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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(MARK ONE)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 28, 2003

OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | 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)

777 Gibraltar Drive
Milpitas, California 95035
(Address of principal executive offices including zip code)

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

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

YES  [x]  NO  [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)

YES  [x]  NO  [  ]

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

At December 30, 2003, 836,450,051 shares of Common Stock of the Registrant
were outstanding (including approximately 30 million shares of Solectron Global
Services Canada, Inc., which are exchangeable on a one-to-one basis for the
Registrants common stock).





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TABLE OF CONTENTS



|                              |                                                                                               |                                                         |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                  
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements   
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                    
|INDEX TO EXHIBITS            
|EXHIBIT 3.2                  
|EXHIBIT 10.1                 
|EXHIBIT 10.2                 
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 
|EXHIBIT 32.2                 



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SOLECTRON CORPORATION

INDEX TO FORM 10-Q

|                                                                                              |                                                                                                               |  |    |   | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |  | -- | - | 
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                               |  |    |  
|Item 1. Financial Statements (unaudited)                                                      |                                                                                                               |  |    |  
|                                                                                              | Condensed Consolidated Balance Sheets at November 30, 2003 and August 31, 2003                                |  |    | 3 | 
|                                                                                              | Condensed Consolidated Statements of Operations for the three months ended November 30, 2003 and 2002         |  |    | 4 | 
|                                                                                              | Condensed Consolidated Statements of Comprehensive Loss for the three months ended November 30, 2003 and 2002 |  |    | 5 | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2003 and 2002         |  |    | 6 | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                                          |  |    | 8 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                               |  | 18 |  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                               |  | 37 |  
|Item 4. Controls and Procedures                                                               |                                                                                                               |  | 37 |  
|PART II. OTHER INFORMATION                                                                    |                                                                                                               |  |    |  
|Item 1. Legal Proceedings                                                                     |                                                                                                               |  | 38 |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                               |  | 39 |  
|Signatures                                                                                    |                                                                                                               |  | 41 |  

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)

