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________________________________________________________________________________


UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended February 25, 2005                                            
|          
|           |  | or                                                                                          
|          
|o          |  | 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 of
    Incorporation or Organization) |  | (I.R.S. Employer Identification
    Number)

847 Gibraltar Drive


Milpitas, California 95035


(Address of
principal executive offices including zip code)


(408) 957-8500


(Registrants telephone number, including area code)




þ o




þ o














---










SOLECTRON CORPORATION


INDEX TO FORM 10-Q


|                                  |  |                                                                                                                                        |  |   
|--------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Financial Statements (unaudited)                                                                                                       |  | 3 
|                                  |  | Condensed Consolidated Balance Sheets at
    February 28, 2005 and August 31, 2004                                                     |  | 3 
|                                  |  | Condensed Consolidated Statements of
    Operations for the three and six months ended February 28,
    2005 and 2004                  |  | 4 
|                                  |  | Condensed Consolidated Statements of
    Comprehensive Income (Loss) for the three and six months ended
    February 28, 2005 and 2004 |  | 5 
|                                  |  | Condensed Consolidated Statements of Cash
    Flows for the six months ended February 28, 2005 and
    2004                            |  | 6 
|                                  |  | Notes to Condensed Consolidated Financial
    Statements                                                                               |  | 7 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                              |  | 24
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                         |  | 44
|Item 4.                           |  | Controls and Procedures                                                                                                                |  | 44
|                                 
|PART II. OTHER
    INFORMATION   
|Item 1.                           |  | Legal Proceedings                                                                                                                      |  | 46
|Item 6.                           |  | Exhibits                                                                                                                               |  | 47
|Signatures                        |  | 48                                                                                                                                    
|EXHIBIT 10.1                     
|EXHIBIT 10.2                     
|EXHIBIT 10.3                     
|EXHIBIT 10.4                     
|EXHIBIT 31.1                     
|EXHIBIT 31.2                     
|EXHIBIT 32.1                     
|EXHIBIT 32.2                     



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PART I.     FINANCIAL
INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements




SOLECTRON CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


|                                                 |                                                |                            |         |          |           |   |         |          |         | 
|------------------------------------------------ | ---------------------------------------------- | -------------------------- | ------- | -------- | --------- | - | ------- | -------- | ------- | 
|                                                 |                                                | February 28                |         |          | August 31 |  
|                                                 |                                                | 2005                       |         |          | 2004      |  
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | (In millions)              |        
|                                                 |                                                | (Unaudited)                |        
|ASSETS                                          
|Current assets:                                  |                                                |                            |         |          |           |   |         |         
|                                                 | Cash and cash equivalents*                     |                            | $       | 1,957.7  |           |   | $       | 1,430.2  |        
|                                                 | Accounts receivable, net                       |                            |         | 1,388.7  |           |   |         | 1,550.2  |        
|                                                 | Inventories                                    |                            |         | 1,241.6  |           |   |         | 1,455.4  |        
|                                                 | Prepaid expenses and other current assets      |                            |         | 190.2    |           |   |         | 189.5    |        
|                                                 | Current assets of discontinued operations      |                            |         |         |           |   |         | 36.4     |        
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | Total current assets       |         |          | 4,778.2   |   |         |          | 4,661.7 | 
|Property and equipment, net                      |                                                |                            | 694.8   |          |           |   | 754.4   |         
|Goodwill                                         |                                                |                            | 135.8   |          |           |   | 135.8   |         
|Other assets                                     |                                                |                            | 246.8   |          |           |   | 294.3   |         
|Long-term assets of discontinued operations      |                                                |                            |        |          |           |   | 11.9    |         
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | Total assets               |         | $        | 5,855.6   |   |         | $        | 5,858.1 | 
|                                                 |                                                |                            |         |          |           |  
|                                                
|LIABILITIES AND STOCKHOLDERS EQUITY            
|Current liabilities:                             |                                                |                            |         |          |           |   |         |         
|                                                 | Short-term debt                                |                            | $       | 19.2     |           |   | $       | 25.1     |        
|                                                 | Accounts payable                               |                            |         | 1,382.0  |           |   |         | 1,439.0  |        
|                                                 | Accrued employee compensation                  |                            |         | 160.4    |           |   |         | 173.7    |        
|                                                 | Accrued expenses and other current liabilities |                            |         | 465.2    |           |   |         | 500.7    |        
|                                                 | Current liabilities of discontinued operations |                            |         |         |           |   |         | 46.4     |        
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | Total current liabilities  |         |          | 2,026.8   |   |         |          | 2,184.9 | 
|Long-term debt                                   |                                                |                            | 1,208.0 |          |           |   | 1,221.4 |         
|Other long-term liabilities                      |                                                |                            | 47.5    |          |           |   | 31.1    |         
|Long-term liabilities of discontinued operations |                                                |                            |        |          |           |   | 1.8     |         
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | Total liabilities          |         | $        | 3,282.3   |   |         | $        | 3,439.2 | 
|                                                 |                                                |                            |         |          |           |  
|Commitments and contingencies                    |                                                |                            |         |          |           |   |         |         
|Stockholders equity:                            |                                                |                            |         |          |           |   |         |         
|                                                 | Common stock                                   |                            |         | 1.0      |           |   |         | 1.0      |        
|                                                 | Additional paid-in capital                     |                            |         | 7,848.5  |           |   |         | 7,775.9  |        
|                                                 | Accumulated deficit                            |                            |         | (5,153.9 | )         |   |         | (5,209.9 | )      
|                                                 | Accumulated other comprehensive loss           |                            |         | (122.3   | )         |   |         | (148.1   | )      
|                                                 |                                                |                            |         |          |           |  
|                                                 |                                                | Total stockholders equity |         |          | 2,573.3   |   |         |          | 2,418.9 | 
|                                                 |                                                |                            |         |          |           |  
|Total liabilities and stockholders equity       |                                                | $                          | 5,855.6 |          |           | $ | 5,858.1 |         
|                                                 |                                                |                            |         |          |           |  






|  |                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------
|* | Includes $20.4 million and $17.5 million of restricted
    cash balances as of February 28, 2005 and August 31,
    2004, respectively.



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SOLECTRON CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |       |      |   |         |        |        |  
|------------------------------------------------------------ | ------------------------------------------ | ---------------------------------------- | ------- | ---------- | ---------------- | - | ------- | ----- | ---------- | - | ------- | ----- | ---- | - | ------- | ------ | ------ | -
|                                                             |                                            | Three Months Ended                       |         |            | Six Months Ended |  
|                                                             |                                            | February 28                              |         |            | February 28      |  
|                                                             |                                            |                                          |         |            |                  |  
|                                                             |                                            | 2005                                     |         |            | 2004             |   |         | 2005  |            |   | 2004    |      
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             |                                            |                                          |         | (Restated) |                  |   |         |       | (Restated) |  
|                                                             |                                            | (In millions, except per share data)     |        
|                                                             |                                            | (Unaudited)                              |        
|Net sales                                                    |                                            | $                                        | 2,756.0 |            |                  | $ | 2,877.8 |       |            | $ | 5,446.6 |       |      | $ | 5,563.5 |       
|Cost of sales                                                |                                            |                                          | 2,598.1 |            |                  |   | 2,749.8 |       |            |   | 5,133.2 |       |      |   | 5,308.8 |       
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|Gross profit                                                 |                                            |                                          | 157.9   |            |                  |   | 128.0   |       |            |   | 313.4   |       |      |   | 254.7   |       
|Operating expenses:                                          |                                            |                                          |         |            |                  |   |         |       |            |   |         |       |      |   |         |       
|                                                             | Selling, general and administrative        |                                          |         | 104.7      |                  |   |         | 113.8 |            |   |         | 200.3 |      |   |         | 228.2  |       
|                                                             | Restructuring and impairment costs         |                                          |         | 43.2       |                  |   |         | 74.0  |            |   |         | 43.9  |      |   |         | 105.4  |       
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             |                                            | Operating income (loss)                  |         |            | 10.0             |   |         |       | (59.8      | ) |         |       | 69.2 |   |         |        | (78.9  | )
|Interest income                                              |                                            |                                          | 9.1     |            |                  |   | 3.7     |       |            |   | 14.9    |       |      |   | 6.2     |       
|Interest expense                                             |                                            |                                          | (16.7   | )          |                  |   | (44.4   | )     |            |   | (33.0   | )     |      |   | (88.3   | )     
|Other income  net                                           |                                            |                                          | 1.1     |            |                  |   | 2.0     |       |            |   | 5.8     |       |      |   | 6.2     |       
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|Income (loss) from continuing operations before income taxes |                                            |                                          | 3.5     |            |                  |   | (98.5   | )     |            |   | 56.9    |       |      |   | (154.8  | )     
|Income tax expense                                           |                                            |                                          | 6.6     |            |                  |   | 0.5     |       |            |   | 12.5    |       |      |   | 2.1     |       
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             |                                            | Income (loss) from continuing operations |         | $          | (3.1             | ) |         | $     | (99.0      | ) |         | $     | 44.4 |   |         | $      | (156.9 | )
|Discontinued operations:                                     |                                            |                                          |         |            |                  |   |         |       |            |   |         |       |      |   |         |       
|Income (loss) from discontinued operations                   |                                            |                                          | 0.9     |            |                  |   | 27.4    |       |            |   | 13.3    |       |      |   | (39.9   | )     
|Income tax expense                                           |                                            |                                          |        |            |                  |   | 4.4     |       |            |   | 1.7     |       |      |   | 4.7     |       
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             | Income (loss) from discontinued operations |                                          |         | 0.9        |                  |   |         | 23.0  |            |   |         | 11.6  |      |   |         | (44.6  | )     
|                                                             | Net (loss) income                          |                                          | $       | (2.2       | )                |   | $       | (76.0 | )          |   | $       | 56.0  |      |   | $       | (201.5 | )     
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|Basic net (loss) income per share                            |                                            |                                          |         |            |                  |   |         |       |            |   |         |       |      |   |         |       
|                                                             | Continuing operations                      |                                          | $       |           |                  |   | $       | (0.12 | )          |   | $       | 0.05  |      |   | $       | (0.19  | )     
|                                                             | Discontinued operations                    |                                          |         |           |                  |   |         | 0.03  |            |   |         | 0.01  |      |   |         | (0.05  | )     
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             | Basic net (loss) income per share          |                                          | $       |           |                  |   | $       | (0.09 | )          |   | $       | 0.06  |      |   | $       | (0.24  | )     
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|Diluted net (loss) income per share                          |                                            |                                          |         |            |                  |   |         |       |            |   |         |       |      |   |         |       
|                                                             | Continuing operations                      |                                          | $       |           |                  |   | $       | (0.12 | )          |   | $       | 0.05  |      |   | $       | (0.19  | )     
|                                                             | Discontinued operations                    |                                          |         |           |                  |   |         | 0.03  |            |   |         | 0.01  |      |   |         | (0.05  | )     
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|                                                             | Diluted net (loss) income per share        |                                          | $       |           |                  |   | $       | (0.09 | )          |   | $       | 0.06  |      |   | $       | (0.24  | )     
|                                                             |                                            |                                          |         |            |                  |   |         |       |            |   |         |      
|Shares used to compute basic net (loss) income per share     |                                            |                                          | 977.1   |            |                  |   | 835.6   |       |            |   | 966.7   |       |      |   | 834.6   |       
|Shares used to compute diluted net (loss) income per share   |                                            |                                          | 977.1   |            |                  |   | 835.6   |       |            |   | 970.6   |       |      |   | 834.6   |       



