron's sites in Malaysia. The
Malaysian tax holiday is effective through January 31, 2002, subject to some
conditions, including certain levels of research and development expenditures.
Solectron has also been granted various tax holidays in China, which are
effective for various terms and are subject to some conditions.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up
Activities." This SOP requires companies to expense all costs incurred in
connection with start-up activities. The Company recorded a cumulative effect of
change in accounting principle of $3.5 million, net of $1.6 million tax benefit
in the first quarter of fiscal 2000.



                                       26
<PAGE>   27

LIQUIDITY AND CAPITAL RESOURCES

Net working capital was $3.4 billion at February 29, 2000 compared to $3.2
billion at the end of fiscal 1999. During the first half of fiscal 2000, cash,
cash equivalents and short-term investments decreased to $1.5 billion from $1.9
billion which reflects funding for required investments in working capital and
capital expenditures to support sales growth. Additionally, we used
approximately $69 million for acquisitions of additional manufacturing assets
from Trimble in California, acquisition funding of manufacturing assets at IBM's
Netfinity server operations in Greenock of Scotland, as well as the business
acquisitions of NULOGIX in Canada and Compaq's embedded and real-time product
lines in Fremont, California and Scotland during the first half of fiscal 2000.

As we continue to grow, it is expected that we will require greater amounts of
working capital to support our operations. We believe that our current level of
working capital, together with cash generated from operations and our available
credit facilities, will provide adequate working capital for our operations for
the foreseeable future. However, we may need to raise additional funds to
finance our rapid expansion, including establishing new locations or financing
additional acquisitions. We cannot assure that such funds, if needed, will be
available on terms acceptable to us or at all.

Inventory levels fluctuate directly with the volume of Solectron's
manufacturing. Changes or significant fluctuations in product market demands can
cause fluctuations in inventory levels that may result in changes of inventory
turns and liquidity. Historically, we have been able to manage our inventory
levels for these fluctuations. However, should material fluctuations occur in
product demand, we could experience slower turns and reduced liquidity. The
increase in inventory levels at February 29, 2000 from fiscal year end 1999 was
primarily due to incomplete kits on hand awaiting short components, stock up in
anticipation of new programs, and bulk inventory buys from certain customers.

In the first half of fiscal 2000, Solectron invested $191.5 million in capital
expenditures. A large portion of these expenditures related to the purchase of
new equipment, primarily surface mount assembly and test equipment, to meet
current and expected production levels, as well as to replace or upgrade older
equipment which was retired or sold. Expenditures were also made for the
acquisition of land and buildings for the Mexico and Romania sites. We expect
total capital expenditures in fiscal 2000 to be approximately $500 million.

In addition to cash and cash equivalents of $723.9 million and short-term
investments of $745.4 million as of February 29, 2000, Solectron has available a
$100 million unsecured multicurrency revolving credit facility and an unsecured
revolving bank line of credit up to $30.0 million that expire in April 2002 and
May 2000, respectively. These credit facilities are subject to certain
financial covenants. We also have approximately $98.7 million in unused foreign
credit facilities of which $24.2 million is committed credit line.

"YEAR 2000" ISSUES

Solectron developed a comprehensive program to address the issues associated
with the programming code in the computer systems as the year 2000 approached.
The Year 2000 problem was pervasive and complex, since computer systems,
manufacturing equipment and industrial control systems would have been affected
in some way by the rollover of the two-digit year value to 00. Systems that
could not properly recognize such dates could have generated erroneous
information or caused a system to fail. The Year 2000 issue created risk for us
from unforeseen problems in our systems and from those of third parties with
whom we do business.

We experienced no significant operational or administrative problems as we
passed the transition to the year 2000. While the New Year rollover was
potentially the



                                       27
<PAGE>   28

most critical period, the computer-related problems may not surface for months
from now. We will continue to diligently monitor the systems for any Year 2000
issues and any other date-related computer issues in the coming months. Any
failure of Solectron's and/or third parties' computer systems, manufacturing
equipment and industrial control systems could materially harm our ability to
conduct business.