|                                                 |                                                   |                            |         |             |         |           |         |          |         | 
|------------------------------------------------ | ------------------------------------------------- | -------------------------- | ------- | ----------- | ------- | --------- | ------- | -------- | ------- | 
|                                                 |                                                   |                            |         | November 30 |         | August 31
|                                                 |                                                   |                            |         | 2003        |         | 2003     
|                                                 |                                                   |                            |         |             |         |          
|ASSETS                                           |                                                   |                            |         |             |         |           |         |         
|Current assets:                                  |                                                   |                            |         |             |         |           |         |         
|                                                 | Cash, cash equivalents and short-term investments |                            | $       | 1,371.8     |         |           | $       | 1,515.0  |        
|                                                 | Accounts receivable, net                          |                            |         | 1,591.3     |         |           |         | 1,389.1  |        
|                                                 | Inventories                                       |                            |         | 1,472.4     |         |           |         | 1,327.3  |        
|                                                 | Prepaid expenses and other current assets         |                            |         | 247.8       |         |           |         | 270.3    |        
|                                                 | Current assets of discontinued operations         |                            |         | 496.0       |         |           |         | 452.1    |        
|                                                 |                                                   |                            |         |             |         |           |         |         
|                                                 |                                                   | Total current assets       |         |             | 5,179.3 |           |         |          | 4,953.8 | 
|Property and equipment, net                      |                                                   |                            | 773.9   |             |         |           | 781.9   |         
|Goodwill                                         |                                                   |                            | 134.6   |             |         |           | 134.6   |         
|Other assets                                     |                                                   |                            | 416.7   |             |         |           | 396.3   |         
|Long-term assets of discontinued operations      |                                                   |                            | 193.2   |             |         |           | 262.9   |         
|                                                 |                                                   |                            |         |             |         |           |         |         
|Total assets                                     |                                                   | $                          | 6,697.7 |             |         | $         | 6,529.5 |         
|                                                 |                                                   |                            |         |             |         |           |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY             |                                                   |                            |         |             |         |           |         |         
|Current liabilities:                             |                                                   |                            |         |             |         |           |         |         
|                                                 | Short-term debt                                   |                            | $       | 959.5       |         |           | $       | 973.8    |        
|                                                 | Accounts payable                                  |                            |         | 1,500.7     |         |           |         | 1,266.6  |        
|                                                 | Accrued employee compensation                     |                            |         | 169.1       |         |           |         | 161.0    |        
|                                                 | Accrued expenses                                  |                            |         | 313.2       |         |           |         | 334.9    |        
|                                                 | Other current liabilities                         |                            |         | 164.0       |         |           |         | 164.7    |        
|Current liabilities of discontinued operations   |                                                   |                            | 332.4   |             |         |           | 333.9   |         
|                                                 |                                                   |                            |         |             |         |           |         |         
|                                                 |                                                   | Total current liabilities  |         |             | 3,438.9 |           |         |          | 3,234.9 | 
|Long-term debt                                   |                                                   |                            | 1,832.1 |             |         |           | 1,817.6 |         
|Other long-term liabilities                      |                                                   |                            | 33.2    |             |         |           | 32.4    |         
|Long-term liabilities of discontinued operations |                                                   |                            | 21.0    |             |         |           | 22.6    |         
|                                                 |                                                   |                            |         |             |         |           |         |         
|                                                 |                                                   | Total liabilities          |         | $           | 5,325.2 |           |         | $        | 5,107.5 | 
|                                                 |                                                   |                            |         |             |         |           |         |         
|Commitments and contingencies                    |                                                   |                            |         |             |         |           |         |         
|Stockholders equity:                            |                                                   |                            |         |             |         |           |         |         
|                                                 | Common stock                                      |                            |         | 0.8         |         |           |         | 0.8      |        
|                                                 | Additional paid-in capital                        |                            |         | 6,671.1     |         |           |         | 6,658.2  |        
|                                                 | Accumulated deficit                               |                            |         | (5,160.4    | )       |           |         | (5,040.6 | )      
|                                                 | Accumulated other comprehensive losses            |                            |         | (139.0      | )       |           |         | (196.4   | )      
|                                                 |                                                   |                            |         |             |         |           |         |         
|                                                 |                                                   | Total stockholders equity |         |             | 1,372.5 |           |         |          | 1,422.0 | 
|                                                 |                                                   |                            |         |             |         |           |         |         
|Total liabilities and stockholders equity       |                                                   | $                          | 6,697.7 |             |         | $         | 6,529.5 |         
|                                                 |                                                   |                            |         |             |         |           |         |         

See accompanying notes to condensed consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)