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SOLECTRON CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)


|                                   |                                          |                    |      |            |                  |   |       |      |            |   |      |      |  |   |        |      | 
|---------------------------------- | ---------------------------------------- | ------------------ | ---- | ---------- | ---------------- | - | ----- | ---- | ---------- | - | ---- | ---- |  | - | ------ | ---- | 
|                                   |                                          | Three Months Ended |      |            | Six Months Ended |  
|                                   |                                          | February 28        |      |            | February 28      |  
|                                   |                                          |                    |      |            |                  |  
|                                   |                                          | 2005               |      |            | 2004             |   |       | 2005 |            |   | 2004 |     
|                                   |                                          |                    |      |            |                  |   |       |      |            |   |      |     
|                                   |                                          |                    |      | (Restated) |                  |   |       |      | (Restated) |  
|                                   |                                          | (In millions)      |     
|                                   |                                          | (Unaudited)        |     
|Net (loss) income                  |                                          | $                  | (2.2 | )          |                  | $ | (76.0 | )    |            | $ | 56.0 |      |  | $ | (201.5 | )   
|Other comprehensive income (loss): |                                          |                    |      |            |                  |   |       |      |            |   |      |      |  |   |        |     
|                                   | Foreign currency translation adjustments |                    |      | 17.6       |                  |   |       | (2.9 | )          |   |      | 25.8 |  |   |        | 44.2 | 
|                                   | Unrealized gain (loss) on investments    |                    |      |           |                  |   |       | (0.9 | )          |   |      |     |  |   |        | 7.8  | 
|                                   |                                          |                    |      |            |                  |   |       |      |            |   |      |     
|Comprehensive income (loss)        |                                          | $                  | 15.4 |            |                  | $ | (79.8 | )    |            | $ | 81.8 |      |  | $ | (149.5 | )   
|                                   |                                          |                    |      |            |                  |   |       |      |            |   |      |     





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SOLECTRON CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |       |         |        |       |        |        |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---- | ----- | ------- | ------ | ----- | ------ | ------ | -
|                                                                                         |                                                                                                                                       | Six Months Ended                                                                   |                                                                                                
|                                                                                         |                                                                                                                                       | February 28                                                                        |                                                                                                
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                
|                                                                                         |                                                                                                                                       | 2005                                                                               |                                                                                                 |                                                | 2004 |      
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | (Restated)                                     |     
|                                                                                         |                                                                                                                                       | (In millions)                                                                      |                                                                                                
|                                                                                         |                                                                                                                                       | (Unaudited)                                                                        |                                                                                                
|Cash flows from operating activities of continuing operations:                           |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |       |         |       
|                                                                                         | Net income (loss) from continuing operations                                                                                          |                                                                                    | $                                                                                               | 44.4                                           |      |       | $       | (156.9 | )    
|                                                                                         | Adjustments to reconcile net income (loss) from continuing
    operations to net cash provided by (used in) operating
    activities: |                                                                                    |                                                                                                 |                                                |      |       |         |        |      
|                                                                                         |                                                                                                                                       | Depreciation and amortization                                                      |                                                                                                 |                                                | 99.6 |       |         |        | 118.5 |       
|                                                                                         |                                                                                                                                       | Amortization of debt issuance costs and accretion of discount on
    notes payable |                                                                                                 |                                                | 1.7  |       |         |        | 32.4  |       
|                                                                                         |                                                                                                                                       | Loss on disposal of property and equipment                                         |                                                                                                 |                                                | (0.1 | )     |         |        |      |       
|                                                                                         |                                                                                                                                       |                                                                                    | Change in the carrying value of property and equipment, goodwill
    and other long-term assets |                                                |      | 40.8  |         |        |       | 23.7   |       
|                                                                                         |                                                                                                                                       |                                                                                    | Changes in operating assets and liabilities:                                                    |                                                |      |       |         |        |       |        |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | Accounts receivable, net                       |      |       | 161.3   |        |       |        | (132.6 | )
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | Inventories                                    |      |       | 213.9   |        |       |        | (174.6 | )
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | Prepaid expenses and other current assets      |      |       | 14.9    |        |       |        | 16.1   |  
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | Accounts payable                               |      |       | (55.5   | )      |       |        | 138.5  |  
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 | Accrued expenses and other current liabilities |      |       | (44.4   | )      |       |        | (53.8  | )
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|                                                                                         |                                                                                                                                       |                                                                                    | Net cash provided by (used in) operating activities of
    continuing operations                |                                                |      | 476.6 |         |        |       | (188.7 | )     
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Cash flows from investing activities of continuing operations:                           |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |       |         |       
|                                                                                         | Change in restricted cash and cash equivalents                                                                                        |                                                                                    |                                                                                                 | (2.9                                           | )    |       |         | (402.4 | )    
|                                                                                         | Sales and maturities of short-term investments                                                                                        |                                                                                    |                                                                                                 |                                               |      |       |         | 21.9   |      
|                                                                                         | Settlement of receivable related to synthetic lease                                                                                   |                                                                                    |                                                                                                 | 19.9                                           |      |       |         |       |      
|                                                                                         | Proceeds from disposition of discontinued operations                                                                                  |                                                                                    |                                                                                                 | 30.0                                           |      |       |         | 104.2  |      
|                                                                                         | Capital expenditures                                                                                                                  |                                                                                    |                                                                                                 | (66.1                                          | )    |       |         | (68.5  | )    
|                                                                                         | Proceeds from sale of property and equipment                                                                                          |                                                                                    |                                                                                                 | 9.3                                            |      |       |         | 33.9   |      
|                                                                                         | Proceeds from sale of investments                                                                                                     |                                                                                    |                                                                                                 | 16.0                                           |      |       |         | 10.4   |      
|                                                                                         | Advances to discontinued operations                                                                                                   |                                                                                    |                                                                                                 | (22.9                                          | )    |       |         | (27.5  | )    
|                                                                                         | Supply agreement and other                                                                                                            |                                                                                    |                                                                                                 |                                               |      |       |         | 0.2    |      
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|                                                                                         |                                                                                                                                       |                                                                                    | Net cash used in investing activities of continuing operations                                  |                                                |      | (16.7 | )       |        |       | (327.8 | )     
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Cash flows from financing activities of continuing operations:                           |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |       |         |       
|                                                                                         | Net proceeds from issuance of convertible senior notes                                                                                |                                                                                    |                                                                                                 |                                               |      |       |         | 436.5  |      
|                                                                                         | Net repayment of bank lines of credit and other debt arrangements                                                                     |                                                                                    |                                                                                                 | (16.5                                          | )    |       |         | (15.2  | )    
|                                                                                         | Lyons repurchase                                                                                                                      |                                                                                    |                                                                                                 | (0.5                                           | )    |       |         |       |      
|                                                                                         | Common stock repurchase                                                                                                               |                                                                                    |                                                                                                 | (1.4                                           | )    |       |         |       |      
|                                                                                         | Net proceeds from issuance of common stock                                                                                            |                                                                                    |                                                                                                 | 64.3                                           |      |       |         |       |      
|                                                                                         | Net proceeds from stock issued under option and employee
    purchase plans                                                           |                                                                                    |                                                                                                 | 8.1                                            |      |       |         | 21.2   |      
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|                                                                                         |                                                                                                                                       | Net cash provided by financing activities of continuing
    operations             |                                                                                                 |                                                | 54.0 |       |         |        | 442.5 |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Effect of exchange rate changes on cash and cash
    equivalents  continuing operations |                                                                                                                                       |                                                                                    | 10.7                                                                                            |                                                |      |       | 14.2    |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Net increase (decrease) in cash and cash equivalents 
    continuing operations         |                                                                                                                                       |                                                                                    | 524.6                                                                                           |                                                |      |       | (59.8   | )     
|Cash and cash equivalents at beginning of period 
    continuing operations             |                                                                                                                                       |                                                                                    | 1,412.7                                                                                         |                                                |      |       | 1,425.3 |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Cash and cash equivalents at end of period 
    continuing operations                   |                                                                                                                                       | $                                                                                  | 1,937.3                                                                                         |                                                |      | $     | 1,365.5 |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Cash and cash equivalents at beginning of period 
    discontinued operations           |                                                                                                                                       | $                                                                                  |                                                                                                |                                                |      | $     | 36.4    |       
|Cash provided by discontinued operations                                                 |                                                                                                                                       |                                                                                    |                                                                                                |                                                |      |       | 9.7     |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      
|Cash and cash equivalents at end of period 
    discontinued operations                 |                                                                                                                                       | $                                                                                  |                                                                                                |                                                |      | $     | 46.1    |       
|                                                                                         |                                                                                                                                       |                                                                                    |                                                                                                 |                                                |      |      



6



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SOLECTRON CORPORATION AND SUBSIDIARIES