The total cost for the completion of Year 2000 program was approximately $35
million. Of this amount, approximately $10.0 million was for the replacement of
capital equipment, approximately half of which comprises non-compliant systems
that would not otherwise have been replaced at that point in time. A significant
portion of these costs was not incremental to us, but rather represents the
redeployment of existing resources. Certain other information technology
projects were delayed due to the focus on Year 2000 issues. The total amount
spent on the program in the prior fiscal year ended August 31, 1999, was $27.0
million, of which $18.0 million principally pertained to payroll costs for
personnel involved in the program and costs of outside consultants and $9.0
million principally pertained to capital expenditures. The total amount spent
for the six months ended February 29, 2000 was $4.8 million in expense plus an
additional $0.6 million on capital expenditures. Prior to fiscal 1999, costs of
software and hardware applications incurred for Year 2000 compliance were not
tracked separately, but were estimated to be in the range of $2.0 million to
$3.0 million.


                            TRENDS AND UNCERTAINTIES

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

A majority of our annual net sales comes from a small number of our customers.
Our ten largest customers accounted for approximately 71% of net sales in the
first half of fiscal 2000 and approximately 75% of net sales in fiscal 1999.
Since we are dependent upon continued net sales from our ten largest customers,
any material delay, cancellation or reduction of orders from these or other
major customers could cause our net sales to decline significantly. Some of
these customers individually account for more than ten percent of our annual net
sales. We cannot guarantee that we will be able to retain any of our ten largest
customers or any other accounts. In addition, our customers may materially
reduce the level of services ordered from us at any time. This could cause a
significant decline in our net sales and we may not be able to reduce the
accompanying expenses at the same time. Moreover, our business, financial
condition and results of operations will continue to depend in significant part
on our ability to obtain orders from new customers, as well as on the financial
condition and success of our customers. Therefore, any adverse factors affecting
any of our customers or their customers could have a material adverse effect on
our business, financial condition and results of operations.

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

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



                                       28
<PAGE>   29

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

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

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

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

WE ARE DEPENDENT UPON THE ELECTRONICS INDUSTRY WHICH CONTINUALLY PRODUCES
TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES; OUR INABILITY TO
CONTINUALLY MANUFACTURE SUCH PRODUCTS ON A COST-EFFECTIVE BASIS WOULD HARM OUR
BUSINESS.

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

For our technology solutions business, we have experienced, and may in the
future experience, delays from time to time in the development and introduction
of new products. Moreover, there can be no assurance that we will be successful
in selecting, developing, manufacturing and marketing new products or
enhancements. There can be no assurance that defects or errors will not be found
in our products after commencement of commercial shipments, which could result
in the delay in market acceptance of such products. The inability to introduce
new products or enhancements could have a material adverse effect on our
business, financial condition and results of operations.

WE ARE DEPENDENT ON LIMITED OR SOLE SOURCE OF SUPPLIERS FOR CRITICAL COMPONENTS.
THE INABILITY TO OBTAIN SUFFICIENT COMPONENTS AS REQUIRED WOULD CAUSE SALES
REDUCTIONS.

We are dependent on certain suppliers, including limited and sole source
suppliers, to provide key components used in our products. We have experienced
and may continue to experience delays in component deliveries which could cause
delays in product shipments and require the redesign of certain products. Also
for our technology solutions business, we are dependent upon certain limited or
sole source suppliers for critical components used for our memory module,
communications card and embedded



                                       29
<PAGE>   30

computer products. The electronics industry has experienced in the past, and may
experience in the future, shortages in semiconductor devices, including DRAM,
SRAM, Flash memory, tantalum capacitors and other commodities that may be caused
by such conditions as overall market demand surges or supplier production
capacity constraints. Except for certain commodity parts, we generally have no
written agreements with our suppliers. There can be no assurance that we will
receive adequate component supplies on a timely basis in the future. The
inability to continue to obtain sufficient components as required, or to develop
alternative sources if required, could cause delays, disruptions or reductions
in product shipments or require product redesigns which could damage
relationships with current or prospective customers and sales reduction.