|                                                              |                                      |                                     |         |                                |       |      |         |       |       |  
|------------------------------------------------------------- | ------------------------------------ | ----------------------------------- | ------- | ------------------------------ | ----- | ---- | ------- | ----- | ----- | -
|                                                              |                                      |                                     |         | Three Months Ended November 30
|                                                              |                                      |                                     |         |                               
|                                                              |                                      |                                     |         | 2003                           |       | 2002
|                                                              |                                      |                                     |         |                                |       |     
|Net sales                                                     |                                      | $                                   | 2,696.8 |                                |       | $    | 2,668.1 |      
|Cost of sales                                                 |                                      |                                     | 2,569.3 |                                |       |      | 2,503.1 |      
|                                                              |                                      |                                     |         |                                |       |      |         |      
|Gross profit                                                  |                                      |                                     | 127.5   |                                |       |      | 165.0   |      
|Operating expenses:                                           |                                      |                                     |         |                                |       |      |         |      
|                                                              | Selling, general and administrative  |                                     |         | 114.7                          |       |      |         | 158.9 |      
|                                                              | Restructuring and impairment costs   |                                     |         | 27.0                           |       |      |         | 94.5  |      
|                                                              |                                      |                                     |         |                                |       |      |         |      
|                                                              |                                      | Operating loss                      |         |                                | (14.2 | )    |         |       | (88.4 | )
|Interest income                                               |                                      |                                     | 2.4     |                                |       |      | 5.2     |      
|Interest expense                                              |                                      |                                     | (43.9   | )                              |       |      | (55.3   | )    
|Other income - net                                            |                                      |                                     | 6.0     |                                |       |      | 36.2    |      
|                                                              |                                      |                                     |         |                                |       |      |         |      
|Operating loss from continuing operations before income
taxes |                                      |                                     | (49.7   | )                              |       |      | (102.3  | )    
|Income tax expense (benefit)                                  |                                      |                                     | 2.5     |                                |       |      | (35.0   | )    
|                                                              |                                      |                                     |         |                                |       |      |         |      
|                                                              |                                      | Net loss from continuing operations |         | $                              | (52.2 | )    |         | $     | (67.3 | )
|Discontinued operations:                                      |                                      |                                     |         |                                |       |      |         |      
|Income (loss) from discontinued operations                    |                                      |                                     | (67.3   | )                              |       |      | 2.5     |      
|Income tax expense                                            |                                      |                                     | 0.3     |                                |       |      | 6.1     |      
|                                                              |                                      |                                     |         |                                |       |      |         |      
|                                                              | Loss from discontinued operations    |                                     |         | (67.6                          | )     |      |         | (3.6  | )    
|                                                              | Net loss                             |                                     | $       | (119.8                         | )     |      | $       | (70.9 | )    
|                                                              |                                      |                                     |         |                                |       |      |         |      
|Basic and diluted net loss per share                          |                                      |                                     |         |                                |       |      |         |      
|                                                              | Continuing operations                |                                     | $       | (0.06                          | )     |      | $       | (0.08 | )    
|                                                              | Discontinued operations              |                                     |         | (0.08                          | )     |      |         | (0.01 | )    
|                                                              |                                      |                                     |         |                                |       |      |         |      
|                                                              | Basic and diluted net loss per share |                                     | $       | (0.14                          | )     |      | $       | (0.09 | )    
|                                                              |                                      |                                     |         |                                |       |      |         |      
|Shares used to compute basic and diluted net loss per
share   |                                      |                                     | 833.6   |                                |       |      | 825.5   |      

See accompanying notes to condensed consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(unaudited)

|                                   |                                          |   |                                |      |      |   |       |      |  
|---------------------------------- | ---------------------------------------- | - | ------------------------------ | ---- | ---- | - | ----- | ---- | -
|                                   |                                          |   | Three Months Ended November 30
|                                   |                                          |   |                               
|                                   |                                          |   | 2003                           |      | 2002
|                                   |                                          |   |                                |      |     
|Net loss                           |                                          | $ | (119.8                         | )    |      | $ | (70.9 | )   
|Other comprehensive income (loss): |                                          |   |                                |      |      |   |       |     
|                                   | Foreign currency translation adjustments |   |                                | 48.7 |      |   |       | 15.1 |  
|                                   | Unrealized loss on investments           |   |                                | 8.7  |      |   |       | (0.3 | )
|                                   |                                          |   |                                |      |      |   |       |     
|Comprehensive loss                 |                                          | $ | (62.4                          | )    |      | $ | (56.1 | )   
|                                   |                                          |   |                                |      |      |   |       |     

Accumulated unrealized foreign currency translation losses were $138.0 million
at November 30, 2003 and $186.7 million at August 31, 2003. Foreign currency
translation adjustments consist of adjustments to consolidate subsidiaries that
use the local currency as their functional currency and transaction gains and
losses related to intercompany dollar-denominated debt that is not expected to
be repaid in the foreseeable future.

See accompanying notes to condensed consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)