Notes to Condensed Consolidated Financial Statements


(Unaudited)


NOTE 1  Basis of Presentation and Recent
Accounting Pronouncements




| |                      
| | ---------------------
| | Basis of Presentation













| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements





7



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










|         |                                                 
|-------- | ------------------------------------------------
|NOTE 2  | Restatement of Prior Period Financial Statements













|         |                         
|-------- | ------------------------
|NOTE 3  | Stock-Based Compensation



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                   |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |       |   |   |        |        |  
|---------------------------------- | ------------------------------------------------------------------------------------------------------------ | -------------------- | ---- | ---------- | -------------------- | - | ----- | ----- | ---------- | - | ---- | ----- | - | - | ------ | ------ | -
|                                   |                                                                                                              | Three Months Ended   |      |            | Six Months Ended     |  
|                                   |                                                                                                              | February 28          |      |            | February 28          |  
|                                   |                                                                                                              |                      |      |            |                      |  
|                                   |                                                                                                              | 2005                 |      |            | 2004                 |   |       | 2005  |            |   | 2004 |      
|                                   |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |      
|                                   |                                                                                                              |                      |      | (Restated) |                      |   |       |       | (Restated) |  
|                                   |                                                                                                              | (In millions, except |      |            | (In millions, except |  
|                                   |                                                                                                              | per share data)      |      |            | per share data)      |  
|Net income (loss), as reported     |                                                                                                              | $                    | (2.2 | )          |                      | $ | (76.0 | )     |            | $ | 56.0 |       |   | $ | (201.5 | )     
|                                   | Stock-based employee compensation expense determined under fair
    value method, net of related tax effects |                      |      | (43.1      | )                    |   |       | (17.0 | )          |   |      | (52.3 | ) |   |        | (33.3  | )
|                                   |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |      
|                                   | Pro forma net income (loss)                                                                                  |                      | $    | (45.3      | )                    |   | $     | (93.0 | )          |   | $    | 3.7   |   |   | $      | (234.8 | )
|                                   |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |      
|Basic earnings (loss) per share:   |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |       |   |   |        |       
|                                   | As reported                                                                                                  |                      | $    |           |                      |   | $     | (0.09 | )          |   | $    | 0.06  |   |   | $      | (0.24  | )
|                                   | Pro forma                                                                                                    |                      | $    | (0.05      | )                    |   | $     | (0.11 | )          |   | $    |      |   |   | $      | (0.28  | )
|Diluted earnings (loss) per share: |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |       |   |   |        |       
|                                   | As reported                                                                                                  |                      | $    |           |                      |   | $     | (0.09 | )          |   | $    | 0.06  |   |   | $      | (0.24  | )
|                                   | Pro forma                                                                                                    |                      | $    | (0.05      | )                    |   | $     | (0.11 | )          |   | $    |      |   |   | $      | (0.28  | )
|Weighted average number of shares: |                                                                                                              |                      |      |            |                      |   |       |       |            |   |      |       |   |   |        |       
|                                   | Basic                                                                                                        |                      |      | 977.1      |                      |   |       | 835.6 |            |   |      | 966.7 |   |   |        | 834.6  |  
|                                   | Diluted                                                                                                      |                      |      | 977.1      |                      |   |       | 835.6 |            |   |      | 970.6 |   |   |        | 834.6  |  





|                         |  |                    |  |                  |  |           |  |          
|------------------------ |  | ------------------ |  | ---------------- |  | --------- |  | ---------
|                         |  | Three Months Ended |  | Six Months Ended
|                         |  | February 28        |  | February 28     
|                         |  |                    |  |                 
|Stock Options            |  | 2005               |  | 2004             |  | 2005      |  | 2004     
|                         |  |                    |  |                  |  |           |  |          
|Expected life of options |  | 3.9 years          |  | 3.9 years        |  | 3.9 years |  | 3.9 years
|Volatility               |  | 69%                |  | 76%              |  | 70%       |  | 77%      
|Risk-free interest rate  |  | 3.54%              |  | 2.74%            |  | 3.43%     |  | 2.75%    
|Dividend yield           |  | zero               |  | zero             |  | zero      |  | zero     

9



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


|                                |  |                    |  |                  |  |          |  |         
|------------------------------- |  | ------------------ |  | ---------------- |  | -------- |  | --------
|                                |  | Three Months Ended |  | Six Months Ended
|                                |  | February 28        |  | February 28     
|                                |  |                    |  |                 
|Employee Stock Purchase Plan    |  | 2005               |  | 2004             |  | 2005     |  | 2004    
|                                |  |                    |  |                  |  |          |  |         
|Expected life of purchase right |  | 6 months           |  | 6 months         |  | 6 months |  | 6 months
|Volatility                      |  | 39%                |  | 76%              |  | 40%      |  | 77%     
|Risk-free interest rate         |  | 2.68%              |  | 1.00%            |  | 2.50%    |  | 1.02%   
|Dividend yield                  |  | zero               |  | zero             |  | zero     |  | zero    











|         |            
|-------- | -----------
|NOTE 4  | Inventories



|                |  |             |         |  |           |   |         | 
|--------------- |  | ----------- | ------- |  | --------- | - | ------- | 
|                |  | February 28 |         |  | August 31 |  
|                |  | 2005        |         |  | 2004      |  
|                |  |             |         |  |           |  
|Raw materials   |  | $           | 871.5   |  |           | $ | 992.6   | 
|Work-in-process |  |             | 174.2   |  |           |   | 224.0   | 
|Finished goods  |  |             | 195.9   |  |           |   | 238.8   | 
|                |  |             |         |  |           |  
|Total           |  | $           | 1,241.6 |  |           | $ | 1,455.4 | 
|                |  |             |         |  |           |  

10



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|         |                         
|-------- | ------------------------
|NOTE 5  | Accounts Receivable, Net



|                                      |  |             |         |  |           |   |         | 
|------------------------------------- |  | ----------- | ------- |  | --------- | - | ------- | 
|                                      |  | February 28 |         |  | August 31 |  
|                                      |  | 2005        |         |  | 2004      |  
|                                      |  |             |         |  |           |  
|Accounts Receivable                   |  | $           | 1,413.4 |  |           | $ | 1,585.9 | 
|Less: Allowance for doubtful accounts |  |             | 24.7    |  |           |   | 35.7    | 
|                                      |  |             |         |  |           |  
|Accounts Receivable, net              |  | $           | 1,388.7 |  |           | $ | 1,550.2 | 
|                                      |  |             |         |  |           |  



|         |                            
|-------- | ---------------------------
|NOTE 6  | Property and Equipment, Net



|                               |  |             |         |  |           |   |         | 
|------------------------------ |  | ----------- | ------- |  | --------- | - | ------- | 
|                               |  | February 28 |         |  | August 31 |  
|                               |  | 2005        |         |  | 2004      |  
|                               |  |             |         |  |           |  
|Original Cost                  |  | $           | 1,880.6 |  |           | $ | 1,692.5 | 
|Less: accumulated depreciation |  |             | 1,185.8 |  |           |   | 938.1   | 
|                               |  |             |         |  |           |  
|Total                          |  | $           | 694.8   |  |           | $ | 754.4   | 
|                               |  |             |         |  |           |  



|         |                              
|-------- | -----------------------------
|NOTE 7  | Commitments and Contingencies



| |                 
| | ----------------
| | Synthetic Leases







11



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






| |                                 
| | --------------------------------
| | Future Minimum Lease Obligations



|                |  |       |  |            |      |  |           |  |      |      |  |  |      |  |  |      |      |  |      |  |      |            |  |  |      |  |  |  |      | 
|--------------- |  | ----- |  | ---------- | ---- |  | --------- |  | ---- | ---- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | ---- | ---------- |  |  | ---- |  |  |  | ---- | 
|                |  | Total |  | Short-Term |      |  | Q306-Q406 |  |      | FY07 |  |  | FY08 |  |  | FY09 |      |  | FY10 |  |      | Thereafter | 
|                |  |       |  |            |      |  |           |  |      |      |  |  |      |  |  |      |      |  |      |  |      |            | 
|Operating lease |  | 155.2 |  |            | 41.1 |  |           |  | 17.3 |      |  |  | 22.1 |  |  |      | 17.2 |  |      |  | 12.8 |            |  |  | 11.4 |  |  |  | 33.3 | 



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



Lifshitz v. Cannon
et al.,


Abrams v. Solectron
Corporation et al.


12



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|         |                                               
|-------- | ----------------------------------------------
|NOTE 8  | Segment Information and Geographic Information







|                      |                               |                    |         |            |                  |   |         |       |            |   |         |         |  |   |         |         | 
|--------------------- | ----------------------------- | ------------------ | ------- | ---------- | ---------------- | - | ------- | ----- | ---------- | - | ------- | ------- |  | - | ------- | ------- | 
|                      |                               | Three Months Ended |         |            | Six Months Ended |  
|                      |                               | February 28        |         |            | February 28      |  
|                      |                               |                    |         |            |                  |  
|                      |                               | 2005               |         |            | 2004             |   |         | 2005  |            |   | 2004    |        
|                      |                               |                    |         |            |                  |   |         |       |            |   |         |        
|                      |                               |                    |         | (Restated) |                  |   |         |       | (Restated) |  
|Geographic net sales: |                               |                    |         |            |                  |   |         |       |            |   |         |         |  |   |         |        
|                      | United States                 |                    | $       | 828.8      |                  |   | $       | 768.5 |            |   | $       | 1,615.2 |  |   | $       | 1,520.8 | 
|                      | Other North and Latin America |                    |         | 448.0      |                  |   |         | 464.0 |            |   |         | 921.7   |  |   |         | 846.5   | 
|                      | Europe                        |                    |         | 381.2      |                  |   |         | 398.9 |            |   |         | 815.3   |  |   |         | 834.2   | 
|                      | Malaysia                      |                    |         | 514.7      |                  |   |         | 434.5 |            |   |         | 951.2   |  |   |         | 829.6   | 
|                      | China                         |                    |         | 349.5      |                  |   |         | 545.5 |            |   |         | 689.6   |  |   |         | 914.4   | 
|                      | Other Asia Pacific            |                    |         | 233.8      |                  |   |         | 266.4 |            |   |         | 453.6   |  |   |         | 618.0   | 
|                      |                               |                    |         |            |                  |   |         |       |            |   |         |        
|                      |                               | $                  | 2,756.0 |            |                  | $ | 2,877.8 |       |            | $ | 5,446.6 |         |  | $ | 5,563.5 |        
|                      |                               |                    |         |            |                  |   |         |       |            |   |         |        