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

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

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

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

WE ARE DEPENDENT ON THE MEMORY MODULE PRODUCT MARKET.

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

IF WE ARE UNABLE TO MANAGE OUR RAPID GROWTH AND ASSIMILATE NEW OPERATIONS IN A
COST-EFFECTIVE MANNER, OUR PROFITABILITY COULD DECLINE.

We have experienced rapid growth over a good number of years. Our historical
growth may not continue. In recent years, we have established operations in
different places throughout the world. For example, in fiscal 1998, we opened
offices in Taipei, Taiwan, Tel Aviv, Israel, and Norrkoping and Stockholm,
Sweden, and



                                       30
<PAGE>   31

commenced manufacturing operations in Guadalajara, Mexico, Suzhou, China, and
Timisoara, Romania. Also in fiscal 1998, we acquired foreign facilities in Sao
Paulo, Brazil, and Dublin, Ireland. Furthermore, through acquisitions in fiscal
1998 and 1999, we acquired facilities in Columbia, South Carolina, Memphis,
Tennessee, and San Jose, California and enhanced our capabilities in Charlotte,
North Carolina, Austin, Texas, and Milpitas, California.

During October and November of 1999, we completed the asset acquisition of IBM's
Netfinity server operations in Greenock, Scotland, and acquired IBM Canada's
NULOGIX Technical Services, Inc. subsidiary in Vaughan, Canada, in its entirety.
Also in October 1999, we signed a definitive agreement with Acer, Inc. (Acer), a
core unit of the Acer Group, the world's third-largest PC manufacturer, to form
a strategic alliance to provide global design, manufacturing and service
solutions for OEM-branded personal computers, servers and workstations. On
November 30, 1999, we completed the acquisition of SMART Modular Technologies,
Inc which was accounted for as a pooling of interests. In addition, we have
benefited from the business purchase transaction of Compaq Computer
Corporation's embedded and real-time product business in Fremont, California and
Scotland by SMART in August 1999.

On February 28, 2000, Solectron signed a letter of intent to acquire AMERICOM
Wireless Services (AMERICOM) in its entirety, a privately held corporation which
specializes in wireless handset repair and refurbishment and outsourced
technical customer support services. On March 1, 2000, we acquired the complex
systems manufacturing assets of Ericsson's telecommunications infrastructure
equipment operations in Longuenesse, France, and Ostersund, Sweden. On March 31,
2000, Solectron completed the acquisition of Alcatel's manufacturing business in
Aguadilla, Puerto Rico.

On April 4, 2000, Solectron signed a definitive agreement to acquire certain
Nortel Networks' NPI prototyping, PCB and telephone set ("telset") assembly
assets in North America and Asia. The companies are also discussing the
divestiture or outsourcing of certain manufacturing and repair operations in
Europe. On April 6, 2000, we announced the completion of acquisition for the
manufacturing assets of Premisys Communications, Inc., a wholly owned subsidiary
of Zhone Technologies, Inc.

Since we have been significantly expanding our operations, the growth has
resulted in a significant increase in responsibility for existing management
which has placed, and may continue to place, a heavy strain on our personnel and
management, manufacturing and other resources. Our ability to manage the
expansion to date, as well as any future expansion, will require progressive
increases in manufacturing capacity, as well as enhancements or upgrades of
accounting and other internal management systems and the implementation of a
variety of procedures and controls. There can be no assurance that significant
problems in these areas will not occur. Any failure to enhance or expand these
systems and implement such procedures and controls in an efficient manner and at
a pace consistent with our business could have a material adverse effect on our
financial condition and results of operations. Also, in order to achieve
anticipated revenue and other financial performance targets, we will continue to
be required to manage our assets and operations efficiently. In addition, should
we continue to expand geographically, we may experience certain inefficiencies
from the management of geographically dispersed facilities.

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



                                       31
<PAGE>   32

WE NEED TO MANAGE INTEGRATION OF OUR ACQUISITIONS TO MAINTAIN PROFITABILITY.