|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |      |       |       |       |  
|-------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------------------- | ----- | ------------------------------ | ------ | ---- | ----- | ----- | ----- | -
|                                                               |                                                                             |                                                                                             |                                                |       | Three Months Ended November 30
|                                                               |                                                                             |                                                                                             |                                                |       |                               
|                                                               |                                                                             |                                                                                             |                                                |       | 2003                           |        | 2002
|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |     
|Cash flows from operating activities of continuing operations: |                                                                             |                                                                                             |                                                |       |                                |        |      |      
|                                                               | Net loss from continuing operations                                         |                                                                                             | $                                              | (52.2 | )                              |        | $    | (67.3 | )    
|                                                               | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                             |                                                |       |                                |        |      |       |      
|                                                               |                                                                             | Depreciation and amortization                                                               |                                                |       | 59.3                           |        |      |       | 67.7  |      
|                                                               |                                                                             | Amortization of debt issuance costs and accretion of discount on notes
payable              |                                                |       | 16.1                           |        |      |       | 24.6  |      
|                                                               |                                                                             | Gain on retirement of debt                                                                  |                                                |       |                               |        |      |       | (34.2 | )    
|                                                               |                                                                             | Change in the carrying value of property and equipment, goodwill and
other
long-term assets |                                                |       | 0.8                            |        |      |       | 13.3  |      
|                                                               |                                                                             | Changes in operating assets and liabilities:                                                |                                                |       |                                |        |      |       |       |      
|                                                               |                                                                             |                                                                                             | Accounts receivable, net                       |       |                                | (202.2 | )    |       |       | (76.5 | )
|                                                               |                                                                             |                                                                                             | Inventories                                    |       |                                | (145.1 | )    |       |       | 68.2  |  
|                                                               |                                                                             |                                                                                             | Prepaid expenses and other current assets      |       |                                | 17.9   |      |       |       | 2.0   |  
|                                                               |                                                                             |                                                                                             | Accounts payable                               |       |                                | 234.1  |      |       |       | (17.1 | )
|                                                               |                                                                             |                                                                                             | Accrued expenses and other current liabilities |       |                                | (43.0  | )    |       |       | (39.8 | )
|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |      |      
|                                                               |                                                                             | Net cash used in operating activities of continuing operations                              |                                                |       | (114.3                         | )      |      |       | (59.1 | )    
|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |      |      
|Cash flows from investing activities of continuing operations: |                                                                             |                                                                                             |                                                |       |                                |        |      |      
|                                                               | Change in restricted cash and cash equivalents                              |                                                                                             |                                                | 27.0  |                                |        |      | 87.0  |      
|                                                               | Sales and maturities of short-term investments                              |                                                                                             |                                                | 11.2  |                                |        |      | 159.0 |      
|                                                               | Purchases of short-term investments                                         |                                                                                             |                                                |      |                                |        |      | (31.9 | )    
|                                                               | Acquisition of manufacturing assets and locations                           |                                                                                             |                                                |      |                                |        |      | (30.4 | )    
|                                                               | Capital expenditures                                                        |                                                                                             |                                                | (37.0 | )                              |        |      | (32.7 | )    
|                                                               | Proceeds from sale of property and equipment                                |                                                                                             |                                                | 25.6  |                                |        |      | 12.0  |      
|                                                               | Advances (to) from discontinued operations                                  |                                                                                             |                                                | (12.1 | )                              |        |      | 28.5  |      
|                                                               | Supply agreement and other                                                  |                                                                                             |                                                |      |                                |        |      | 47.1  |      
|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |      |      
|                                                               |                                                                             | Net cash provided by investing activities of continuing operations                          |                                                |       | 14.7                           |        |      |       | 238.6 |      
|                                                               |                                                                             |                                                                                             |                                                |       |                                |        |      |      

See accompanying notes to condensed consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)

|                                                                           |                                                                         |                                                                |         |                                |       |      |         |        |        |  
|-------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------------------- | ------- | ------------------------------ | ----- | ---- | ------- | ------ | ------ | -
|                                                                           |                                                                         |                                                                |         | Three Months Ended November 30
|                                                                           |                                                                         |                                                                |         |                               
|                                                                           |                                                                         |                                                                |         | 2003                           |       | 2002
|                                                                           |                                                                         |                                                                |         |                                |       |     
|Cash flows from financing activities of continuing operations:             |                                                                         |                                                                |         |                                |       |      |         |       
|                                                                           | Repurchase of LYONS                                                     |                                                                |         |                               |       |      |         | (182.0 | )     
|                                                                           | Net repayment of bank lines of credit and other debt arrangements       |                                                                |         | (24.4                          | )     |      |         | (81.7  | )     
|                                                                           | Net proceeds from stock issued under option and employee purchase plans |                                                                |         | 12.6                           |       |      |         |       |       
|                                                                           | Other                                                                   |                                                                |         |                               |       |      |         | 29.9   |       
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|                                                                           |                                                                         | Net cash used in financing activities of continuing operations |         |                                | (11.8 | )    |         |        | (233.8 | )
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|Effect of exchange rate changes on
cash and cash equivalents               |                                                                         |                                                                | 6.3     |                                |       |      | 13.5    |       
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|Net decrease in cash and cash equivalents                                  |                                                                         |                                                                | (105.1  | )                              |       |      | (40.8   | )     
|Cash and cash equivalents at beginning of period - continuing operations   |                                                                         |                                                                | 1,421.9 |                                |       |      | 1,740.0 |       
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|Cash and cash equivalents at end of period - continuing operations         |                                                                         | $                                                              | 1,316.8 |                                |       | $    | 1,699.2 |       
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|Cash and cash equivalents at beginning of period - discontinued operations |                                                                         | $                                                              | 36.4    |                                |       | $    | 41.9    |       
|Cash provided by (used in) discontinued operations                         |                                                                         |                                                                | 11.1    |                                |       |      | (3.4    | )     
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       
|Cash and cash equivalents at end of period - discontinued operations       |                                                                         | $                                                              | 47.5    |                                |       | $    | 38.5    |       
|                                                                           |                                                                         |                                                                |         |                                |       |      |         |       