|                   |                               |             |       |       |           |   |       |       | 
|------------------ | ----------------------------- | ----------- | ----- | ----- | --------- | - | ----- | ----- | 
|                   |                               | February 28 |       |       | August 31 |  
|                   |                               | 2005        |       |       | 2004      |  
|                   |                               |             |       |       |           |  
|Long-lived assets: |                               |             |       |       |           |   |       |      
|                   | United States                 |             | $     | 308.9 |           |   | $     | 332.4 | 
|                   | Other North and Latin America |             |       | 171.8 |           |   |       | 182.6 | 
|                   | Europe                        |             |       | 136.6 |           |   |       | 144.7 | 
|                   | Asia Pacific                  |             |       | 305.9 |           |   |       | 330.1 | 
|                   |                               |             |       |       |           |  
|                   |                               | $           | 923.2 |       |           | $ | 989.8 |      
|                   |                               |             |       |       |           |  



|                |  |                   |      |            |                  |  |      |      |            |  |      |   |  |  |      |  
|--------------- |  | ----------------- | ---- | ---------- | ---------------- |  | ---- | ---- | ---------- |  | ---- | - |  |  | ---- | -
|                |  | Three Months      |      |            | Six Months Ended | 
|                |  | Ended February 28 |      |            | February 28      | 
|                |  |                   |      |            |                  | 
|                |  | 2005              |      |            | 2004             |  |      | 2005 |            |  | 2004 |  
|                |  |                   |      |            |                  |  |      |      |            |  |      |  
|                |  |                   |      | (Restated) |                  |  |      |      | (Restated) | 
|Cisco Systems   |  |                   | 17.0 | %          |                  |  | 12.9 | %    |            |  | 15.6 | % |  |  | 12.0 | %
|Nortel Networks |  |                   | 10.7 | %          |                  |  | ***  |      |            |  | 10.5 | % |  |  | 10.3 | %
|NEC             |  |                   | ***  |            |                  |  | 10.2 | %    |            |  | ***  |   |  |  | ***  |  






|    |              
|--- | -------------
|*** | Less than 10%

13



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|         |               
|-------- | --------------
|NOTE 9  | Long-Term Debt



| |                    
| | -------------------
| | 9.625% Senior Notes





| |                                       
| | --------------------------------------
| | 0.5% Convertible Senior Notes due 2034









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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




| |                    
| | -------------------
| | 7.375% Senior Notes





| |                                                    
| | ---------------------------------------------------
| | Adjustable Conversion-Rate Equity Securities (ACES)









| |                                  
| | ---------------------------------
| | Liquid Yield Option Notes (LYONs)





|          |                       
|--------- | ----------------------
|NOTE 10  | Derivative Instruments



| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |            
| | -----------
| | Derivatives



15



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##### Table of Contents



SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)














|          |                  
|--------- | -----------------
|NOTE 11  | Intangible Assets







| |                   
| | ------------------
| | February 28, 2005:

|                         |  |            |       |              |            |   |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ----- | ------------ | ---------- | - | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  |            |       | Intellectual |            |   |       |       | 
|                         |  | Supply     |       |              | Property   |   |       |       |  |  
|                         |  | Agreements |       |              | Agreements |   |       | Other |  |   | Total |  
|                         |  |            |       |              |            |   |       |       |  |   |       |  
|Gross amount             |  | $          | 87.7  |              |            | $ | 61.0  |       |  | $ | 92.3  |   |  | $ | 241.0  |  
|Accumulated amortization |  |            | (86.4 | )            |            |   | (55.3 | )     |  |   | (81.0 | ) |  |   | (222.7 | )
|                         |  |            |       |              |            |   |       |       |  |   |       |  
|Carrying value           |  | $          | 1.3   |              |            | $ | 5.7   |       |  | $ | 11.3  |   |  | $ | 18.3   |  
|                         |  |            |       |              |            |   |       |       |  |   |       |  

16



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




| |                 
| | ----------------
| | August 31, 2004:

|                         |  |            |       |              |            |   |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ----- | ------------ | ---------- | - | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  |            |       | Intellectual |            |   |       |       | 
|                         |  | Supply     |       |              | Property   |   |       |       |  |  
|                         |  | Agreements |       |              | Agreements |   |       | Other |  |   | Total |  
|                         |  |            |       |              |            |   |       |       |  |   |       |  
|Gross amount             |  | $          | 87.7  |              |            | $ | 108.5 |       |  | $ | 92.3  |   |  | $ | 288.5  |  
|Accumulated amortization |  |            | (86.1 | )            |            |   | (54.5 | )     |  |   | (77.5 | ) |  |   | (218.1 | )
|Impairment               |  |            |      |              |            |   | (47.5 | )     |  |   |      |   |  |   | (47.5  | )
|                         |  |            |       |              |            |   |       |       |  |   |       |  
|Carrying value           |  | $          | 1.6   |              |            | $ | 6.5   |       |  | $ | 14.8  |   |  | $ | 22.9   |  
|                         |  |            |       |              |            |   |       |       |  |   |       |  





|          |                        
|--------- | -----------------------
|NOTE 12  | Discontinued Operations





|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |       |      |   |       |       |       |  
|--------------------------------- | ------------------------------------------------------ | ----------------------- | --- | ---------- | ---------------- | - | ----- | ---- | ---------- | - | ---- | ----- | ---- | - | ----- | ----- | ----- | -
|                                  |                                                        | Three Months Ended      |     |            | Six Months Ended |  
|                                  |                                                        | February 28             |     |            | February 28      |  
|                                  |                                                        |                         |     |            |                  |  
|                                  |                                                        | 2005                    |     |            | 2004             |   |       | 2005 |            |   | 2004 |      
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      
|                                  |                                                        |                         |     | (Restated) |                  |   |       |      | (Restated) |  
|Net sales                         |                                                        | $                       |    |            |                  | $ | 411.5 |      |            | $ | 15.2 |       |      | $ | 947.2 |      
|Cost of sales                     |                                                        |                         |    |            |                  |   | 345.3 |      |            |   | 14.1 |       |      |   | 815.9 |      
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      
|Gross profit                      |                                                        |                         |    |            |                  |   | 66.2  |      |            |   | 1.1  |       |      |   | 131.3 |      
|                                  | Operating expenses (income)  net                      |                         |     | (0.9       | )                |   |       | 42.4 |            |   |      | (11.3 | )    |   |       | 170.7 |      
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      
|                                  |                                                        | Operating income (loss) |     |            | 0.9              |   |       |      | 23.8       |   |      |       | 12.4 |   |       |       | (39.4 | )
|Interest income  net             |                                                        |                         |    |            |                  |   | 0.6   |      |            |   |     |       |      |   | 0.8   |      
|Other income (expense)  net      |                                                        |                         |    |            |                  |   | 3.0   |      |            |   | 0.9  |       |      |   | (1.3  | )    
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      
|Income (loss) before income taxes |                                                        |                         | 0.9 |            |                  |   | 27.4  |      |            |   | 13.3 |       |      |   | (39.9 | )    
|Income tax expense                |                                                        |                         |    |            |                  |   | 4.4   |      |            |   | 1.7  |       |      |   | 4.7   |      
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      
|                                  | Income (loss) from discontinued operations, net of tax |                         | $   | 0.9        |                  |   | $     | 23.0 |            |   | $    | 11.6  |      |   | $     | (44.6 | )    
|                                  |                                                        |                         |     |            |                  |   |       |      |            |   |      |      





17



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










|                              |                                                          |             |   |           |  |   |      |      | 
|----------------------------- | -------------------------------------------------------- | ----------- | - | --------- |  | - | ---- | ---- | 
|                              |                                                          | February 28 |   | August 31 | 
|                              |                                                          | 2005        |   | 2004      | 
|                              |                                                          |             |   |           | 
|Accounts receivable, net      |                                                          | $           |  |           |  | $ | 18.3 |     
|Inventories                   |                                                          |             |  |           |  |   | 18.1 |     
|                              |                                                          |             |   |           |  |  
|                              | Total current assets of discontinued operations          |             | $ |          |  |   | $    | 36.4 | 
|                              |                                                          |             |   |           |  |  
|Net property and equipment    |                                                          | $           |  |           |  | $ | 10.1 |     
|Other assets                  |                                                          |             |  |           |  |   | 1.8  |     
|                              |                                                          |             |   |           |  |  
|                              | Total non-current assets of discontinued operations      |             | $ |          |  |   | $    | 11.9 | 
|                              |                                                          |             |   |           |  |  
|Short-term debt               |                                                          | $           |  |           |  | $ | 8.9  |     
|Accounts payable              |                                                          |             |  |           |  |   | 26.0 |     
|Accrued employee compensation |                                                          |             |  |           |  |   | 7.2  |     
|Accrued expenses              |                                                          |             |  |           |  |   | 4.3  |     
|                              |                                                          |             |   |           |  |  
|                              | Total current liabilities of discontinued operations     |             | $ |          |  |   | $    | 46.4 | 
|                              |                                                          |             |   |           |  |  
|                              | Total non-current liabilities of discontinued operations |             | $ |          |  |   | $    | 1.8  | 
|                              |                                                          |             |   |           |  |  



|          |                             
|--------- | ----------------------------
|NOTE 13  | Restructuring and Impairment



18



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








| |                                                      
| | -----------------------------------------------------
| | Three and six months ended February 28, 2005 and 2004





