<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 26, 1999.

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

               FOR THE TRANSITION PERIOD FROM _________ TO _________

                         COMMISSION FILE NUMBER 1-11098

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

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


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

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

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

Yes [X]    No [ ]

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

At March 31, 1999, 252,314,362 shares of Common Stock of the Registrant were
outstanding.


<PAGE>   2
                              SOLECTRON CORPORATION

INDEX TO FORM 10-Q

<TABLE>
<S>      <C>                                                              <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets at
         February 28, 1999 and August 31, 1998                                 3

         Condensed Consolidated Statements of Income
         for the three months and six months ended
         February 28, 1999 and 1998                                            4

         Condensed Consolidated Statements of Cash Flows
         for the six months ended February 28, 1999
         and 1998                                                            5 - 6

         Notes to Condensed Consolidated Financial
         Statements                                                          7 - 11

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

Item 3.  Quantitative and Qualitative Disclosures About                       28
         Market Risk


PART II. OTHER INFORMATION


Item 1.  Legal Proceedings                                                    29

Item 2.  Changes in Securities                                                29

Item 3.  Defaults Upon Senior Securities                                      29

Item 4.  Submission of Matters to a Vote of Security Holders                29 - 30

Item 5.  Other Information                                                    30

Item 6.  Exhibits and Reports on Form 8-K                                   30 - 31

Signature                                                                     32
</TABLE>


                                       2
<PAGE>   3
ITEM 1. FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>
                                                     February 28,     August 31,
                                                        1999             1998
                                                     ------------     ----------
<S>                                                  <C>              <C>
ASSETS
Current assets:
  Cash, cash equivalents and
    short-term investments                             $  736.6        $  308.8
  Accounts receivable, net                                877.9           670.2
  Inventories                                             929.4           788.5
  Prepaid expenses and other
    current assets                                        135.8           120.0
                                                       --------        --------
    Total current assets                                2,679.7         1,887.5
Net property and equipment                                559.2           448.0
Other assets                                              144.6            75.0
                                                       --------        --------
Total assets                                           $3,383.5        $2,410.5
                                                       ========        ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                                      $   11.4        $     --
  Accounts payable                                        769.8           666.5
  Accrued employee compensation                            69.8            72.1
  Accrued expenses                                         53.0            34.9
  Other current liabilities                                42.4            67.3
                                                       --------        --------
    Total current liabilities                             946.4           840.8
Long-term debt                                          1,140.0           385.5
Other long-term liabilities                                 7.2             2.9
                                                       --------        --------
    Total liabilities                                   2,093.6         1,229.2
                                                       --------        --------
Commitments

Stockholders' equity:
  Common stock                                              0.1             0.1
  Additional paid-in capital                              560.8           510.8
  Retained earnings                                       806.7           677.4
  Accumulated other comprehensive income -
    cumulative translation adjustment                     (77.7)           (7.0)
                                                       --------        --------
     Total stockholders' equity                         1,289.9         1,181.3
                                                       --------        --------
Total liabilities and
  stockholders' equity                                 $3,383.5        $2,410.5
                                                       ========        ========
</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)

<TABLE>
<CAPTION>
                                  Three Months Ended                Six Months Ended
                                     February 28,                      February 28,
                              -------------------------         -------------------------
                                1999             1998             1999             1998
                              --------         --------         --------         --------
<S>                           <C>              <C>              <C>              <C>
Net sales                     $1,908.1         $1,186.8         $3,853.8         $2,323.6
Cost of sales                  1,729.7          1,060.7          3,499.5          2,073.7
                              --------         --------         --------         --------
  Gross profit                   178.4            126.1            354.3            249.9
Operating expenses:
  Selling, general and
    administrative                69.4             48.0            140.2             99.9
  Research and
    Development                    7.5              4.9             15.4              9.3
  Acquisition costs                2.9               --              2.9               --
                              --------         --------         --------         --------
      Operating income            98.6             73.2            195.8            140.7

Interest income                    5.1              6.5              9.5             13.0
Interest expense                  (9.5)            (6.3)           (15.0)           (12.8)
                              --------         --------         --------         --------

Income before
  income taxes                    94.2             73.4            190.3            140.9

Income tax expense                28.7             24.6             60.9             47.2
                              --------         --------         --------         --------
     Net income               $   65.5         $   48.8         $  129.4         $   93.7
                              ========         ========         ========         ========

Net income per share:
     Basic                    $   0.28         $   0.21         $   0.55         $   0.41
                              ========         ========         ========         ========
     Diluted                  $   0.26         $   0.20         $   0.52         $   0.39
                              ========         ========         ========         ========

Shares used to compute
  net income per share:

     Basic                       238.1            230.8            237.5            230.2
                              ========         ========         ========         ========

     Diluted                     261.6            252.3            259.8            252.2
                              ========         ========         ========         ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>   5
                     SOLECTRON CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In millions)

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                             February 28,
                                                      ------------------------
                                                        1999            1998
                                                      --------        --------
<S>                                                   <C>             <C> 
Cash flows from operating activities:
  Net income                                          $  129.4        $   93.7
  Adjustments to reconcile net income
   to net cash (used in) provided by operating
   activities:
     Depreciation and amortization                        82.3            61.2
     Tax benefit associated with the
       exercise of stock options                          14.5             0.3
     Other                                                (1.1)            7.8
     Changes in operating assets and
     liabilities:
       Accounts receivable                              (222.4)          (61.2)
       Inventories                                      (133.1)          (87.4)
       Prepaid expenses and other
        current assets                                   (16.0)          (10.8)
       Accounts payable                                  106.4            59.3
       Accrued expenses and other
        current liabilities                               (7.9)           (8.1)
                                                      --------        --------
     Net cash (used in) provided by operating
     activities                                          (47.9)           54.8
                                                      --------        --------
Cash flows from investing activities:
  Sales and maturities of short-term
   investments                                            93.2           137.5
  Purchases of short-term investments                   (282.5)         (162.4)
  Acquisition of manufacturing location                 (100.5)             --
  Capital expenditures                                  (222.8)         (143.5)
  Proceeds from sale of property and equipment            10.2            18.3
  Other                                                   (3.9)           (1.5)
                                                      --------        --------
     Net cash used in investing
     activities                                         (506.3)         (151.6)
                                                      --------        --------
</TABLE>

                            (continued on next page)


                                       5
<PAGE>   6
                  SOLECTRON CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                            (In millions)

<TABLE>
<CAPTION>
                                                       Six Months Ended
                                                         February 28,
                                                    ----------------------
                                                     1999            1998
                                                    ------          ------
<S>                                                 <C>             <C>
Cash flows from financing activities:
  Net proceeds from short-term debt                   11.4              --
  Net proceeds from long-term debt                   732.6              --
  Repayments of long-term debt                          --            (2.0)
  Net proceeds from sale of common stock              35.4            16.6
  Other                                                6.3            (0.1)
                                                    ------          ------
    Net cash provided by financing
    activities                                       785.7            14.5
                                                    ------          ------
Effect of exchange rate changes on
 cash and cash equivalents                             6.9             0.6
                                                    ------          ------
Net increase (decrease) in cash and
 cash equivalents                                    238.4           (81.7)

Cash and cash equivalents at
 beginning of period                                 225.2           225.1
                                                    ------          ------
Cash and cash equivalents at
 end of period                                      $463.6          $143.4
                                                    ======          ======

SUPPLEMENTAL DISCLOSURES

Cash paid during the period:
   Income taxes                                     $ 47.1          $ 37.8
   Interest                                         $ 13.2          $  2.4

Non-cash investing and financing activities:

   Issuance of common stock upon
     conversion of long-term debt                   $  0.1          $   --
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>   7
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
28, 1999 and August 31, 1998, and the related unaudited condensed consolidated
statements of income for the three- and six-month periods ended February 28,
1999 and 1998, and the unaudited condensed consolidated statements of cash flows
for the six months ended February 28, 1999 and 1998 have been prepared on
substantially the same basis as the annual consolidated financial statements.
Management believes the financial statements reflect all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
Company's financial position, operating results and cash flows for the periods
presented. The results of operations for the three- and six-month periods ended
February 28, 1999 are not necessarily indicative of results to be expected for
the entire year. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
for the year ended August 31, 1998 included in the Company's Annual Report to
Stockholders.