See accompanying notes to condensed consolidated financial statements.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE 1  Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

The accompanying financial data as of November 30, 2003 and for the three
months ended November 30, 2003 and 2002 has been prepared by Solectron, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations. The August 31, 2003 condensed
consolidated balance sheet was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. However, Solectron believes that the disclosures are adequate to
make the information presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in Solectrons Annual
Report on Form 10-K for the fiscal year ended August 31, 2003.

In the opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present a fair statement of financial position as of
November 30, 2003, the results of operations, comprehensive loss and cash flows
for the three months ended November 30, 2003 and 2002 have been made. The
results of operations for the three months ended November 30, 2003 are not
necessarily indicative of the operating results for the full fiscal year or any
future periods.

Solectrons first quarters of fiscal 2004 and 2003 ended on November 28, 2003
and November 29, 2002, respectively. Solectrons fiscal year ended on August
29, 2003. For clarity of presentation, Solectron has indicated its first
quarters as having ended on November 30 and its fiscal year as having ended on
August 31.

Reclassification: Beginning in the first quarter of fiscal 2004, Solectron
classified research and development costs differently than in prior periods.
Solectron now classifies research and development costs as selling, general and
administrative expense. Previously, research and development costs was a
separate line item on the condensed consolidated statements of operations.
Solectron has revised prior period financial information to conform the expense
classifications to the current presentation. Selling, general and
administrative expense now includes $4.8 million and $6.7 million of research
and development expenses for the first quarters of fiscal 2004 and 2003,
respectively. This reclassification did not impact operating loss, net loss or
net loss per share for the periods presented.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities,
which requires variable interest entities, previously referred to as
special-purpose entities or off-balance sheet structures, to be consolidated by
a company if that company is subject to a majority of the risk of loss from the
entitys activities or is entitled to receive a majority of the entitys
returns or both. The consolidation provisions of FIN No. 46 apply immediately
to variable interest entities created after January 31, 2003 and to existing
entities in the first fiscal year or interim period beginning after December
15, 2003. Certain disclosure provisions apply in financial statements issued
after January 31, 2003. Solectron does not expect this interpretation to have a
material impact on its synthetic lease arrangements, as variable interest
entities were not used in the transactions.

NOTE 2  Stock-Based Compensation

Employee Stock Plans: As it is permitted by Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, amended
by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure, Solectron accounts for its employee stock plans, which generally
consist of fixed stock option plans and an employee stock purchase plan, using
the intrinsic value method under APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. In general, where the
exercise price of options granted under these plans is equal to the market
price of the underlying common stock on the grant date, no stock-based employee
compensation expense is recognized. In certain situations, under these plans,
options to purchase shares of common stock may be granted at less than fair
market value, which results in compensation

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expense equal to the difference between the market value on the date of grant
and the purchase price. This expense is recognized over the vesting period of
the options and included in operations. However, such expense amount has not
been significant. The table below sets out the pro forma amounts of net loss
and net loss per share that would have resulted for all fiscal periods
presented, if Solectron accounted for its employee stock plans under the fair
value recognition provisions of SFAS No. 123.