In fiscal 1998 and 1999, we completed acquisitions of manufacturing assets and
facilities from Ericsson, NCR, IBM, Mitsubishi and Trimble Navigation Limited
and acquired all of the capital stock of Sequel, Inc. For the first half of
fiscal 2000, we completed the asset acquisition of IBM's Netfinity server
operations in Greenock, Scotland, acquired IBM Canada's NULOGIX Technical
Services, Inc. subsidiary in Vaughan, Canada, in its entirety, and completed the
acquisition of SMART Modular Technologies, Inc which was accounted for as a
pooling of interests. On March 1, 2000, we acquired the complex systems
manufacturing assets of Ericsson's telecommunications infrastructure equipment
operations in Longuenesse, France and Ostersund, Sweden. On March 31, 2000, we
completed the acquisition of Alcatel's manufacturing business in Aguadilla,
Puerto Rico. On April 6, 2000, we announced the completion of acquisition for
the manufacturing assets of Premisys Communications, Inc., a wholly owned
subsidiary of Zhone Technologies, Inc. We also continue to evaluate acquisition
opportunities and may pursue additional acquisitions over time. These
acquisitions involve risks, including:

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

Our profitability will suffer if we are unable to successfully integrate and
manage recent acquisitions, as well as any future acquisitions that we might
pursue, or if we do not achieve sufficient revenue to offset the increased
expenses associated with these acquisitions.

OUR INTERNATIONAL SALES ARE A SIGNIFICANT AND GROWING PORTION OF OUR NET SALES;
WE ARE INCREASINGLY EXPOSED TO RISKS ASSOCIATED WITH OPERATING INTERNATIONALLY.

In the first half of fiscal 2000, approximately 40% of net sales come from our
international sites while approximately 36% of net sales came from outside of
the United States in fiscal 1999. As a result of our foreign sales and
facilities, our operations are subject to a variety of risks that are unique to
international operations, including the following:

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

In addition, we have operations in several locations in emerging or developing
economies that have a potential for higher risk. The risks associated with these
economies include but are not limited to currency volatility, and other economic
or political risks. In the future, these factors may harm our results of
operations. Solectron locations in emerging or developing economies include
Mexico, Brazil, China, Malaysia and Romania. As of February 29, 2000, we
recorded $98.4 million in cumulative foreign exchange translation losses on our
balance sheet which was primarily due to the devaluation of the Brazilian real.
While, to date, these factors have not had a significant adverse impact on our
results of operations, we cannot assure that there will not be such an impact.
Furthermore, while we may adopt measures to reduce the impact of losses
resulting from volatile currencies and other risks of doing business abroad, we
cannot assure that such measures will be adequate.



                                       32
<PAGE>   33

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

We have been granted a tax holiday which is effective through January 31, 2002,
subject to some conditions, for our Malaysian sites. We have also been granted
various tax holidays in China. These tax holidays are effective for various
terms and are subject to some conditions. It is possible that the current tax
holidays will be terminated or modified or that future tax holidays that
Solectron may seek will not be granted. If the current tax holidays are
terminated or modified, or if additional tax holidays are not granted in the
future, Solectron's effective income tax rate would likely increase.

WE ARE EXPOSED TO FLUCTUATIONS IN THE EXCHANGE RATES OF FOREIGN CURRENCY.

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

As of February 29, 2000, all of the foreign currency hedging contracts were
scheduled to mature in less than three months and there were no material
deferred gains or losses. In addition, our international operations in some
instances act as a natural hedge because both operating expenses and a portion
of sales are denominated in local currency. In these instances, including our
current experience involving the devaluation of the Brazilian real, although an
unfavorable change in the exchange rate of a foreign currency against the U.S.
dollar will result in lower sales when translated to U.S. dollars, operating
expenses will also be lower in these circumstances.

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

WE ARE EXPOSED TO FLUCTUATIONS IN INTEREST RATES.