For clarity of presentation, the Company has indicated its second fiscal
quarters as ending on February 28, and its fiscal year as ending on August 31,
whereas in fact, the Company's second quarter of fiscal 1999 ended on February
26, 1999, its second quarter of fiscal 1998 ended on February 27, 1998 and its
1998 fiscal year ended on August 28, 1998.

NOTE 2 - Inventories

Inventories consisted of (in millions):

<TABLE>
<CAPTION>
                                                 February 28,     August 31,
                                                     1999            1998
                                                 ------------     ----------
<S>                                              <C>             <C>
    Raw materials                                  $  702.6        $  577.8
    Work-in-process                                   226.8           210.7
                                                   --------        --------
    Total                                          $  929.4        $  788.5
                                                   ========        ========
</TABLE>

NOTE 3 - Net Income Per Share

Basic net income per share is calculated using the weighted average number of
common shares outstanding during the period. Diluted net income per share is
calculated using the weighted average number of common shares plus dilutive
common equivalent shares outstanding during the period. Common equivalent shares
consist of stock options that are computed using the treasury stock method and
shares issuable upon conversion of the Company's outstanding convertible
subordinated notes. The shares issuable upon conversion of the Company's
convertible senior notes were not included in the calculation because the effect
would have been antidilutive. Share and per-share data presented reflect the
two-for-one stock split effective February 24, 1999. The following table sets
forth the computation of basic and diluted net income per share for the three-
and six-month periods ended February 28, 1999 and 1998.


                                       7
<PAGE>   8

<TABLE>
<CAPTION>
                                             Three Months Ended          Six Months Ended
                                                February 28,                February 28,
                                            --------------------        -------------------
                                             1999          1998          1999          1998
                                            ------        ------        ------        ------
                                                  (in millions, except per share data)
<S>                                         <C>           <C>           <C>           <C>
Net income - basic                          $ 65.5        $ 48.8        $129.4        $ 93.7

 Interest expense from
   convertible subordinated
     notes, net of taxes                       2.5           2.4           4.9           4.8
                                            ------        ------        ------        ------
Net income - diluted                        $ 68.0        $ 51.2        $134.3        $ 98.5
                                            ======        ======        ======        ======

Weighted average shares - basic              238.1         230.8         237.5         230.2

  Common stock equivalents
    - stock options                            9.9           7.9           8.7           8.4
  Common shares issuable upon
    assumed conversion of
    convertible subordinated
    notes                                     13.6          13.6          13.6          13.6
                                            ------        ------        ------        ------

Weighted average shares - diluted            261.6         252.3         259.8         252.2
                                            ======        ======        ======        ======

Net income per share - basic                $ 0.28        $ 0.21        $ 0.55        $ 0.41
                                            ======        ======        ======        ======

Net income per share - diluted              $ 0.26        $ 0.20        $ 0.52        $ 0.39
                                            ======        ======        ======        ======
</TABLE>

For the three- and six-month periods ended February 28, 1999, options to
purchase 660,000 shares of common stock with exercise prices greater than the
average fair market value of the Company's stock for the period of $41.19 and
$33.86, respectively, were not included in the calculation because the effect
would have been antidilutive. For the three- and six-month periods ended
February 28, 1998, options to purchase 2.7 million shares of common stock with
exercise prices greater than the average fair market value of the Company's
stock for the period of $20.12 and $20.41, respectively, were not included in
the calculation because the effect would have been antidilutive.

Note 4 - Comprehensive income

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


                                       8
<PAGE>   9

<TABLE>
<CAPTION>
                                                   Three Months Ended             Six Months Ended
                                                       February 28,                 February 28,
                                                  ---------------------         ---------------------
                                                   1999           1998           1999           1998
                                                  ------         ------         ------         ------
                                                                      (in millions)
<S>                                               <C>            <C>            <C>            <C>
Net income                                        $ 65.5         $ 48.8         $129.4         $ 93.7

Other comprehensive income (loss)
  foreign currency translation adjustments         (72.9)          (3.5)         (70.7)           1.0
                                                  ------         ------         ------         ------
Comprehensive income (loss)                       $ (7.4)        $ 45.3         $ 58.7         $ 94.7
                                                  ======         ======         ======         ======
</TABLE>

For both the three- and six-month periods of fiscal 1999, the loss in foreign
currency translation was primarily due to the recent devaluation of the
Brazilian Real. In addition, the foreign currency translation adjustments are
not currently adjusted for income taxes since they relate to investments which
are permanent in nature.

NOTE 5 - Asset Securitization & Accounts Receivable Financing

The Company has an asset securitization arrangement with a bank under which it
may sell up to $220 million of eligible accounts receivable. The arrangement
expires in August 1999 and is subject to certain financial covenants and
management representations. During the second quarter of fiscal year 1999, the
Company borrowed $72 million against its eligible accounts receivable under the
arrangement and paid off the amount within the same quarter.

NOTE 6 - Commitments

The Company leases various facilities under operating lease agreements. The
facility leases expire at various dates through 2006. Substantially all leases
require the Company to pay property taxes, insurance and normal maintenance
costs. Payments under certain leases are periodically adjusted based on LIBOR
rates. The leases for certain Solectron's facilities in Milpitas and San Jose,
California; Everett, Washington; and Suwanee, Georgia, provide the Company with
the option at the end of each of the leases of either acquiring the property at
its original cost or arranging for the property to be acquired. The Company is
contingently liable under a first loss clause for a decline in market value of
these leased facilities totaling up to $143 million in the event the Company
does not purchase the properties at the end of the respective lease terms. The
Company must also maintain compliance with financial covenants similar to its
credit facilities.

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

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


                                       9
<PAGE>   10
NOTE 7 - Acquisitions of IBM Assets in Texas

On February 1, 1999, the Company acquired IBM's Electronic Card Assembly and
Test (ECAT) manufacturing assets in Austin, Texas. Additionally, the Company
acquired the non-exclusive rights to use certain IBM intellectual property. The
total purchase price for the manufacturing assets and intellectual property
rights was approximately $75 million, subject to adjustment. The transaction was
accounted for as a purchase of assets, and the purchase price was allocated to
the assets acquired based on the relative fair values of the assets at the date
of acquisition. Under the terms of the agreements, Solectron will provide
printed circuit board (PCB) assembly for motherboards used in IBM's mobile
products manufactured worldwide for the next three years. This includes physical
design, early prototyping, new product launch, PCB assembly and test, volume
production, end-of-life support, field return services and life-cycle
management. Solectron will also provide IBM's worldwide design teams a full
range of integrated New Product Introduction (NPI) services which involve
pre-manufacturing support, such as design and layout, component and concurrent
engineering, test development, prototype, procurement and assembly. In addition,
the Company has hired approximately 1,300 IBM design, test, and manufacturing
associates.