|                    |                                                                                                          |  |                                      |        |      |  |   |        |  
|------------------- | -------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | ---- |  | - | ------ | -
|                    |                                                                                                          |  | Three Months Ended November 30      
|                    |                                                                                                          |  |                                     
|                    |                                                                                                          |  | 2003                                 |        | 2002
|                    |                                                                                                          |  |                                      |        |     
|                    |                                                                                                          |  | (in millions, except per share data)
|                    | Net loss, as reported                                                                                    |  | $                                    | (119.8 | )    |  | $ | (70.9  | )
|                    | Stock-based employee compensation
expense determined under fair
value
method, net of related tax effects |  |                                      | (16.4  | )    |  |   | (31.2  | )
|                    |                                                                                                          |  |                                      |        |      |  |   |       
|                    | Pro forma net loss                                                                                       |  | $                                    | (136.2 | )    |  | $ | (102.1 | )
|                    |                                                                                                          |  |                                      |        |      |  |   |       
|Net loss per share: |                                                                                                          |  |                                      |        |      |  |   |       
|                    | Basic and diluted - as reported                                                                          |  | $                                    | (0.14  | )    |  | $ | (0.09  | )
|                    | Basic and diluted - pro forma                                                                            |  | $                                    | (0.16  | )    |  | $ | (0.12  | )

The stock-based employee compensation expense determined under the fair value
method, net of related tax effects, included $2.9 million and $4.4 million of
expense relating to discontinued operations during the three months ended
November 30, 2003 and November 30, 2002, respectively.

For purposes of computing pro forma net loss, the fair value of each option
grant and Employee Stock Purchase Plan purchase right is estimated on the date
of grant using the Black-Scholes option pricing model. The assumptions used to
value the option grants and purchase rights are stated below.

|                                      |  |                                |      |                |  |   |      |  
|------------------------------------- |  | ------------------------------ | ---- | -------------- |  | - | ---- | -
|                                      |  | Three Months Ended November 30
|                                      |  |                               
|                                      |  | 2003                           |      | 2002          
|                                      |  |                                |      |               
|Expected life of options              |  | 3 years                        |      | 3 years       
|Expected life of purchase right       |  | 6 months                       |      | 6 months      
|Volatility                            |  |                                | 78   | %              |  |   | 80   | %
|Risk-free interest rate               |  | 1.02% to 2.45%                 |      | 1.30% to 2.32%
|Dividend yield                        |  | zero                           |      | zero          
|Weighted average fair value of grants |  | $                              | 5.13 |                |  | $ | 3.58 |  

During fiscal 2003, Solectron provided a restricted stock award to certain
eligible executives. During the three months ended November 30, 2003 and 2002,
compensation expense related to the restricted stock awards amounted to
approximately $0.6 million and $0, respectively.

NOTE 3  Inventories

Inventories related to continuing operations as of November 30, 2003 and August
31, 2003, consisted of (in millions):

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|                |  |             |         |           |  |   |         | 
|--------------- |  | ----------- | ------- | --------- |  | - | ------- | 
|                |  | November 30 |         | August 31
|                |  | 2003        |         | 2003     
|                |  |             |         |          
|Raw materials   |  | $           | 964.1   |           |  | $ | 906.4   | 
|Work-in-process |  |             | 251.0   |           |  |   | 220.4   | 
|Finished goods  |  |             | 257.3   |           |  |   | 200.5   | 
|                |  |             |         |           |  |   |         | 
|Total           |  | $           | 1,472.4 |           |  | $ | 1,327.3 | 
|                |  |             |         |           |  |   |         | 

NOTE 4  Commitments and Contingencies

Lease Obligations

During fiscal 2002, Solectron restructured its synthetic lease agreements
relating to four manufacturing sites. The synthetic leases have expiration
dates in 2007. At the end of the lease terms, Solectron has an option, subject
to certain conditions, to purchase or to cause a third party to purchase the
facilities subject to the synthetic leases for the Termination Value, which
approximates the lessors original cost, or may market the property to a third
party at a different price. Solectron is entitled to any proceeds from a sale
of the properties to third parties in excess of the Termination Value and
liable to the lessor for any shortfall. In connection with its restructuring of
these synthetic leases, Solectron provided loans to the lessor equaling
approximately 85% of its Termination Value. These loans are repayable solely
from the sale of the properties to third parties in the future, are
subordinated to the amounts payable to the lessor at the end of the synthetic
leases, and may be credited against the Termination Value payable if Solectron
purchases the properties. The approximate Termination Values and loan amounts
were $102 million and $86 million, respectively, as of November 30, 2003.