19



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                                                |  |                    |      |            |                  |   |      |      |            |   |      |   |  |        |       |  |  |  |          | 
|--------------------------------------------------------------- |  | ------------------ | ---- | ---------- | ---------------- | - | ---- | ---- | ---------- | - | ---- | - |  | ------ | ----- |  |  |  | -------- | 
|                                                                |  | Three Months Ended |      |            | Six Months Ended |   |      |     
|                                                                |  | February 28        |      |            | February 28      |   |      |     
|                                                                |  |                    |      |            |                  |   |      |     
|                                                                |  | 2005               |      |            | 2004             |   |      | 2005 |            |   | 2004 |   |  | Nature |      
|                                                                |  |                    |      |            |                  |   |      |      |            |   |      |   |  |        |      
|                                                                |  |                    |      | (Restated) |                  |   |      |      | (Restated) |   |      |  
|Impairment of equipment and facilities, net of gain on disposal |  | $                  | 38.5 |            |                  | $ | 16.8 |      |            | $ | 39.7 |   |  | $      | 18.4  |  |  |  | non-cash | 
|Severance and benefit costs                                     |  |                    | 2.9  |            |                  |   | 4.6  |      |            |   | 3.3  |   |  |        | 14.7  |  |  |  | cash     | 
|Net adjustment to equipment lease loss accrual                  |  |                    | (0.2 | )          |                  |   | 3.6  |      |            |   | (0.1 | ) |  |        | 4.7   |  |  |  | cash     | 
|Net adjustment to facility lease loss accrual                   |  |                    | 1.9  |            |                  |   | 31.3 |      |            |   | 0.9  |   |  |        | 35.3  |  |  |  | cash     | 
|Other exit costs                                                |  |                    | 0.1  |            |                  |   | 17.7 |      |            |   | 0.1  |   |  |        | 32.3  |  |  |  | cash     | 
|                                                                |  |                    |      |            |                  |   |      |      |            |   |      |   |  |        |      
|Total                                                           |  | $                  | 43.2 |            |                  | $ | 74.0 |      |            | $ | 43.9 |   |  | $      | 105.4 |  |  |  |          | 
|                                                                |  |                    |      |            |                  |   |      |      |            |   |      |   |  |        |      





| |                     
| | --------------------
| | Fiscal 2004 and 2003



|                                                               |  |             |       |   |      |   |       |        |  |  |          | 
|-------------------------------------------------------------- |  | ----------- | ----- | - | ---- | - | ----- | ------ |  |  | -------- | 
|                                                               |  | Years Ended |       |   |     
|                                                               |  | August 31   |       |   |     
|                                                               |  |             |       |   |     
|                                                               |  | 2004        |       |   | 2003 |   |       | Nature | 
|                                                               |  |             |       |   |      |   |       |        | 
|Loss on disposal of and impairment of equipment and facilities |  | $           | 38.5  |   |      | $ | 153.6 |        |  |  | non-cash | 
|Severance and benefit costs                                    |  |             | 25.9  |   |      |   | 221.8 |        |  |  | cash     | 
|Net adjustment to equipment lease loss accrual                 |  |             | (2.2  | ) |      |   | 2.2   |        |  |  | cash     | 
|Net adjustment to facility lease loss accrual                  |  |             | 42.5  |   |      |   | 22.9  |        |  |  | cash     | 
|Other exit costs                                               |  |             | 25.7  |   |      |   | 32.6  |        |  |  | cash     | 
|                                                               |  |             |       |   |      |   |       |        | 
|Total                                                          |  | $           | 130.4 |   |      | $ | 433.1 |        |  |  |          | 
|                                                               |  |             |       |   |      |   |       |        | 



| |     
| | ----
| | 2004





20



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










| |     
| | ----
| | 2003









| |                      
| | ---------------------
| | Restructuring Accrual



|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |      |   |  |   |       |  
|--------------------------------------- |  | ------------ | ---- | - | ------------- | - | ---- | ------------- |  | - | ---------- | - |  | ----- | ---- | - |  | - | ----- | -
|                                        |  | Severance    |      |   | Lease Accrual |   |      | Lease Accrual |  |   | Other Exit |   |  |      
|                                        |  | and Benefits |      |   | on Facilities |   |      | on Equipment  |  |   | Costs      |   |  | Total |     
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at August 31, 2004   |  | $            | 28.9 |   |               | $ | 57.5 |               |  | $ | 4.9        |   |  | $     | 1.3  |   |  | $ | 92.6  |  
|Q1-FY05 Provision                       |  |              | 0.4  |   |               |   | (1.0 | )             |  |   | 0.1        |   |  |       |     |   |  |   | (0.5  | )
|Q1-FY05 Cash payments                   |  |              | (9.8 | ) |               |   | (9.9 | )             |  |   | (1.7       | ) |  |       | (0.3 | ) |  |   | (21.7 | )
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at November 30, 2004 |  |              | 19.5 |   |               |   | 46.6 |               |  |   | 3.3        |   |  |       | 1.0  |   |  |   | 70.4  |  
|Q2-FY05 Provision                       |  |              | 3.5  |   |               |   | 2.3  |               |  |   |           |   |  |       | 0.1  |   |  |   | 5.9   |  
|Q2-FY05 Provision adjustment            |  |              | (0.6 | ) |               |   | (0.4 | )             |  |   | (0.2       | ) |  |       |     |   |  |   | (1.2  | )
|Q2-FY05 Cash payments                   |  |              | (4.2 | ) |               |   | (4.8 | )             |  |   | (0.4       | ) |  |       | (0.8 | ) |  |   | (10.2 | )
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     
|Balance of accrual at February 28, 2005 |  |              | 18.2 |   |               |   | 43.7 |               |  |   | 2.7        |   |  |       | 0.3  |   |  |   | 64.9  |  
|                                        |  |              |      |   |               |   |      |               |  |   |            |   |  |       |     



21



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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|          |                                    
|--------- | -----------------------------------
|NOTE 14  | Income (Loss) Per Share Calculation







|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |      |       |  |   |        |       |  
|------------------------------------ | --------------------------- | --------------------------------------------- | - | ---------- | ---------------- |  | - | ----- | ---------- | - | ---- | ---- | ----- |  | - | ------ | ----- | -
|                                     |                             | Three Months Ended                            |   |            | Six Months Ended | 
|                                     |                             | February 28                                   |   |            | February 28      | 
|                                     |                             |                                               |   |            |                  | 
|                                     |                             | 2005                                          |   |            | 2004             |  |   | 2005  |            |   | 2004 |     
|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |     
|                                     |                             |                                               |   | (Restated) |                  |  |   |       | (Restated) |  
|Basic earnings (net loss) per share: |                             |                                               |   |            |                  |  |   |       |            |   |      |      |       |  |   |       
|                                     | Net income (loss)           |                                               | $ | (3.1       | )                |  | $ | (99.0 | )          |   | $    | 44.4 |       |  | $ | (156.9 | )    
|                                     | Shares used in computation: |                                               |   |            |                  |  |   |       |            |   |      |      |       |  |   |        |      
|                                     |                             | Weighted average ordinary shares outstanding  |   |            | 977.1            |  |   |       | 835.6      |   |      |      | 966.7 |  |   |        | 834.6 |  
|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |     
|                                     |                             | Basic earnings (net loss) per share           |   | $          |                 |  |   | $     | (0.12      | ) |      | $    | 0.05  |  |   | $      | (0.19 | )
|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |     
|Diluted earnings per share:          |                             |                                               |   |            |                  |  |   |       |            |   |      |      |       |  |   |       
|                                     | Net income (loss)           |                                               | $ | (3.1       | )                |  | $ | (99.0 | )          |   | $    | 44.4 |       |  | $ | (156.9 | )    
|                                     | Shares used in computation: |                                               |   |            |                  |  |   |       |            |   |      |      |       |  |   |        |      
|                                     |                             | Weighted average ordinary shares outstanding  |   |            | 977.1            |  |   |       | 835.6      |   |      |      | 966.7 |  |   |        | 834.6 |  
|                                     |                             | Employee stock options                        |   |            |                 |  |   |       |           |   |      |      | 3.9   |  |   |        |      |  
|                                     |                             | Shares issuable upon conversion of LYONs      |   |            |                 |  |   |       |           |   |      |      |      |  |   |        |      |  
|                                     |                             | Shares issuable upon conversion of ACES       |   |            |                  |  |   |       |            |   |      |      |      |  |   |        |      |  
|                                     |                             | Shares issuable upon conversion of 0.5% notes |   |            |                 |  |   |       |           |   |      |      |      |  |   |        |      |  
|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |     
|                                     |                             | Weighted average number of shares             |   |            | 977.1            |  |   |       | 835.6      |   |      |      | 970.6 |  |   |        | 834.6 |  
|                                     |                             | Diluted earnings (net loss) per share         |   | $          |                 |  |   | $     | (0.12      | ) |      | $    | 0.05  |  |   | $      | (0.19 | )
|                                     |                             |                                               |   |            |                  |  |   |       |            |   |      |     



|                     |                                               |                                        |  |      |             |  |  |       |       |  |      |      |      |  |  |       |       | 
|-------------------- | --------------------------------------------- | -------------------------------------- |  | ---- | ----------- |  |  | ----- | ----- |  | ---- | ---- | ---- |  |  | ----- | ----- | 
|                     |                                               | Three Months                           |  |      | Six Months  | 
|                     |                                               | Ended                                  |  |      | Ended       | 
|                     |                                               | February 28                            |  |      | February 28 | 
|                     |                                               |                                        |  |      |             | 
|                     |                                               | 2005                                   |  |      | 2004        |  |  | 2005  |       |  | 2004 |     
|                     |                                               |                                        |  |      |             |  |  |       |       |  |      |     
|Dilutive securities: |                                               |                                        |  |      |             |  |  |       |       |  |      |      |      |  |  |      
|                     | Employee stock options                        |                                        |  | 28.6 |             |  |  | 42.9  |       |  |      | 26.9 |      |  |  | 44.4  |      
|                     | Shares issuable upon conversion of LYONs      |                                        |  | 0.2  |             |  |  | 19.3  |       |  |      | 0.3  |      |  |  | 19.3  |      
|                     | Shares issuable upon conversion of ACES       |                                        |  |     |             |  |  | 112.1 |       |  |      | 2.9  |      |  |  | 112.1 |      
|                     | Shares issuable upon conversion of 0.5% notes |                                        |  | 0.3  |             |  |  | 5.6   |       |  |      | 0.3  |      |  |  | 2.8   |      
|                     |                                               |                                        |  |      |             |  |  |       |       |  |      |     
|                     |                                               | Total dilutive potential common shares |  |      | 29.1        |  |  |       | 179.9 |  |      |      | 30.4 |  |  |       | 178.6 | 
|                     |                                               |                                        |  |      |             |  |  |       |       |  |      |     