Note 8 - Convertible Debt

In January 1999, Solectron issued 1,656,000 zero-coupon convertible senior notes
to qualified institutional investors in a private placement at an issue price of
$452.89 per note which resulted in gross proceeds to the Company approximately
$750 million. These notes are unsecured and unsubordinated indebtedness of the
Company with a maturity value aggregating $1.656 billion. There will be no
interest payment by the Company prior to maturity. Each note has a yield of 4%
with a maturity value of $1,000 on January 27, 2019. The Company is amortizing
the issue discount using the effective interest method over the term of the
notes. Each note is convertible at any time by the holder at a conversion rate
of 7.472 shares per note, adjusted for the two-for-one stock split effective
February 24, 1999. Holders may require the Company to purchase all or a portion
of their notes on January 27, 2002 and January 27, 2009, at a price of $510.03
and $672.97 per note, respectively. Also, each holder may require the Company to
repurchase all or a portion of such holder's notes upon a change in control of
the Company occurring on or before January 27, 2002. The Company, at its option,
may redeem all or a portion of the notes at any time on or after January 27,
2003. In addition, the Company has agreed to file with the Securities Exchange
Commission (SEC) within 90 days and to use reasonable efforts to have declared
effective within 180 days after the issuance, a registration statement under the
Securities Act to register resales of the notes and the common stock issuable
upon conversion thereof. Such registration statement was filed with the SEC on
April 7, 1999.


                                       10
<PAGE>   11

In February 1996, the Company issued convertible subordinated notes for an
aggregate principal amount of $230 million. The notes are in denominations of
and have a maturity value of $1,000 each, payable on March 1, 2006. Interest is
payable semi-annually at 6%. Each note is convertible at any time by the holder
into shares of common stock at a conversion price of $16.90 per share as
adjusted for the two-for-one stock split effective February 24, 1999. The notes
are redeemable at the option of the Company beginning on March 3, 1999. During
February and March 1999, all of the convertible subordinated notes were
voluntarily converted into 5,914 and 13,603,514 shares of common stock,
respectively.


                                       11
<PAGE>   12

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's net sales are derived from sales to electronics systems original
equipment manufacturers (OEMs). The majority of Solectron's customers compete in
the networking, data and voice communications, workstation, personal computer
and computer peripheral segments of the electronics industry. The Company
provides integrated solutions that span the entire product life cycle - from
pre-production planning and design, to manufacturing, distribution and
end-of-life product service and support. Solectron offers its customers
competitive outsourcing advantages, such as access to advanced manufacturing
technologies, shortened time-to-market, reduced cost of production and more
effective asset utilization. A discussion of some of the potential fluctuations
in operating results is included under "Trends and Uncertainties."

The Company has manufacturing operations in locations throughout the world,
including North America, Europe, Asia/Pacific and Latin America. Solectron also
has its Asia/Pacific headquarters office in Taipei, Taiwan and program offices
located in Japan and Israel. The Company's subsidiaries, Force Computers and
Fine Pitch Technologies, are both headquartered in San Jose, California. Force's
European headquarters and a significant portion of its operations are located in
Munich, Germany. In addition to its headquarters' locations, Force has sales
support offices in various locations in the United States and internationally.

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

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


                                       12
<PAGE>   13

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

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

Also in October 1998, the Company signed a definitive agreement with Ingram
Micro Inc. under which the two companies entered into a strategic alliance to
provide global build-to-order and configure-to-order assembly services for
personal computers, servers and related products in the United States, Canada,
Europe, Asia and Latin America. The alliance will be managed by both companies
under a joint management matrix that will include a sales and marketing staff,
program management, materials management, information technology resources and
test and process engineers and will, in most part, utilize existing facilities,
systems and personnel. The companies expect that shipments to customers will
begin in the second quarter of calendar 1999.

On February 1, 1999, the Company acquired IBM's Electronic Card Assembly and
Test (ECAT) manufacturing assets in Austin, Texas and non-exclusive rights to
certain IBM intellectual property for a purchase price of approximately $75
million, subject to adjustment. The transaction was accounted for as a purchase
of assets, and the purchase price was allocated to the assets acquired based on
the relative fair values of the assets at the date of acquisition. Under the
terms of the agreements, Solectron will provide printed circuit board (PCB)
assembly for motherboards used in IBM's mobile products manufactured worldwide
for the next three years. This includes physical design, early prototyping, new
product launch, PCB assembly and test, volume production, end-of-life support,
field return services and life-cycle management. Solectron will also provide
IBM's worldwide design teams a full range of integrated New Product Introduction
(NPI) services which involve pre-manufacturing support, such as design and
layout, component and concurrent engineering, test development, prototype,
procurement and assembly. In addition, the Company has hired approximately 1,300
IBM design, test, and manufacturing associates.


                                       13
<PAGE>   14

Results of Operations

The electronics industry is subject to rapid technological change, product
obsolescence and price competition. These and other factors affecting the
electronics industry, or any of Solectron's major customers in particular, could
have an adverse material effect on Solectron's results of operations. See
"Trends and Uncertainties -- Potential Fluctuations in Operating Results" and
"Competition" for further discussion of potential fluctuations in operating
results.

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.

<TABLE>
<CAPTION>
                                        Three Months Ended              Six Months Ended
                                           February 28,                   February 28,
                                      ----------------------         ----------------------
                                       1999            1998           1999            1998
                                      ------          ------         ------          ------
<S>                                   <C>             <C>            <C>             <C>
Net sales                              100.0%          100.0%         100.0%          100.0%
Cost of sales                           90.7            89.4           90.8            89.2
                                      ------          ------         ------          ------
  Gross profit                           9.3            10.6            9.2            10.8

Operating expenses:
  Selling, general and
    administrative                       3.6             4.0            3.6             4.3
  Research and development               0.4             0.4            0.4             0.4
  Acquisition costs                      0.2              --            0.1              --
                                      ------          ------         ------          ------
    Operating income                     5.1             6.2            5.1             6.1
Net interest income (expense)           (0.2)             --           (0.1)             --
                                      ------          ------         ------          ------
    Income before income taxes           4.9             6.2            5.0             6.1

Income taxes                             1.5             2.1            1.6             2.1
                                      ------          ------         ------          ------
Net income                               3.4%            4.1%           3.4%            4.0%
                                      ======          ======         ======          ======
</TABLE>

Net Sales

Net sales for the three- and six-month periods of fiscal 1999 grew to $1.9
billion and $3.9 billion, respectively, increases of 60.8% and 65.9%,
respectively, compared to the corresponding periods in fiscal 1998. The sales
growth was primarily attributable to significant increases in sales volume from
both existing and new customers worldwide, as well as from the acquisitions of
Ericsson, NCR, and IBM ECAT in Charlotte, North Carolina during fiscal 1998 and
Mitsubishi in the first quarter of fiscal 1999. Sales resulting from the
acquisition of IBM ECAT in Austin, Texas on February 1, 1999 were not recognized
in the second quarter of fiscal 1999 since the Company's Texas site reports
consistently its results one month in arrears.

Within the Americas, the acquired sites from NCR and IBM ECAT in Charlotte and
the new site in Mexico were the largest contributors to the strong growth in the
fiscal 1999 periods as compared to the fiscal


                                       14
<PAGE>   15
1998 periods. The sales growth at the Texas site was particularly strong
resulting from new programs. The Milpitas, California site also experienced
sales growth, although the demand increase was partially offset by the planned
transfer of personal computer printed circuit board programs and computer
peripherals systems assembly programs to Mexico and networking business to
Penang, which are a part of management's efforts to improve global load
balancing through specific product program transitioning.

Sales of the Company's European and Asian operations increased in fiscal 1999
periods over the same periods of fiscal 1998 principally as a result of core
business growth and new accounts. In addition, the sales growth at the Penang
site was significant due primarily to increased demand from personal computer
customers and networking business transferred in from California. The growth at
the Scotland site was also strong primarily due to increased demand from its
telecommunications customers. Although the Company does not currently anticipate
any future decline in sales, to lessen the potential impact of any possible
future declines related to customers within any particular region or market
segment, the Company is committed to seeking diversification of its customer
base among many countries, market segments and product lines within market
segments.