In addition, cash collateral of $16 million is pledged for the difference
between the Termination Values and the loan amounts. Each lease agreement
contains various affirmative and financial covenants. A default under a lease,
including violation of these covenants, may accelerate the termination date of
the arrangement. Prior to the end of the first quarter of fiscal 2004, we
amended the minimum cash interest coverage ratio covenant for each of the lease
agreements. As a result of these amendments, Solectron was in compliance with
all applicable covenants as of November 30, 2003. Monthly lease payments are
generally based on the Termination Value and 30-day LIBOR index (1.17% as of
November 30, 2003) plus an interest-rate margin, which may vary depending upon
Solectrons Moodys Investors Services and Standard and Poors ratings and are
allocated between the lessor and Solectron based on the proportion of the loan
amount to the total Termination Value for each synthetic lease.

Solectron accounts for these synthetic lease arrangements as operating leases
in accordance with SFAS No. 13, Accounting for Leases, as amended.
Solectrons loans to the lessor and cash collateral were included in other
long-term assets and cash, cash equivalents and short-term investments,
respectively, in the condensed consolidated balance sheets.

If Solectron should determine that it is probable that the expected fair value
of the property at the end of the lease term will be less than the Termination
Value, any expected loss will be recognized on a straight-line basis over the
remaining lease term.

Future minimum payments for operating lease obligations related to continuing
operations, including the synthetic leases discussed above, are $54 million
(for the remaining nine months of fiscal 2004), $28 million, $17 million, $15
million, and $14 million for each of the years in the four-year period ending
August 31, 2008 and an aggregate of $51 million for all years subsequent to
August 31, 2008 combined.

Legal Proceedings

Solectron is from time to time involved in various litigation and legal
matters, including those described below. By describing the particular matters
set forth below, Solectron does not intend to imply that the Company or its
legal advisors have concluded or believe that the outcome of any of those
particular matters is or is not likely to have a material adverse impact upon
Solectrons business or consolidated financial condition.

On September 19, 2002, one of Solectrons former employees filed a complaint
against Solectron in the Superior Court of the State of California, Santa Clara
County, asserting two claims for wrongful termination. The case is encaptioned
Ronald Sorisho v. Solectron

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Corporation et al., Case No. CV811243. In the
complaint, plaintiff alleges that he was wrongfully terminated by Solectron in
supposed retaliation for his alleged efforts to ensure that Solectron timely
recognized a charge for excess, obsolete and slow moving inventory in the
Technology Solutions business unit. Plaintiffs complaint seeks compensatory
damages in an amount not less than $2.5 million as well as punitive damages.
Solectron believes Mr. Sorishos claims of wrongful termination are without
merit and intends to vigorously defend itself. Solectron filed a motion with
the court challenging the sufficiency of Mr. Sorishos complaint, and in
response to this motion, Mr. Sorisho filed an amended complaint in which he
dropped one of his two original wrongful termination claims, but added a new
claim for purported defamation based upon statements attributed to Solectron in
a news article regarding Mr. Sorishos allegations against Solectron. Solectron
tendered the defense of the defamation claim to its insurance carrier and the
insurance carrier has assumed the defense of the defamation claim, subject to a
reservation of rights. Solectron is also continuing to vigorously defend
against Mr. Sorishos wrongful termination claim.