The primary objective of our investment activities is to preserve principal,
while at the same time, maximize yields without significantly increasing risk.
To achieve this objective, we maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including both government and
corporate obligations, certificates of deposit and money market funds. As of
February 29, 2000, approximately 58% of our total portfolio was scheduled to
mature in less than



                                       33
<PAGE>   34

six months. In addition, our investments are diversified and of relatively short
maturity. A hypothetical 10% increase in interest rates would not have a
material effect on our investment portfolios.

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

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

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

Our ability to effectively compete may be affected by our ability to protect our
proprietary information. We hold a number of patents and other license rights.
These patent and license rights may not provide meaningful protection for our
manufacturing processes and equipment innovations. On June 23, 1999, Solectron
was served, along with 87 other companies including SMART Modular Technologies,
Inc., as a defendant in a lawsuit brought by the Lemelson Medical, Education &
Research Foundation. The lawsuit alleges that Solectron has infringed certain of
the plaintiff's patents relating to machine vision and bar-code technology.
Solectron believes it has meritorious defenses to these allegations and does not
expect that this litigation will result in a material impact on its financial
condition or results of operations. In the semiconductor, computer,
telecommunications and networking industries, companies receive notices from
time to time alleging infringement of patents, copyrights, or other intellectual
property rights or others. We are currently being sued by a party who alleges
that certain of our technology solutions business' communications card products
have infringed and continue to infringe upon the party's intellectual property
rights. Moreover, we have been and may from time to time continue to be notified
of claims that we may be infringing patents, copyrights or other intellectual
property rights owned by other third parties. The current litigation or any
other litigation could result in substantial costs and diversion of resources
and could have a material adverse effect on our business, financial condition
and results of operations. In the future, third parties may assert infringement
claims against Solectron or its customers. In the event of an infringement
claim, we may be required to spend a significant amount of money to develop a
non-infringing alternative or to obtain licenses. We may not be successful in
developing such an alternative or obtaining a license on reasonable terms, if at
all. In addition, any such litigation could be lengthy and costly and could harm
our financial condition.

FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD HARM OUR BUSINESS.

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



                                       34
<PAGE>   35

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

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

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

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

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

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

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


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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



                                       35
<PAGE>   36

SOLECTRON CORPORATION AND SUBSIDIARIES


PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

        SMART Modular Technologies, Inc. (SMART), a wholly owned subsidiary of
        Solectron Corporation, and certain of SMART's ex-officers and
        ex-directors have been named as defendants in six securities class
        action lawsuits filed in the United States District Court for the
        Northern District of California, Boren v. SMART Modular Technologies,
        Inc., et al., No. C 98 20692 JW (PVT) (filed July 1, 1998), Woszczak v.
        SMART Modular Technologies, Inc., et al., No. C 98 2617 JL (filed July
        2, 1998), Bisson v. SMART Modular Technologies, Inc., et al., No. C 98
        20714 JF (filed July 8, 1998), D'Amato v. SMART Modular Technologies,
        Inc., et al., No. C 98 2804 PJH (filed July 16, 1998), Cha v. SMART
        Modular Technologies, Inc., et al., No. C 98 2833 BZ (filed July 17,
        1998) and Chang v. SMART Modular Technologies, Inc., et al., No. C 98
        3151 SI (filed August 13, 1998) (collectively, the "Federal Actions").
        The plaintiffs in the Federal Actions allege that defendants made
        material misrepresentations and omissions during the period from July 1,
        1997 through May 21, 1998 in violation of Section 10(b) of the
        Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
        The Federal Actions were consolidated on October 9, 1998, and a
        consolidated complaint was filed on November 30, 1998 (the "Federal
        Complaint"). On November 2, 1999, defendants filed a motion to dismiss
        the Federal Complaint. This motion is pending.

        On October 22, 1998, a putative securities class action lawsuit,
        captioned Reagan v. SMART Modular Technologies, Inc., et al., Case No.
        H204162-5 (the "State Complaint"), was filed against SMART and certain
        of ex-officers and ex-directors in the Superior Court of the State of
        California, County of Alameda. The State Complaint alleges violations of
        Sections 25400 and 25500 of the California Corporations Code and seeks
        unspecified damages on behalf of a purported class of purchasers of
        SMART common stock during the period from July 1, 1997 through May 21,
        1998. The factual allegations of the State Complaint are nearly
        identical to the factual allegations contained within the Federal
        Complaint. On February 22, 1999, the Superior Court granted SMART's
        motion to stay the state action pending resolution of the federal
        action.