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

<TABLE>
<CAPTION>
                                            Three Months Ended            Six Months Ended
                                               February 28,                 February 28,
                                          ---------------------         ---------------------
                                           1999           1998           1999           1998
                                          ------         ------         ------         ------
<S>                                       <C>            <C>            <C>            <C>
Hewlett-Packard Company(HP)                11.6%          13.8%          11.9%          14.6%
Cisco Systems, Inc.                        10.8%          11.4%          10.1%          10.3%
Sun Microsystems, Inc.                        *           12.3%             *           11.2%
</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 72.8% and 67.1% of consolidated net
sales in the first six months of fiscal 1999 and 1998, respectively. Solectron
is still dependent upon continued revenues from HP and the rest of its top ten
customers and there can be no guarantee that these or any other customers will
not increase or decrease as a percentage of consolidated net sales either
individually or as a group. Consequently, any material decrease in sales to
these or other customers could have an adverse material effect on Solectron's
results of operations.

In the first half of fiscal 1999, international locations contributed 39.4% of
consolidated net sales compared to 34.5% in the same period of fiscal 1998. In
addition to the sales growth factors for Europe and Asia noted above, the
Company's international sales also benefited from the addition of the Mexico and
Brazil sites during the first quarter of fiscal 1998 and the acquisition of the
Ireland site from NCR in April 1998. As a result of Solectron's international
sales and facilities, Solectron's operations are subject to risks of doing
business abroad. 

                                       15
<PAGE>   16
While to date these dynamics have not had an adverse material effect on
Solectron's results of operations, there can be no assurance that there will not
be such an impact in the future. See "Trends and Uncertainties -- International
Operations" for a further discussion of potential fluctuations in operating
results associated with the risks of doing business abroad.

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

Solectron believes that its ability to continue to achieve growth will depend
upon growth in sales to existing customers for their current and future product
generations, successful marketing to new customers and future geographic
expansion. Customer contracts can be canceled and volume levels can be changed
or delayed. The timely replacement of delayed, canceled or reduced orders with
new business cannot be assured. In addition, there can be no assurance that any
of Solectron's current customers will continue to utilize Solectron's services.
Because of these factors, there can be no assurance 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 declined to 9.2% for the first half of fiscal 1999
period from 10.8% for the same period of fiscal 1998. The decrease was primarily
attributable to a shift toward higher volume projects and systems build projects
which typically yield lower margins. Also, gross margins of the newly acquired
NCR operations are lower than the overall average margins of the rest of the
Company primarily due to the fact that the majority of its net sales are derived
from systems integration activities, which normally generate lower gross margins
than printed circuit board assembly.

For the foreseeable future, Solectron's gross margin is expected to depend
primarily on product mix, production efficiencies, utilization of manufacturing
capacity, start-up and integration costs of new and acquired businesses, the
percentage of sales derived from systems build projects, pricing within the
electronics industry and the cost structure at individual sites. Over time,
gross margins at the individual sites and for the Company as a whole may
continue to fluctuate. The Company anticipates that a larger percentage of its
sales may be derived from systems build projects in future periods. Systems
build projects typically have lower gross margin percentages than printed
circuit board assembly projects. Increases in systems build business, additional
costs associated with new projects and price erosion within the electronics
industry could adversely affect the Company's gross margin. Additionally,
changes in product mix could cause the Company's gross margin to fluctuate.
Also, while the availability of raw materials appears adequate to meet the
Company's current revenue projections for the foreseeable future, component
availability is still subject to lead


                                       16
<PAGE>   17
time and other constraints that could possibly limit the Company's revenue
growth. Because of these factors and others discussed under "Trends and
Uncertainties" below, there can be no assurance that the Company'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 44.6% and 40.3%, respectively, for the three- and six-months of fiscal
1999 over the same periods of fiscal 1998. The increase in fiscal 1999 period
was primarily due to investment in infrastructure such as personnel and related
departmental expenses at all manufacturing locations as well as continuing
investment in information systems to support the increased size and complexity
of the Company's business. As a percentage of net sales, SG&A expenses were 3.6%
for both the three- and six-month periods in the fiscal 1999 and 4.0% and 4.3%,
respectively, in the comparable fiscal 1998 periods. The primary reason for the
fiscal 1999 decrease in SG&A expenses as a percentage of net sales is the
significant increase in the sales base offset partially by the costs associated
with investments in starting up new sites and investments in the Company's
information systems. The Company anticipates SG&A expenses will continue to
increase in terms of absolute dollars in the future, and may possibly increase
as a percentage of net sales, as the Company continues to build the
infrastructure necessary to support its current and prospective business.

Research and Development Expenses

With the exception of its Force Computers operation, the Company'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. Force's R&D efforts
are concentrated on new product development and improvement of product designs
through improvements in functionality and the use of microprocessors in embedded
applications. Research and development expenses, as a percentage of net sales,
were 0.4% in each of the fiscal 1999 and fiscal 1998 periods. In absolute
dollars, R&D expenses increased 52.7% and 65.8%, respectively, for the three-
and six-month periods of fiscal 1999 over the same periods in fiscal 1998. The
increases were primarily due to increased R&D expenditures at Force. The Company
expects that R&D expenses will increase in absolute dollars in the future and
may possibly increase as a percentage of net sales as Force continues to invest
in its R&D efforts and additional R&D projects are undertaken at certain sites.

Acquisition Costs

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

Net Interest Income (Expense)

Net interest expense was $4.4 million and $5.5 million, respectively, for the
three- and six-month periods of fiscal 1999 compared to net interest income of
$0.2 million for the same periods of fiscal 1998. The interest expense in the
fiscal 1999 periods included $6.2 million per quarter of interest expense for
the Company's 6% convertible


                                       17
<PAGE>   18
subordinated notes and 7 3/8% senior notes, as well as one-month interest
expense of $2.6 million resulting from the new issuance of zero-coupon
convertible senior notes. The net interest expense primarily reflects the
interest expense associated with the Company's long-term debt offset by interest
income earned on undeployed cash and investments and the capitalization of
interest expense. In the first half of fiscal 1999, the Company capitalized $2.4
million of interest expense related to the costs of computer software developed
for internal use and the facility construction projects at the Brazil and China
sites. Solectron expects to utilize more of the undeployed cash during fiscal
1999 in order to fund anticipated future growth. See "Trends and Uncertainties
-- Management of Growth," and "Potential Fluctuations in Operating Results."

Income Taxes

Income taxes increased to $60.9 million in the first half of fiscal 1999 from
$47.2 million in the fiscal 1998 period primarily due to increased income before
income taxes. For the first half of fiscal 1999, Solectron's effective income
tax rate was 32.0% compared to 33.5% for the corresponding period in fiscal
1999. While the Company's effective tax rate is substantially affected by the
proportion of income before taxes derived from domestic and international
operations, the tax rate reduction in fiscal 1999 resulted from increased income
before taxes from the foreign operations which have been taxed at a lower rate
than in the United States. This is primarily due to the tax holiday granted to
the Company's Malaysia sites. The Malaysian tax holiday is effective through
January 31, 2002, subject to certain conditions. The Company has also been
granted various tax holidays in China, which are effective for various terms and
are subject to certain conditions.

Liquidity and Capital Resources

Working capital was $1.7 billion at February 28, 1999 compared to $1.0 billion
at the end of fiscal 1998. During the same period, cash, cash equivalents and
short-term investments increased to $736.6 million from $308.8 million. The
increase was primarily due to proceeds from the completion of the private
placement of the 4% yield zero-coupon convertible senior notes, offset by
required investments in working capital and capital expenditures to support
sales growth. The notes have a maturity date in January 2019, and no interest
payment will be made during the term. In addition, the Company used
approximately $25 million for the purchase of manufacturing assets of MCEA's CMT
division in the first quarter of fiscal 1999 and approximately $75 million for
the acquisition of manufacturing assets and rights to certain intellectual
property from IBM ECAT in Austin, Texas during the second quarter of fiscal
1999. As Solectron continues to grow, it is expected that the Company will
require greater amounts of working capital to support its operations. The
Company believes that its current level of working capital and the Company's
available credit facilities will provide adequate working capital for the
foreseeable future. However, the Company may need to raise additional funds to
finance more rapid expansion, including establishing new locations or financing
additional acquisitions. There can be no assurance that such funds, if needed,
will be available on terms acceptable to the Company or at all.