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SOLECTRON CORPORATION AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|          |             
|--------- | ------------
|NOTE 15  | Income Taxes









23



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements


With the exception of historical facts, the statements
contained in this quarterly report are forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange
Act), and are subject to the safe harbor provisions set
forth in the Exchange Act. These forward-looking statements
relate to matters including, but not limited to:




| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | future sales and operating results;                                                                                                                                                                         
|
| |  | our anticipation of the timing and amounts of our future
    obligations and commitments;                                                                                                                   
|
| |  | our belief that our cash and cash equivalents, lines of
    credit and cash to be generated from continuing operations will
    be sufficient for us to meet our obligations for the next twelve
    months;
|
| |  | the capabilities and capacities of our business
    operations;                                                                                                                                             
|
| |  | the adequacy of our restructuring provisions;                                                                                                                                                               
|
| |  | the anticipated financial impact of recent and future
    acquisitions and divestitures and the adequacy of our provisions
    for indemnification obligations pursuant to such
    transactions;           
|
| |  | the consummation of pending transactions;                                                                                                                                                                   
|
| |  | our ability to comply with certain requirements of the
    Sarbanes-Oxley Act of 2002;                                                                                                                      
|
| |  | our exposure of foreign currency exchange rate
    fluctuations;                                                                                                                                            
|
| |  | our belief that our current environmental liability exposure
    related to our facilities will not be material to our business,
    financial condition or results of operations; and                      
|
| |  | various other forward-looking statements contained in
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations.                                                      

We intend that our forward-looking statements be subject to
the safe harbors created by the Exchange Act. The
forward-looking statements are generally accompanied by words
such as intend, anticipate,
believe, estimate, expect
and other similar words and statements and variations or
negatives of these words. Our forward-looking statements are
based on current expectations, forecasts and assumptions and are
subject to risks, uncertainties and changes in condition,
significance, value and effect, including those discussed under
the heading Risk Factors in this report and in our
reports filed with the Securities and Exchange Commission on
Forms 10-K, 10-Q, 8-K, S-3 and S-4. Such risks,
uncertainties and changes in condition, significance, value and
effect could cause our actual results to differ materially from
our anticipated outcomes. Although we believe that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate.
Therefore, we can give no assurance that the results implied by
these forward-looking statements will be realized. The inclusion
of forward-looking information should not be regarded as a
representation by our company or any other person that the
future events, plans or expectations contemplated by Solectron
will be achieved. Furthermore, past performance in operations
and share price is not necessarily indicative of future
performance. We disclaim any intention or obligation to update
or revise any forward-looking statements contained in the
documents incorporated by reference herein, whether as a result
of new information, future events or otherwise.


Overview




24



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| |                             
| | ----------------------------
| | Restatement of Prior Periods









25



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| |                                                  
| | -------------------------------------------------
| | Summary of Results and Key Performance Indicators



|                                            |  |                    |         |            |                  |   |         |      |            |   |         |  |  |   |         |  
|------------------------------------------- |  | ------------------ | ------- | ---------- | ---------------- | - | ------- | ---- | ---------- | - | ------- |  |  | - | ------- | -
|                                            |  | Three Months Ended |         |            | Six Months Ended |  
|                                            |  | February 28        |         |            | February 28      |  
|                                            |  |                    |         |            |                  |  
|                                            |  | 2005               |         |            | 2004             |   |         | 2005 |            |   | 2004    | 
|                                            |  |                    |         |            |                  |   |         |      |            |   |         | 
|                                            |  |                    |         | (Restated) |                  |   |         |      | (Restated) |  
|Net sales                                   |  | $                  | 2,756.0 |            |                  | $ | 2,877.8 |      |            | $ | 5,446.6 |  |  | $ | 5,563.5 |  
|Gross profit                                |  |                    | 157.9   |            |                  |   | 128.0   |      |            |   | 313.4   |  |  |   | 254.7   |  
|Selling, general and administrative expense |  |                    | 104.7   |            |                  |   | 113.8   |      |            |   | 200.3   |  |  |   | 228.2   |  
|(Loss) income from continuing operations    |  |                    | (3.1    | )          |                  |   | (99.0   | )    |            |   | 44.4    |  |  |   | (156.9  | )



|                                   |  |                    |         |  |              |   |           |            |  |   |           |  |  |              |           |  |  |   |           | 
|---------------------------------- |  | ------------------ | ------- |  | ------------ | - | --------- | ---------- |  | - | --------- |  |  | ------------ | --------- |  |  | - | --------- | 
|                                   |  | Three Months Ended |        
|                                   |  |                    |        
|                                   |  | February 28,       |         |  | November 30, |   |           | August 31, |  |   | May 31,   |  |  | February 28, |          
|                                   |  | 2005               |         |  | 2004         |   |           | 2004       |  |   | 2004      |  |  | 2004         |          
|                                   |  |                    |         |  |              |   |           |            |  |   |           |  |  |              |          
|Inventory turns                    |  |                    | 7.9     |  |              |   | 7.1 turns |            |  |   | 7.6 turns |  |  |              | 7.5 turns |  |  |   | 7.4 turns | 
|Days sales outstanding (DSO)       |  |                    | 46 days |  |              |   | 50 days   |            |  |   | 47 days   |  |  |              | 47 days   |  |  |   | 49 days   | 
|Days payable outstanding (DPO)     |  |                    | 48 days |  |              |   | 50 days   |            |  |   | 47 days   |  |  |              | 47 days   |  |  |   | 48 days   | 
|Cash-to-cash cycle (C2C)           |  |                    | 44 days |  |              |   | 51 days   |            |  |   | 48 days   |  |  |              | 48 days   |  |  |   | 49 days   | 
|Capital expenditures (in millions) |  | $                  | 34.1    |  |              | $ | 32.0      |            |  | $ | 48.3      |  |  | $            | 32.8      |  |  | $ | 31.5      | 



Critical Accounting Policies






| |                    
| | -------------------
| | Inventory Valuation



26



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##### Table of Contents







| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |         
| | --------
| | Goodwill





| |                  
| | -----------------
| | Intangible Assets





| |                                           
| | ------------------------------------------
| | Restructuring and Related Impairment Costs



27



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##### Table of Contents







| |             
| | ------------
| | Income Taxes







| |                   
| | ------------------
| | Loss Contingencies



Results of Operations




28



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|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |     |     |   |       |     |      |   
|------------------------------------------------------------- | ----------------------------------- | ------------------------------- | ----- | ---------- | ---------------- | -- | ----- | ---- | ---------- | -- | ----- | --- | --- | - | ----- | --- | ---- | --
|                                                              |                                     | Three Months Ended              |       |            | Six Months Ended |   
|                                                              |                                     | February 28                     |       |            | February 28      |   
|                                                              |                                     |                                 |       |            |                  |   
|                                                              |                                     | 2005                            |       |            | 2004             |    |       | 2005 |            |    | 2004  |    
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|                                                              |                                     |                                 |       | (Restated) |                  |    |       |      | (Restated) |   
|Net sales                                                     |                                     |                                 | 100.0 | %          |                  |    | 100.0 | %    |            |    | 100.0 | %   |     |   | 100.0 | %  
|Cost of sales                                                 |                                     |                                 | 94.3  |            |                  |    | 95.6  |      |            |    | 94.2  |     |     |   | 95.4  |    
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|Gross profit                                                  |                                     |                                 | 5.7   |            |                  |    | 4.4   |      |            |    | 5.8   |     |     |   | 4.6   |    
|Operating expenses:                                           |                                     |                                 |       |            |                  |    |       |      |            |    |       |     |     |   |       |    
|                                                              | Selling, general and administrative |                                 |       | 3.8        |                  |    |       | 3.9  |            |    |       | 3.7 |     |   |       | 4.1 |     
|                                                              | Restructuring and impairment costs  |                                 |       | 1.5        |                  |    |       | 2.6  |            |    |       | 0.8 |     |   |       | 1.9 |     
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|                                                              |                                     | Operating income (loss)         |       |            | 0.4              |    |       |      | (2.1       | )  |       |     | 1.3 |   |       |     | (1.4 | ) 
|Interest income                                               |                                     |                                 | 0.3   |            |                  |    | 0.1   |      |            |    | 0.3   |     |     |   | 0.1   |    
|Interest expense                                              |                                     |                                 | (0.6  | )          |                  |    | (1.5  | )    |            |    | (0.6  | )   |     |   | (1.6  | )  
|Other income-net                                              |                                     |                                 |      |            |                  |    | 0.1   |      |            |    |      |     |     |   | 0.1   |    
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|Operating loss from continuing operations before income taxes |                                     |                                 | 0.1   |            |                  |    | (3.4  | )    |            |    | 1.0   |     |     |   | (2.8  | )  
|Income tax expense                                            |                                     |                                 | 0.2   |            |                  |    |      |      |            |    | 0.2   |     |     |   |      |    
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|                                                              |                                     | Loss from continuing operations |       |            | (0.1             | )% |       |      | (3.4       | )% |       |     | 0.8 | % |       |     | (2.8 | )%
|Discontinued operations:                                      |                                     |                                 |       |            |                  |    |       |      |            |    |       |     |     |   |       |    
|Income (loss) from discontinued operations                    |                                     |                                 |      |            |                  |    | 1.0   |      |            |    | 0.2   |     |     |   | (0.7  | )  
|Income tax expense                                            |                                     |                                 |      |            |                  |    | 0.2   |      |            |    |      |     |     |   | 0.1   |    
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    
|                                                              |                                     | Net loss                        |       |            | (0.1             | )% |       |      | (2.6       | )% |       |     | 1.0 | % |       |     | (3.6 | )%
|                                                              |                                     |                                 |       |            |                  |    |       |      |            |    |       |    