        On June 23, 1999, Solectron was served, along with 87 other companies
        including SMART, as a defendant in a lawsuit brought by the Lemelson
        Medical, Education & Research Foundation. The lawsuit alleges that
        Solectron and SMART have infringed certain of the plaintiff's patents
        relating to machine vision and bar-code technology.

        The Company believes that all claims related to the state and federal
        securities actions are without merit and intends to defend vigorously
        against these actions. The Company also believes it has meritorious
        defenses to the patent infringement allegations. The Company does not
        expect that all these allegations will result in a material impact on
        its financial position or results of operations.

ITEM 2: CHANGES IN SECURITIES

        None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

        None



                                       36
<PAGE>   37

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

        The Company held its Annual Meeting of Stockholders on January 11, 2000.
        At the meeting, the following proposals received the votes listed below:

        Proposal I: Election of ten (10) Directors

              Dr. Koichi Nishimura                Votes for: 247,264,286
                                                  Votes withheld: 1,088,617

              Dr. Winston H. Chen                 Votes for: 247,257,351
                                                  Vote withheld: 1,095,552

              Richard A. D'Amore                  Votes for: 247,173,426
                                                  Votes withheld: 1,179,477

              Charles A. Dickinson                Votes for: 247,132,136
                                                  Votes withheld: 1,220,767

              Heinz Fridrich                      Votes for: 247,190,793
                                                  Votes withheld: 1,162,110

              Dr. Philip V. Gerdine               Votes for: 247,190,779
                                                  Votes withheld: 1,162,124

              William A. Hasler                   Votes for: 247,188,761
                                                  Votes withheld: 1,164,142

              Dr. Kenneth E. Haughton             Votes for: 247,233,673
                                                  Votes withheld: 1,119,230

              Dr. Paul R. Low                     Votes for: 247,185,896
                                                  Votes withheld: 1,167,007

              Osamu Yamada                        Votes for: 247,172,798
                                                  Votes withheld: 1,180,105

              Proposal II: Approval of an amendment to the Company's
              Certification of Incorporation increasing the number of authorized
              shares of Common Stock of the Company from 400,000,000 to
              800,000,000 shares

                      Votes for: 235,374,023
                      Votes against: 12,312,592
                      Abstentions: 666,318

              Proposal III: Approval of ratification of the appointment of KPMG
              LLP as independent auditors of the Company for the fiscal year
              ended August 25, 2000.

                      Votes for: 247,590,755
                      Votes against: 176,243
                      Abstentions: 585,905

ITEM 5: OTHER INFORMATION

        None



                                       37
<PAGE>   38

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits

              3.1  Certificate of Amendment of Certificate of Incorporation of
                   the Company

              27.1 Financial Data Schedule - Six Months Ended February 25, 2000.

        (b) Reports on Form 8-K

              On December 9, 1999, Solectron filed a Current Report on Form 8-K
              regarding the completion of its acquisition of SMART Modular
              Technologies, Inc.



                                       38
<PAGE>   39

SOLECTRON CORPORATION



SIGNATURE



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




                                       SOLECTRON CORPORATION
                                       (Registrant)

Date: April 10, 2000                   By: /s/ Susan Wang
                                       -----------------------------------
                                       Susan S. Wang
                                       Senior Vice President, Chief
                                       Financial Officer and Secretary
                                       (Principal Financial and
                                       Accounting Officer)





                                       39
<PAGE>   40

                                 EXHIBIT INDEX

         Exhibit
           No.                      Document
           --                       --------

           3.1     Certificate of Amendment of Certificate of Incorporation of
                   the Company

          27.1     Financial Data Schedule - Six Months Ended February 25, 2000.