Inventory levels fluctuate directly with the volume of the Company's
manufacturing. Changes or significant fluctuations in product market demands can
cause fluctuations in inventory levels which may result in changes in levels of
inventory turns and liquidity. Historically, the Company has been able to manage
its inventory levels with regard to 


                                       18
<PAGE>   19
these fluctuations. However, should material fluctuations occur in product
demand, the Company could experience slower turns and reduced liquidity.

In the first half of fiscal 1999, the Company invested approximately $223
million in capital expenditures. A large portion of these expenditures related
to the purchase of new equipment, primarily surface mount assembly and test
equipment, to meet current and expected production levels, as well as to replace
or upgrade older equipment which was retired or sold. Significant expenditures
were also made for the acquisition of land and buildings for the Company's
manufacturing sites, principally in Brazil and Mexico. The Company expects total
capital expenditures in fiscal 1999 to be in the range of $275 million to $325
million.

In addition to working capital as of February 28, 1999, which includes cash and
cash equivalents of $463.6 million and short-term investments of $273.0 million,
the Company has available a $100 million unsecured multicurrency revolving
credit facility and a $220 million asset securitization arrangement. Both of
these facilities are subject to financial covenants. The Company also has
approximately $93 million in unused foreign credit facilities available.

"Year 2000" Issues

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

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

As of February 28, 1999, the Company had completed an inventory, assessment and,
for the most part, remediation of internal systems, hardware, software,
manufacturing equipment and embedded chips in industrial control instruments.
Each of these items was identified as mission critical, mission essential,
mission impaired or mission non-critical. The Company is in the process of
prioritizing and evaluating 

                                       19
<PAGE>   20
mission critical and mission essential items, identifying fixes and resources as
appropriate, and performing and testing corrective measures. While the Company
believes that its evaluation has been comprehensive, there can be no assurance
that all systems critical to Year 2000 compliance have been identified, or that
the corrective actions identified will be completed on time.

As of February 28, 1999, the Company had inventoried every key supplier of goods
and services to the Company, and considered the potential impact on the Company
and its customers of Year 2000 compliance by these suppliers. Also, the Company
had evaluated the key suppliers' responses to its mailing surveys and is in the
process of auditing these suppliers. The Company plans to disqualify potentially
non-compliant sources, look for alternative sources and re-qualify new suppliers
to help mediate potential business disruptions. The Company is also involved
with various geographic Year 2000 consortiums worldwide, with the intent to
leverage contacts and information for commonly used suppliers and services such
as utility companies. In addition, the Company is in the process of reviewing
EDI linkages and data transmission for its customers and suppliers. While the
Company believes that it will be able to qualify alternative suppliers as
needed, until all supplier and customer survey responses have been received and
evaluated, the Company can not fully evaluate the extent of potential problems
and the costs associated with corrective actions.

The Company estimates the cost to complete its current compliance program to be
in the range of $28 million to $42 million. Of this amount, approximately $7
million is associated with the replacement of capital equipment, of which
approximately half is being purchased to replace non-compliant systems that
would not otherwise have been replaced at this time. The variability in these
estimates depends largely on the response from the Company's suppliers and the
extent to which supplier re-qualification is needed. Cost estimates will also be
re-evaluated as the status of the overall compliance program is updated. There
can be no assurance that actual costs will not be materially higher than
currently anticipated. A significant portion of these costs is not likely to be
incremental costs to the Company, but rather will represent the redeployment of
existing information technology resources. Certain other information technology
projects have been delayed due to the focus on Year 2000 issues. The potential
costs of the redeployment of personnel and delays in implementing other projects
is not known but could be substantial. The total amount spent on the compliance
program this fiscal year through February 28, 1999 was $11 million, of which $7
million pertained to payroll costs for personnel involved in the program and
costs of outside consultants, and $4 million principally pertained to the
replacement of capital equipment. Prior to fiscal 1999, costs of software and
hardware applications incurred for Year 2000 compliance were not material and
related payroll costs for the Company's information systems group were not
tracked separately.

Although the Company has identified general contingency plans, such as the
replacement and re-qualification of suppliers, the stockpiling of supplies and
purchase of generators, a formal contingency plan will not be established until
July of 1999 when the audit of suppliers is expected to be completed. The
Company is unable to determine what effect the failure of systems because of
Year 2000 issues by the Company or its suppliers or customers would have, but
any significant failures could have an adverse material effect on the Company's
results of operations and financial condition.


                                       20
<PAGE>   21
Trends and Uncertainties

Customer Concentration; Dependence on the Electronics Industry

In the first half of fiscal 1999 and for the full years of fiscal 1998, 1997 and
1996, the Company's ten largest customers accounted for as much as 72.8% of
consolidated net sales. The Company is dependent upon continued revenues from
its top ten customers. Any material delay, cancellation or reduction of orders
from these or other significant customers could have an adverse material effect
on the Company's results of operations. During the first half of fiscal 1999, HP
and Cisco accounted for 11.9% and 10.1%, respectively, of net sales compared to
14.6% for HP and 10.3% for Cisco during the same period of fiscal 1998. During
fiscal 1998, HP, Cisco and Sun accounted for 13.9%, 10.7% and 10.5%,
respectively, of net sales, compared to 13.5% for HP and less than 10% for each
of Cisco and Sun during fiscal 1997. There can be no assurance that the Company
will continue to do business with HP, Cisco, Sun or any other customers.

The percentage of the Company's sales to its major customers may fluctuate from
period to period. Significant reductions in sales to any of these customers
would have an adverse material effect on the Company's results of operations.
The Company has long-term contracts (generally for terms of three to five years)
with Ericsson, NCR, IBM and Mitsubishi under which these customers have
committed to source production of certain products and components from the
Company. However, these commitments to source production do not include firm
volume purchase commitments. In addition, the Company has no firm long-term
volume purchase commitments from its other customers, and over the past few
years has experienced reduced lead times in customer orders. Also, customer
contracts can be canceled and volume levels can be changed or delayed. The
timely replacement of canceled, delayed or reduced contracts with new business
cannot be assured. These risks are increased because a majority of the Company's
sales are to customers in the electronics industry, which is subject to rapid
technological change and product obsolescence. The factors affecting the
electronics industry in general, or any of the Company's major customers in
particular, could have an adverse material effect on the Company's results of
operations.

There can be no assurance that sales to customers within any particular market
segment will not experience decreases which could have an adverse material
effect on the Company's sales.

Management of Growth; Geographic Expansion

The Company has experienced substantial growth over the last five fiscal years,
with net sales increasing from $1.5 billion in fiscal 1994 to $5.3 billion in
fiscal year 1998. Additionally, Solectron reported net sales of $3.9 billion for
the first half of fiscal 1999. In recent years, the Company has acquired or
established facilities in many locations. In the first quarter of fiscal 1998,
the Company announced the opening of its Asia/Pacific headquarters office in
Taipei, Taiwan, began operations in Guadalajara, Mexico, and as further
discussed in "Partnership with Ericsson and Related Transactions," established a
manufacturing facility near Sao Paulo, Brazil and opened a New Product
Introduction center in Sweden. In April 1998, the Company announced plans to
open a manufacturing facility in Timisoara, Romania, and in May 1998, announced
the establishment of a program office in Israel. In addition, in April, June and
October 1998, the Company completed its acquisitions of certain manufacturing
assets from NCR, IBM and

                                       21
<PAGE>   22
Mitsubishi, respectively. (See "Acquisition of NCR, IBM and Mitsubishi Assets.")
In October 1998, the Company signed a definitive agreement with Ingram Micro,
Inc. under which the two companies entered into a strategic alliance. (See
"Alliance with Ingram Micro.") In the first quarter of fiscal 1999, the Company
announced plans to build new manufacturing facilities in Romania and Suwanee,
Georgia. On February 1, 1999, it signed agreements with IBM to acquire IBM's
Electronic Card Assembly and Test (ECAT) manufacturing assets in Austin, Texas.
(See "Acquisition of NCR, IBM and Mitsubishi Assets.") During March 1999, the
Company announced the grand opening of the first phase of its new facility in
Brazil.