Net Sales  Continuing Operations




29



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|                    |  |              |       |          |             |  |       |      |          |  |       |   |  |  |       |  
|------------------- |  | ------------ | ----- | -------- | ----------- |  | ----- | ---- | -------- |  | ----- | - |  |  | ----- | -
|                    |  | Three Months |       |          | Six Months  | 
|                    |  | Ended        |       |          | Ended       | 
|                    |  | February 28  |       |          | February 28 | 
|                    |  |              |       |          |             | 
|                    |  | 2005         |       |          | 2004        |  |       | 2005 |          |  | 2004  |  
|                    |  |              |       |          |             |  |       |      |          |  |       |  
|                    |  |              |       | Restated |             |  |       |      | Restated | 
|Computing & Storage |  |              | 28.9  | %        |             |  | 30.9  | %    |          |  | 28.8  | % |  |  | 33.7  | %
|Consumer            |  |              | 15.8  | %        |             |  | 20.5  | %    |          |  | 16.6  | % |  |  | 18.3  | %
|Communications      |  |              | 19.2  | %        |             |  | 18.1  | %    |          |  | 19.9  | % |  |  | 18.0  | %
|Networking          |  |              | 26.0  | %        |             |  | 21.8  | %    |          |  | 24.5  | % |  |  | 21.4  | %
|Industrial          |  |              | 5.3   | %        |             |  | 4.7   | %    |          |  | 5.3   | % |  |  | 4.3   | %
|Automotive          |  |              | 3.0   | %        |             |  | 2.4   | %    |          |  | 3.1   | % |  |  | 2.6   | %
|Other               |  |              | 1.8   | %        |             |  | 1.6   | %    |          |  | 1.8   | % |  |  | 1.7   | %
|                    |  |              |       |          |             |  |       |      |          |  |       |  
|Total               |  |              | 100.0 | %        |             |  | 100.0 | %    |          |  | 100.0 | % |  |  | 100.0 | %
|                    |  |              |       |          |             |  |       |      |          |  |       |  

International Sales  Continuing Operations




Major Customers  Continuing Operations




|                |  |              |      |            |             |  |      |      |            |  |      |   |  |  |      |  
|--------------- |  | ------------ | ---- | ---------- | ----------- |  | ---- | ---- | ---------- |  | ---- | - |  |  | ---- | -
|                |  | Three Months |      |            | Six Months  | 
|                |  | Ended        |      |            | Ended       | 
|                |  | February 28  |      |            | February 28 | 
|                |  |              |      |            |             | 
|                |  | 2005         |      |            | 2004        |  |      | 2005 |            |  | 2004 |  
|                |  |              |      |            |             |  |      |      |            |  |      |  
|                |  |              |      | (Restated) |             |  |      |      | (Restated) | 
|Cisco Systems   |  |              | 17.0 | %          |             |  | 12.9 | %    |            |  | 15.6 | % |  |  | 12.0 | %
|Nortel Networks |  |              | 10.7 | %          |             |  | ***  |      |            |  | 10.5 | % |  |  | 10.3 | %
|NEC             |  |              | ***  |            |             |  | 10.2 | %    |            |  | ***  |   |  |  | ***  |  






|    |              
|--- | -------------
|*** | Less than 10%





Gross Profit  Continuing Operations




30



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##### Table of Contents









Selling, General and Administrative (SG&A)
Expenses  Continuing Operations




Restructuring and Impairment  Continuing
Operations






Interest Income  Continuing Operations




Interest Expense  Continuing Operations




Other Income  net  Continuing
Operations




31



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##### Table of Contents



Income Taxes  Continuing Operations












Liquidity and Capital Resources  Continuing
Operations




|                                                                                 |  |                  |       |            |      |  |        |  
|-------------------------------------------------------------------------------- |  | ---------------- | ----- | ---------- | ---- |  | ------ | -
|                                                                                 |  | Six Months Ended |      
|                                                                                 |  | February 28      |      
|                                                                                 |  |                  |      
|                                                                                 |  | 2005             |       |            | 2004 | 
|                                                                                 |  |                  |       |            |      | 
|                                                                                 |  |                  |       | (Restated) |     
|Net cash provided by (used in) operating activities of
    continuing operations |  |                  | 476.6 |            |      |  | (188.7 | )
|Net cash used in investing activities of continuing operations                   |  |                  | (16.7 | )          |      |  | (327.8 | )
|Net cash provided by financing activities of continuing
    operations           |  |                  | 54.0  |            |      |  | 442.5  |  



32



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1 2












33



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|                                                           |  |                        |         |  |            |   |       |           |  |   |       |  |  |      |       |  |      |   |      |      |  |   |            |  |  |   |      |  |  |   |       | 
|---------------------------------------------------------- |  | ---------------------- | ------- |  | ---------- | - | ----- | --------- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | ---- | ---- |  | - | ---------- |  |  | - | ---- |  |  | - | ----- | 
|                                                           |  | Payments Due by Period |        
|                                                           |  |                        |        
|                                                           |  | Total                  |         |  | Short-Term |   |       | Q306-Q406 |  |   | FY07  |  |  | FY08 |       |  | FY09 |   |      | FY10 |  |   | Thereafter | 
|                                                           |  |                        |         |  |            |   |       |           |  |   |       |  |  |      |       |  |      |   |      |      |  |   |            | 
|                                                           |  | (In millions)          |        
|Long term debt                                             |  |                        | 1,206.3 |  |            |   |      |           |  |   | 167.9 |  |  |      | 72.6  |  |      |   | 0.3  |      |  |   | 501.4      |  |  |   | 13.7 |  |  |   | 450.4 | 
|Operating lease                                            |  |                        | 155.2   |  |            |   | 41.1  |           |  |   | 17.3  |  |  |      | 22.1  |  |      |   | 17.2 |      |  |   | 12.8       |  |  |   | 11.4 |  |  |   | 33.3  | 
|Operating leases for restructured facilities and equipment |  |                        | 55.2    |  |            |   | 19.8  |           |  |   | 6.5   |  |  |      | 12.1  |  |      |   | 6.9  |      |  |   | 4.0        |  |  |   | 3.0  |  |  |   | 2.9   | 
|Other(1)                                                   |  |                        | 104.0   |  |            |   | 103.3 |           |  |   | 0.1   |  |  |      | 0.2   |  |      |   | 0.2  |      |  |   | 0.2        |  |  |   |     |  |  |   |      | 
|                                                           |  |                        |         |  |            |   |       |           |  |   |       |  |  |      |       |  |      |   |      |      |  |   |            | 
|                                                           |  | $                      | 1,520.7 |  |            | $ | 164.2 |           |  | $ | 191.8 |  |  | $    | 107.0 |  |      | $ | 24.6 |      |  | $ | 518.4      |  |  | $ | 28.1 |  |  | $ | 486.6 | 
|                                                           |  |                        |         |  |            |   |       |           |  |   |       |  |  |      |       |  |      |   |      |      |  |   |            | 






|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have guaranteed various purchase commitments for materials,
    supplies and services incurred during the normal course of
    business.



Off-Balance Sheet Arrangements and Contractual Obligations






34



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##### Table of Contents



Discontinued Operations






|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |       |   |   |       |       |  
|--------------------------------- | ------------------------------------------------------ | ------------------ | --- | ---------- | ---------------- | - | ----- | ---- | ---------- | - | ---- | ----- | - | - | ----- | ----- | -
|                                  |                                                        | Three Months Ended |     |            | Six Months Ended |  
|                                  |                                                        | February 28        |     |            | February 28      |  
|                                  |                                                        |                    |     |            |                  |  
|                                  |                                                        | 2005               |     |            | 2004             |   |       | 2005 |            |   | 2004 |      
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      
|                                  |                                                        |                    |     | (Restated) |                  |   |       |      | (Restated) |  
|Net sales                         |                                                        | $                  |    |            |                  | $ | 411.5 |      |            | $ | 15.2 |       |   | $ | 947.2 |      
|Cost of sales                     |                                                        |                    |    |            |                  |   | 345.3 |      |            |   | 14.1 |       |   |   | 815.9 |      
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      
|Gross profit                      |                                                        |                    |    |            |                  |   | 66.2  |      |            |   | 1.1  |       |   |   | 131.3 |      
|                                  | Operating expenses (income)  net                      |                    |     | (0.9       | )                |   |       | 42.4 |            |   |      | (11.3 | ) |   |       | 170.7 |  
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      
|                                  | Operating income (loss)                                |                    |     | 0.9        |                  |   |       | 23.8 |            |   |      | 12.4  |   |   |       | (39.4 | )
|Interest income  net             |                                                        |                    |    |            |                  |   | 0.6   |      |            |   |     |       |   |   | 0.8   |      
|Other income (expense)  net      |                                                        |                    |    |            |                  |   | 3.0   |      |            |   | 0.9  |       |   |   | (1.3  | )    
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      
|Income (loss) before income taxes |                                                        |                    | 0.9 |            |                  |   | 27.4  |      |            |   | 13.3 |       |   |   | (39.9 | )    
|Income tax expense                |                                                        |                    |    |            |                  |   | 4.4   |      |            |   | 1.7  |       |   |   | 4.7   |      
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      
|                                  | Income (loss) from discontinued operations, net of tax |                    | $   | 0.9        |                  |   | $     | 23.0 |            |   | $    | 11.6  |   |   | $     | (44.6 | )
|                                  |                                                        |                    |     |            |                  |   |       |      |            |   |      |      









35



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36



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RISK FACTORS




| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | Most of our net sales come from a small number of
    customers; if we lose any of these customers, our net sales
    could decline significantly.







| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Our customers may cancel their orders, change production
    quantities or locations, or delay production.





| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to sell excess or obsolete inventory to
    customers or third parties, which could have a material adverse
    impact on our consolidated financial condition.





37



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| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Our non-U.S. locations represent a significant
    portion of our net sales; we are exposed to risks associated
    with operating internationally.





| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | adverse movement of foreign currencies against the
    U.S. dollar in which our results are reported;           
|
| |  | import and export duties, and value added taxes;                                                                
|
| |  | import and export regulation changes that could erode our profit
    margins or restrict exports and/or imports;
|
| |  | potential restrictions on the transfer of funds;                                                                
|
| |  | government and license requirements governing the transfer of
    technology and products abroad;               
|
| |  | disruption of local labor supply and/or transportation services;                                                
|
| |  | inflexible employee contracts in the event of business downturns;                                               
|
| |  | the burden and cost of compliance with import and export
    regulations and foreign laws;                      
|
| |  | economic and political risks in emerging or developing
    economies; and                                       
|
| |  | risks of conflict and terrorism that could disrupt our or our
    customers and suppliers businesses.         