The Company continually evaluates growth and acquisition opportunities and may
pursue additional opportunities over time. There can be no assurance that the
Company's historical revenue growth will continue or that the Company will
successfully manage the facilities in China, Mexico, Brazil and Romania, the
partnership with and acquisitions from Ericsson, the acquisitions from NCR, IBM
and Mitsubishi, the alliance with Ingram Micro or any other businesses or assets
it may acquire in the future. As the Company manages its existing operations and
expands geographically, it may experience certain inefficiencies as it
integrates new operations and manages geographically dispersed operations. In
addition, the Company's results of operations could be adversely affected if its
new facilities do not achieve growth sufficient to offset increased expenditures
associated with geographic expansion. The Company's expenses and working capital
requirements will continue to increase as the new facilities become fully
operational. Should the Company increase its expenditures in anticipation of a
future level of sales that does not materialize, its profitability would be
adversely affected. On occasion, customers may require rapid increases in
production that can place an excessive burden on the Company's resources.

Partnership with Ericsson and Related Transactions

During 1997, the Company established a strategic, global manufacturing
partnership with Ericsson Telecom AB's Business Area Infocom Systems. The
Company established a New Product Introduction center in Sweden, and production
from certain Ericsson plants worldwide was transferred to Solectron
manufacturing sites around the world. In October 1997, Solectron acquired
certain assets, primarily equipment and inventory, of Ericsson's printed circuit
board assembly operation located in Brazil. In addition, Solectron's subsidiary,
Solectron Brasil Ltda., hired approximately 370 associates formerly employed by
Ericsson Telecomunicacoes S.A. in Brazil. Under the terms of the agreement,
Ericsson contracted for Solectron's services from Solectron Brasil Ltda. through
September 1999. Thereafter, Solectron will bear the risk of filling the
manufacturing capacity at the site with renewed business from Ericsson and new
business from other customers.

The transactions with Ericsson entail a number of risks, including successfully
managing the integration of the operations, retention of key associates,
integrating purchasing operations and information systems, managing an
increasingly larger and more geographically disparate business and renewing the
Ericsson business or replacing it with new business after expiration of the
Ericsson commitment. In addition, the completion of the transactions with
Ericsson has increased Solectron's expenses and working capital requirements and
there is no assurance that Solectron will achieve sufficient revenue to offset
the increased expenses. There can be no assurance that Solectron will
successfully manage the risks of these transactions.

                                       22
<PAGE>   23
Acquisitions of NCR, IBM and Mitsubishi Assets

On April 27, 1998, the Company acquired NCR's manufacturing assets in three
cities, two in the United States and one in Ireland, for a purchase price of
approximately $91 million. As part of the transaction, Solectron hired
approximately 1,200 NCR manufacturing and related support associates currently
employed at these locations. Under the terms of the agreement, NCR will
outsource the manufacturing of certain computer, computer peripheral and server
components to Solectron for at least five years. Thereafter, Solectron will bear
the risk of filling the manufacturing capacity at the sites with renewed
business from NCR and new business from other customers.

On June 1, 1998, the Company acquired IBM's ECAT manufacturing assets in
Charlotte, North Carolina and non-exclusive rights to certain IBM intellectual
property for a purchase price of approximately $96 million. Under the terms of
the agreement, Solectron hired approximately 700 IBM manufacturing and related
support associates and the Company will provide printed circuit board assembly
services to IBM in North America for the next three years. In addition, IBM has
made available to Solectron 115 patents and 51 disclosures (collectively the
intellectual property rights) covering a wide spectrum of technologies and
capabilities. IBM will also provide to Solectron failure analysis and
characterization tools for process development and manufacturing, including
fault detection and isolation.

On October 1, 1998, the Company acquired the wireless telephone manufacturing
assets of Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular Mobile
Telephone (CMT) division in Braselton, Georgia. MCEA is a subsidiary of
Mitsubishi Electric Corporation (Mitsubishi). The purchase price was
approximately $25 million. Under the terms of the agreement, the Company will
provide MCEA-CMT with a full range of manufacturing services for five years,
including New Product Introduction management, printed circuit board assembly
and full systems assembly for MCEA's branded and private-label cellular products
sold within North America. In addition, Solectron hired approximately 400
MCEA-CMT manufacturing and support associates.

On February 1, 1999, the Company acquired IBM's ECAT manufacturing assets in
Austin, Texas and non-exclusive rights to use certain IBM intellectual property
for a purchase price of approximately $75 million, subject to adjustment. Under
the terms of the agreements, Solectron will provide printed circuit board (PCB)
assembly for motherboards used in IBM's mobile products manufactured worldwide
for the next three years. This includes physical design, early prototyping, new
product launch, PCB assembly and test, volume production, end-of-life support,
field return services and life-cycle management. Solectron will also provide
IBM's worldwide design teams a full range of integrated New Product Introduction
(NPI) services which involve pre-manufacturing support, such as design and
layout, component and concurrent engineering, test development, prototype,
procurement and assembly. Additionally, the Company has hired approximately
1,300 IBM design, test, and manufacturing associates.

The transactions with NCR, IBM and Mitsubishi entail a number of risks,
including successfully managing the integration of the operations, retention of
key associates, integrating purchasing operations and information systems,
managing an increasingly larger and more geographically disparate business,
obtaining customers other than NCR, IBM and Mitsubishi for these facilities and
renewing each of the NCR, 

                                       23
<PAGE>   24
IBM and Mitsubishi business or replacing it with new business after expiration
of NCR's, IBM's and Mitsubishi's respective commitments. In addition, the
transactions with NCR, IBM and Mitsubishi will increase Solectron's expenses and
working capital requirements and there is no assurance that Solectron will
achieve sufficient revenue to offset the increased expenses. There can be no
assurance that Solectron will successfully manage the risks of these
transactions.

Alliance with Ingram Micro

On October 1, 1998, the Company announced that it signed a definitive agreement
with Ingram Micro Inc. under which the two companies entered into a strategic
alliance to provide global build-to-order and configure-to-order assembly
services for personal computers, servers and related products in the United
States, Canada, Europe, Asia and Latin America. The alliance will be managed by
both companies under a joint management matrix that will include a sales and
marketing staff, program management, materials management, information
technology resources and test and process engineers and will, in most part,
utilize existing facilities, systems and personnel.

The alliance with Ingram Micro entails a number of risks, including successfully
establishing the joint management matrix for the alliance, retention of key
associates, integrating purchasing operations and information systems and
obtaining customers for the services to be provided by the alliance. In
addition, the alliance with Ingram Micro will increase Solectron's expenses and
working capital requirements and there is no assurance that Solectron will
achieve sufficient revenue to offset the increased expenses. There can be no
assurance that Solectron will successfully manage the risks of this alliance or
that the terms of the alliance will be finalized.

International Operations

As a result of its international sales and facilities, the Company's operations
are subject to risks of doing business abroad, including but not limited to,
fluctuations in the value of currency, export duties, changes to import and
export regulations (including quotas), possible restrictions on the transfer of
funds, associate turnover, labor unrest, longer payment cycles, greater
difficulty in collecting accounts receivable, the burdens and costs of
compliance with a variety of foreign laws and in certain parts of the world,
political instability. In addition, the Company has operations in several
locations that are considered to have highly inflationary economies or volatile
currencies, including Mexico, Brazil, China and Romania. In fact, the Company
recorded a $77.7 million cumulative foreign exchange translation loss on
its balance sheet as of February 28, 1999 which was primarily the result of the
recent devaluation of the Brazilian Real. While, to date, these factors have 
not had a significant adverse impact on the Company's results of operations, 
there can be no assurance that there will not be such an impact. Furthermore, 
while the Company may adopt measures to reduce the impact of losses resulting 
from volatile currencies and other risks of doing business abroad, no assurance 
may be given that such measures will be adequate.

Southeast Asia and Latin America are currently experiencing currency, economic
and political instability. To date, the Company's operations have not
experienced significant adverse effects from this instability. However, to the
extent the Company's worldwide customers sell the products manufactured by
Solectron into the Southeast Asia and Latin America markets, the customers'
sales may be adversely affected, which 

                                       24
<PAGE>   25
could decrease demand for the Company's manufacturing services. The Company
cannot predict whether such a decrease in demand will materialize and if it
does, whether it will have an adverse material effect on the Company's results
of operations.

The Malaysian government recently adopted currency exchange controls, including
controls on ringgit held outside Malaysia, and established a fixed exchange rate
for the ringgit against the U.S. dollar. The Company does not hold ringgit
outside of Malaysia and therefore will not be affected by these controls. The
fixed exchange rate, when applied to local expenses denominated in ringgit, will
result in higher expenses when translated to U.S. dollars. However, such local
expenses represent a small percentage of the Company's total costs and therefore
the Company's results of operations will not be significantly affected in the
near future. The long term impact of such controls is not predictable due to
dynamic economic conditions that also affect or are affected by other regional
or global economies.

The Company has been granted a tax holiday for its Malaysia sites which is
effective through January 31, 2002, subject to certain conditions. The Company
has also been granted various tax holidays in China. These tax holidays are
effective for various terms and are subject to certain conditions. There is no
assurance that the current tax holidays will not be terminated or modified or
that any future tax holidays that the Company may seek will be granted. If the
current tax holidays are terminated or modified or if additional tax holidays
are not granted in the future, the Company's effective income tax rate would
likely increase.

Foreign Exchange Rate Sensitivity

The Company does not use derivative financial instruments for speculative
purposes. The Company's policy is to hedge its foreign currency denominated
transactions in a manner that substantially offsets the effects of changes in
foreign currency exchange rates. The Company uses foreign currency borrowings
and foreign currency forward contracts to hedge the currency risks of
transactions denominated in foreign currencies. Gains and losses on these
foreign currency hedges are generally offset by corresponding losses and gains
on the underlying transaction. The Company does not hold or issue foreign
exchange contracts for trading purposes. At February 28, 1999, all of its
foreign currency hedging contracts mature in three months or less and there were
no material deferred gains or losses. In addition, the Company's 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 the Company's experience involving the recent devaluation of
the Brazilian Real, although an unfavorable change in the exchange rate of a
foreign currency against the U.S. dollar will result in lower sales when
translated to U.S. dollars, operating expenses will also be lower in these
circumstances. However, because less than 10% of net sales are denominated in
currencies other than the U.S. dollar, the Company does not believe its total
exposure to be significant. (See "International Operations.")

Euro Conversion Issues

Effective January 1, 1999, 11 of the 15 member countries of the European Union
(the participating countries) established fixed conversion rates between their
existing sovereign currencies and the euro. For three years after the
introduction of the euro, the participating countries 

                                       25
<PAGE>   26
can perform financial transactions in either the euro or their original local
currencies. This will result in a fixed exchange rate among the participating
countries, whereas the euro (and the participating countries' currencies in
tandem) will continue to float freely against the U.S. dollar and other
currencies of non-participating countries.

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

Availability of Components

A substantial portion of the Company's net sales is derived from turnkey
manufacturing in which the Company provides both materials procurement and
assembly. In turnkey manufacturing, the Company potentially bears the risk of
component price increases, which could adversely affect the Company's gross
profit margins. At various times there have been shortages of components in the
electronics industry. If significant shortages of components should occur, the
Company may be forced to delay manufacturing and shipments, which could have an
adverse material effect on the Company's results of operations.

Potential Fluctuations in Operating Results

The Company's operating results are affected by a number of factors, including
the mix of turnkey and consignment projects, the mix of printed circuit board
assembly and systems build projects, capacity utilization, price competition,
the degree of automation that can be used in the assembly process, the
efficiencies that can be achieved by the Company in managing inventories and
fixed assets, the timing of orders from major customers, fluctuations in demand
for customer products, the timing of expenditures in anticipation of increased
sales, customer product delivery requirements, and increased costs and shortages
of components or labor. Turnkey manufacturing currently represents a substantial
portion of Solectron's sales. Turnkey projects, in which Solectron procures some
or all of the components necessary for production, typically generate higher net
sales and higher gross profits with lower gross margin percentages than
consignment projects due to the inclusion in Solectron's operating results of
sales and costs associated with the purchase and sale of components. Solectron
assembles products with varying degrees of material content, which may cause
Solectron's gross margin to fluctuate. In addition, the degree of start-up costs
and inefficiencies associated with new sites and new customer projects may
affect Solectron's gross margin. All of these factors can cause fluctuations in
the Company's operating results.

                                       26
<PAGE>   27
Interest Rate Sensitivity

The primary objective of the Company's investment activities is to preserve
principal while at the same time maximizing yields without significantly
increasing risk. To achieve this objective, the Company maintains its 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 28, 1999, approximately 66% of the Company's
portfolio mature in less than 6 months. Because the Company's investments are
diversified and of relatively short maturity, a hypothetical 10% increase in
interest rates would not have a material effect on the Company's financial
position.

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

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

Competition

The electronics manufacturing services industry is comprised of a large number
of companies, several of which have achieved substantial market share. The
Company also faces competition from current and prospective customers that
evaluate Solectron's capabilities against the merits of manufacturing products
internally. Solectron competes with different companies depending on the type of
service or geographic area. Certain competitors may have greater manufacturing,
financial, research and development and/or marketing resources than the Company.
The Company believes that the primary bases of competition in its targeted
markets are manufacturing technology, quality, responsiveness, the provision of
value-added services and price. To be competitive, the Company must provide
technologically advanced manufacturing services, high product quality levels,
flexible delivery schedules and reliable delivery of finished products on a
timely and price competitive basis. The Company currently may be at a
competitive disadvantage as to price when compared to manufacturers with lower
cost structures, particularly with respect to manufacturers with established
facilities where labor costs are lower.

Intellectual Property Protection

The Company's ability to compete may be affected by its ability to protect its
proprietary information. The Company holds a limited number of U.S. patents
related to the process and equipment used in its surface mount technology. The
Company's subsidiary, Force Computers, also holds a number of patents related to
VME technology. The Company believes these patents are valuable. However, there
can be no assurance that these patents will provide meaningful protection for
the Company's manufacturing process and equipment innovations or Force's
technology. 

                                       27
<PAGE>   28
There can be no assurance that third parties will not assert infringement claims
against the Company or its customers in the future, either against the patents
the Company holds itself or against the IBM patents and other intellectual
property rights that the Company has the right to practice. In the event a third
party does assert an infringement claim, the Company may be required to expend
significant resources to develop a non-infringing manufacturing process or
technology or to obtain licenses to the manufacturing process or technology that
is the subject of litigation. There can be no assurance that the Company would
be successful in such development or that any such licenses would be available
on commercially acceptable terms, if at all. In addition, such litigation could
be lengthy and costly and could have an adverse material effect on the Company's
financial condition regardless of the outcome of such litigation.

Environmental Compliance

The Company is subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals used during its
manufacturing process. Any failure by the Company to comply with present and
future regulations could subject it to future liabilities or the suspension of
production. In addition, such regulations could restrict the Company's ability
to expand its facilities or could require the Company to acquire costly
equipment or to incur other significant expenses to comply with environmental
regulations.