38



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| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are exposed to general economic conditions, which could
    have a material adverse impact on our business, operating
    results and consolidated financial condition.





| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | Possible fluctuation of operating results from quarter to
    quarter and factors out of our control could affect the market
    price of our securities.





| |   |                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | differences in the profitability of the types of manufacturing
    services we provide. For example, high velocity and low
    complexity printed circuit boards and systems assembly services
    have lower gross profit than low volume/complex printed circuit
    boards and systems assembly services;
|
| |  | our ability to maximize the hours of use of our equipment and
    facilities is dependent on the duration of the production run
    time for each job and customer;                                                                                                                                         
|
| |  | the amount of automation that we can use in the manufacturing
    process for cost reduction varies, depending upon the complexity
    of the product being made;                                                                                                                                           
|
| |  | our customers demand for our products and their ability to
    take delivery of our products and to make timely payments for
    delivered products;                                                                                                                                                       
|
| |  | our ability to optimize the ordering of inventory as to timing
    and amount to avoid holding inventory in excess of immediate
    production needs;                                                                                                                                                       
|
| |  | our ability to offer technologically advanced, cost-effective,
    quick response, manufacturing services;                                                                                                                                                                                                  
|
| |  | fluctuations in the availability and pricing of components;                                                                                                                                                                                                                                                 
|
| |  | timing of expenditures in anticipation of increased sales;                                                                                                                                                                                                                                                  
|
| |  | cyclicality in our target markets;                                                                                                                                                                                                                                                                          
|
| |  | fluctuations in our market share;                                                                                                                                                                                                                                                                           
|
| |  | expenses and disruptions associated with acquisitions and
    divestitures;                                                                                                                                                                                                                                 
|
| |  | announcements of operating results and business conditions by
    our customers;                                                                                                                                                                                                                            
|
| |  | announcements by our competitors relating to new customers or
    technological innovation or new services;                                                                                                                                                                                                 
|
| |  | economic developments in the electronics industry as a whole;                                                                                                                                                                                                                                               
|
| |  | credit rating and stock analyst downgrades;                                                                                                                                                                                                                                                                 
|
| |  | political and economic developments in countries in which we
    have operations; and                                                                                                                                                                                                                       
|
| |  | general market conditions.                                                                                                                                                                                                                                                                                  

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| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we incur more restructuring-related charges than
    currently anticipated, our consolidated financial condition and
    results of operations may suffer.





| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on limited or sole source suppliers for critical
    components. The inability to obtain sufficient components as
    required, and under favorable purchase terms, would cause harm
    to our business.





| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | We potentially bear the risk of price increases associated
    with shortages in electronics components.





| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Our net sales could decline if our competitors provide
    comparable manufacturing services and improved products at a
    lower cost.



40



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| |                                                            
| | -----------------------------------------------------------
| | We depend on the continuing trend of OEMs to
    outsource.





| |                                                                   
| | ------------------------------------------------------------------
| | Our strategic relationships with major customers create
    risks.





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





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to manage future acquisitions, and
    cost-effectively run our operations, our profitability could be
    adversely affected.



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##### Table of Contents







| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Notwithstanding our recent divestiture of certain
    businesses, we will remain subject to certain indemnification
    obligations for a period of time after completion of the
    divestitures.





| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With regards to our internal controls over financial
    reporting, we may not be able to adequately satisfy the
    requirements of Section 404 of the Sarbanes-Oxley Act of
    2002 ) in a timely manner or we may encounter difficulties in
    implementing any new or improved internal controls.





| |                                                                       
| | ----------------------------------------------------------------------
| | We are exposed to fluctuations in foreign currency
    exchange rates.









42



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##### Table of Contents







| |                                              
| | ---------------------------------------------
| | We are exposed to interest rate fluctuations.









| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Failure to attract and retain key personnel and skilled
    associates could hurt our operations.





| |                                                                              
| | -----------------------------------------------------------------------------
| | Failure to comply with environmental regulations could
    harm our business.





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##### Table of Contents









| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to adequately protect or enforce our
    intellectual property rights and could become involved in
    intellectual property disputes.







| |                                                                         
| | ------------------------------------------------------------------------
| | Our rating downgrades make it more expensive for us to
    borrow money.








|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



| |                                                  
| | -------------------------------------------------
| | Evaluation of disclosure controls and procedures.



44



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##### Table of Contents













| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Account Analysis & Reconciliation:
    Solectrons financial close checklist (FCC) has
    been expanded to address the various account analysis and
    reconciliation issues addressed in this Restatement. In
    particular, the areas of general ledger analyses and
    intercompany accounts have been added to the FCC beginning with
    the quarter ended February 28, 2005. In addition, regional
    and corporate financial management will provide additional
    levels of review concerning these issues.                                      
|
| |  | Foreign Exchange Translation: All locations with
    significant foreign currency exchange transactions have been
    identified and are now subject to compliance with the FCC noted
    above, effective February 28, 2005. Solectron currently
    anticipates that it will be eliminating a number of its legal
    entities, thereby reducing related financial and accounting
    complexity and simplifying the accounting treatment of these
    types of items.                                                                                         
|
| |  | Income Taxes: Previous issues relating to income
    tax account roll-forwards have been identified and corrected. In
    addition Solectrons management has migrated the tax
    account roll-forwards to an automated system (CorpTax), which
    will facilitate accurate and timely treatment of these items,
    effective February 28, 2005. In addition, Solectrons
    management has engaged a third party specialist to assist
    Solectron personnel conducting comprehensive and detailed
    reviews of Solectrons tax reporting and accounting.







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##### Table of Contents







| |                                                      
| | -----------------------------------------------------
| | Changes in internal control over financial reporting.






PART II. OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings



Lifshitz v. Cannon
et al.,


Abrams v. Solectron
Corporation et al.


46



---



##### Table of Contents








|        |         
|------- | --------
|Item 6. | Exhibits



|        |    |                     |  |                                                                                                                                                                               
|------- | -- | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No      |    | Exhibit Description
|        |    |                    
|        | 3  | .1*                 |  | Certificate of Incorporation of the Company, as amended                                                                                                                       
|        | 3  | .2**                |  | Amended and Restated Bylaws of the Company                                                                                                                                    
|        | 3  | .3***               |  | Certificate of Designation Rights, Preferences and Privileges of
    Series A Participating Preferred Stock of the Company                                                    
|        | 10 | .1                  |  | 2002 Stock Plan, as amended                                                                                                                                                   
|        | 10 | .2                  |  | Form of Indemnification Agreement for independent, non-employee
    directors                                                                                                 
|        | 10 | .3                  |  | Form of Employment Agreement for executive officers Craig
    London, Marty Neese, Kevin OConnor, Kiran Patel, and Dave
    Purvis                                           
|        | 10 | .4                  |  | Amendment Agreement entered into as of January 13, 2005,
    among the Company, the lending institutions party thereto, and
    Bank of America, N.A., as Administrative Agent
|        | 31 | .1                  |  | Certification of Chief Executive Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                    
|        | 31 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                     
|        | 32 | .1                  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                      
|        | 32 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                     






|  |                                                                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Incorporated by reference from Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 28, 2001, Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 25, 2000, and Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 26, 1999.



|   |                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------
|** | Incorporated by reference for Exhibit 3.2 filed with
    Solectrons Form 10-Q for the quarter ended
    November 28, 2003.



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|*** | Incorporated by reference from Exhibit 3.3 filed with
    Solectrons Annual Report on Form 10-K for the fiscal
    year ended August 31, 2001.

47



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##### Table of Contents



SOLECTRON CORPORATION





SIGNATURE






| |                      
| | ---------------------
| | SOLECTRON CORPORATION
| | (Registrant)         



| |    |                
| | -- | ---------------
| | By | /s/ Kiran Patel

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Kiran Patel                                      
| | Executive Vice President, Chief Financial Officer
| | (Principal Financial Officer)                    



| |    |                 
| | -- | ----------------
| | By | /s/ Warren Ligan

| |                                                   
| | --------------------------------------------------
| |                                                   
| | Warren Ligan                                      
| | Senior Vice President and Chief Accounting Officer
| | (Principal Accounting Officer)                    



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##### Table of Contents



INDEX TO EXHIBITS


|        |    |                     |  |                                                                                                                                                                               
|------- | -- | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|No      |    | Exhibit Description
|        |    |                    
|        | 3  | .1*                 |  | Certificate of Incorporation of the Company, as amended                                                                                                                       
|        | 3  | .2**                |  | Amended and Restated Bylaws of the Company                                                                                                                                    
|        | 3  | .3***               |  | Certificate of Designation Rights, Preferences and Privileges of
    Series A Participating Preferred Stock of the Company                                                    
|        | 10 | .1                  |  | 2002 Stock Plan, as amended                                                                                                                                                   
|        | 10 | .2                  |  | Form of Indemnification Agreement for independent, non-employee
    directors                                                                                                 
|        | 10 | .3                  |  | Form of Employment Agreement for executive officers Craig
    London, Marty Neese, Kevin OConnor, Kiran Patel, and Dave
    Purvis                                           
|        | 10 | .4                  |  | Amendment Agreement entered into as of January 13, 2005,
    among the Company, the lending institutions party thereto, and
    Bank of America, N.A., as Administrative Agent
|        | 31 | .1                  |  | Certification of Chief Executive Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                    
|        | 31 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                     
|        | 32 | .1                  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                      
|        | 32 | .2                  |  | Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                     






|  |                                                                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Incorporated by reference from Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 28, 2001, Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 25, 2000, and Exhibit 3.1 filed with
    Solectrons Form 10-Q for the quarter ended
    February 26, 1999.



|   |                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------
|** | Incorporated by reference for Exhibit 3.2 filed with
    Solectrons Form 10-Q for the quarter ended
    November 28, 2003.



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|*** | Incorporated by reference from Exhibit 3.3 filed with
    Solectrons Annual Report on Form 10-K for the fiscal
    year ended August 31, 2001.