Dependence on Key Personnel and Skilled Associates

The Company's continued success depends to a large extent upon the efforts and
abilities of key managerial and technical associates. The loss of services of
certain key personnel could have an adverse material effect on the Company. The
Company's business also depends upon its ability to continue to attract and
retain senior managers and skilled associates. Failure to do so could adversely
affect the Company's operations.

Possible Volatility of Market Price of Common Stock

The trading price of the common stock is subject to significant fluctuations in
response to variations in quarterly operating results, general conditions in the
electronics industry and other factors. In addition, the stock market is subject
to price and volume fluctuations that affect the market price for many high
technology companies in particular, and that often are unrelated to operating
performance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management's Discussion and Analysis of Financial Condition and Results of
Operations "Trends and Uncertainties -- Interest Rate Sensitivity" and "--
Foreign Exchange Rate Sensitivity."


                                       28
<PAGE>   29

SOLECTRON CORPORATION AND SUBSIDIARIES

Part II. OTHER INFORMATION

Item 1:  Legal Proceedings

         None

Item 2:  Changes in Securities

         None

Item 3:  Defaults upon Senior Securities

         None

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

         a) The Company held its Annual Meeting of Stockholders on January
            12, 1999.

         b) At the meeting, the following proposals received the votes listed
            below:

            Proposal I: Election of ten (10) Directors

<TABLE>
<S>                                                     <C>
            Dr. Koichi Nishimura                        Votes for: 105,947,215
                                                        Votes withheld: 370,481

            Dr. Winston H. Chen                         Votes for: 105,958,550
                                                        Vote withheld: 359,146

            Richard A. D'Amore                          Votes for: 105,963,938
                                                        Votes withheld: 353,758

            Charles A. Dickinson                        Votes for: 105,992,337
                                                        Votes withheld: 325,359

            Heinz Fridrich                              Votes for: 105,956,128
                                                        Votes withheld: 361,568

            Dr. Philip Gerdine                          Votes for: 105,998,670
                                                        Votes withheld: 319,026

            William Hasler                              Votes for: 105,675,397
                                                        Votes withheld: 642,299

            Dr. Kenneth E. Haughton                     Votes for: 105,953,453
                                                        Votes withheld: 364,243

            Dr. Paul R. Low                             Votes for: 105,890,522
                                                        Votes withheld: 427,174

            Osamu Yamada                                Votes for: 105,958,180
                                                        Votes withheld: 359,516
</TABLE>


                                       29
<PAGE>   30

                  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
                  200,000,000 to 400,000,000 shares

                           Votes for: 102,660,341
                           Votes against: 3,512,413
                           Abstentions: 144,942

                  Proposal III: Approval of an amendment to the Company's 1992
                  Stock Option Plan to increase the number of shares reserved
                  for issuance by 5,700,000 shares

                           Votes for: 61,582,606
                           Votes against: 44,487,757
                           Abstentions: 247,333

                  Proposal IV: Approval of ratification of the appointment of
                  KPMG Peat Marwick LLP as independent accountants of the
                  Company for the fiscal year ended August 31, 1999

                           Votes for: 105,694,561
                           Votes against: 156,197
                           Abstentions: 466,938

Item 5:  Other Information

         None

Item 6:  Exhibits and Reports on Form 8-K

         (a) Exhibits

         3.1      Certificate of Incorporation of the Company

         3.2      Bylaws of the Company

         10.1     Amended and Restated Lease Agreement between BNP Leasing
                  Corporation and Solectron Washington, Inc., dated July 1, 1998

         10.2     Amended and Restated Purchase Agreement between BNP Leasing
                  Corporation and Solectron Washington, Inc., dated July 1, 1998

         10.3     Amended and Restated Guaranty from Solectron Corporation in
                  favor of BNP Leasing Corporation, effective as of July 1, 1998

         10.4     Amended and Restated Lease Agreement between BNP Leasing
                  Corporation and Force Computers, Inc., dated July 16, 1998

         10.5     Amended and Restated Purchase Agreement between BNP Leasing
                  Corporation and Force Computers, Inc., dated July 16, 1998

         10.6     Amended and Restated Guaranty from Solectron Corporation in
                  favor of BNP Leasing Corporation, effective as of July 16,
                  1998


                                       30
<PAGE>   31

         10.7     Lease Agreement between BNP Leasing Corporation and Solectron
                  Georgia Corporation, dated October 20, 1998

         10.8     Purchase Agreement between BNP Leasing Corporation and
                  Solectron Georgia Corporation, dated October 20, 1998

         10.9     Guaranty from Solectron Corporation in favor of BNP Leasing
                  Corporation, effective as of October 20, 1998

         27.1     Financial Data Schedule - Six Months Ended February 26, 1999

         27.2     Amended Financial Data Schedule - Twelve Months Ended 
                  August 28, 1998

         27.3     Amended Financial Data Schedule - Twelve Months Ended 
                  August 29, 1997

         27.4     Amended Financial Data Schedule - Twelve Months Ended 
                  August 30, 1996

         27.5     Amended Financial Data Schedule - Six Months Ended
                  February 27, 1998

         27.6     Amended Financial Data Schedule - Six Months Ended
                  February 28, 1997

            (b)   Reports on Form 8-K

                  On January 26, 1999, the Company filed a Current Report on
                  Form 8-K regarding the offer and sale of convertible senior
                  notes.

                  On February 18, 1999, the Company filed a Current Report on
                  Form 8-K regarding the redemption of its 6 percent convertible
                  subordinated notes.


                                       31
<PAGE>   32
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 12, 1999                    By: /s/ Susan Wang
                                        ----------------------------------------
                                        Susan S. Wang
                                        Senior Vice President, Chief
                                        Financial Officer and Secretary
                                        (Principal Financial and
                                        Accounting Officer)


                                       32

<PAGE>   33

                                Index to Exhibits

<TABLE>
<CAPTION>
Exhibit #              Document
---------   --------------------------------------------------------------------
<S>         <C>
 3.1        Certificate of Incorporation of the Company

 3.2        Bylaws of the Company

10.1        Amended and Restated Lease Agreement between BNP Leasing
            Corporation and Solectron Washington, Inc., dated July 1, 1998

10.2        Amended and Restated Purchase Agreement between BNP Leasing
            Corporation and Solectron Washington, Inc., dated July 1, 1998

10.3        Amended and Restated Guaranty from Solectron Corporation in favor of
            BNP Leasing Corporation, effective as of July 1, 1998

10.4        Amended and Restated Lease Agreement between BNP Leasing
            Corporation and Force Computers, Inc., dated July 16, 1998

10.5        Amended and Restated Purchase Agreement between BNP Leasing
            Corporation and Force Computers, Inc., dated July 16, 1998

10.6        Amended and Restated Guaranty from Solectron Corporation in favor of
            BNP Leasing Corporation, effective as of July 16, 1998

10.7        Lease Agreement between BNP Leasing Corporation and Solectron
            Georgia Corporation, dated October 20, 1998

10.8        Purchase Agreement between BNP Leasing Corporation and Solectron
            Georgia Corporation, dated October 20, 1998

10.9        Guaranty from Solectron Corporation in favor of BNP Leasing
            Corporation, effective as of October 20, 1998

27.1        Financial Data Schedule - Six Months Ended February 26, 1999

27.2        Amended Financial Data Schedule - Twelve Months Ended
            August 28, 1998

27.3        Amended Financial Data Schedule - Twelve Months Ended
            August 29, 1997

27.4        Amended Financial Data Schedule - Twelve Months Ended
            August 30, 1996

27.5        Amended Financial Data Schedule - Six Months Ended
            February 27, 1998

27.6        Amended Financial Data Schedule - Six Months Ended
            February 28, 1997
</TABLE>