On March 6, 2003, a putative shareholder class action lawsuit was filed against
Solectron and certain of its officers in the United States District Court for
the Northern District of California alleging claims under Section 10(b) and
20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder. The case is entitled Abrams v. Solectron Corporation et al., Case
No. C-03-0986 CRB. The complaint alleged that the defendants issued false and
misleading statements in certain press releases and SEC filings issued between
September 17, 2001 and September 26, 2002. In particular, plaintiff alleged
that the defendants failed to disclose and to properly account for excess and
obsolete inventory in the Technology Solutions business unit during the
relevant time period. Additional complaints making similar allegations were
subsequently filed in the same court, and pursuant to an order entered June 2,
2003, the Court appointed lead counsel and plaintiffs to represent the putative
class in a single consolidated action. The Consolidated Amended Complaint,
filed September 8, 2003, alleges an expanded class period of June 18, 2001
through September 26, 2002, and purports to add a claim for violation of
Section 11 of the Securities Act of 1933 on behalf of a putative class of
former shareholders of C-MAC Industries, Inc., who acquired Solectron stock
pursuant to the October 19, 2001 Registration Statement filed in connection
with Solectrons acquisition of C-MAC Industries, Inc. In addition, while the
initial complaints focused on alleged inventory issues at the Technology
Solutions business unit, the Consolidated Amended Complaint adds allegations of
inadequate disclosure and failure to properly account for excess and obsolete
inventory at the Companys other business units. The complaint seeks an
unspecified amount of damages on behalf of the putative class. Solectron
intends to vigorously defend against the consolidated lawsuit. There can be no
assurance, however, that the outcome of the lawsuit will be favorable to
Solectron or will not have a material adverse effect on Solectrons business,
financial condition and results of operations. In addition, Solectron may be
forced to incur substantial litigation expenses in defending this litigation.

On March 21, 2003, Solectron, all the current members of its Board of
Directors, and two former officers, were named as defendants in a shareholder
derivative lawsuit entitled Lifshitz v. Cannon et al.,Case No. CV815693, filed
in the Santa Clara County, California Superior Court. The plaintiff alleged
that he should be permitted to pursue litigation, purportedly for the benefit
of Solectron, against the individual director and officer defendants for
alleged mismanagement and waste of corporate assets during the period from May
2001 to the present, purported breaches of fiduciary duty, constructive
fraud, abuse of control, and alleged violations of the California
Corporations Code by certain of the individual defendants who sold some of
their Solectron stockholdings during the period from September 2001 through
September 2002. On May 19, 2003, Solectron and the individual defendants moved
to dismiss the Lifshitzcomplaint. In the meantime, two substantively identical
derivative lawsuits, entitled Schactner v. Cannon, et al., Case No. CV817112,
and Nims v. Cannon, et al.,Case No. CV817158, were filed in the same Court on
May 14 and May 15, respectively. Counsel for the plaintiffs in all three suits
subsequently advised the Court that they would be filing a consolidated amended
complaint, and accordingly, defendants motion to dismiss was taken off
calendar pending the filing of the consolidated amended complaint combining the
three lawsuits. On June 27, 2003, the plaintiffs served their consolidated
amended complaint now alleging that since January of 1999 all of the current
members of Solectrons Board of Directors, as well as four former officers and
directors, purportedly breached their fiduciary duties and participated in or
permitted constructive fraud, unjust enrichment, and alleged violations of
the California Corporations Code. The consolidated complaint alleged an
unspecified amount of compensatory and punitive damages, and sought the
relinquishment of all profits realized by those individual defendants who sold
Solectron stock during the relevant period, together with statutory penalties
under California Corporations Code section 25402 which plaintiff alleged to be
applicable to those sales of Solectron stock. Solectron moved to dismiss the
Consolidated Amended Complaint because Solectron does not believe plaintiffs
have adequately alleged a basis for plaintiffs to appropriate for themselves
the duties of Solectrons Board of Directors under applicable Delaware law, and
believes that the consolidated complaint contains various factual errors and
legal deficiencies. On October 7, 2003, the California Superior Court granted
Solectrons motion to dismiss, but granted the plaintiffs an opportunity to try
to cure the deficiencies in their Consolidated Amended Complaint through a
further amended complaint. Solectron anticipates that the plaintiffs will file
a further amended complaint within the next 60 days, after which Solectron
expects to seek dismissal of that complaint because Solectron does not believe
plaintiffs can show a sufficient basis to allow them to appropriate for
themselves the duties of Solectrons Board of Directors under applicable
Delaware law. Solectron may be forced to incur substantial litigation expenses
in defending this litigation.

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NOTE 5  Segment Information and Geographic Information

SFAS No. 131 Disclosure about Segments of an Enterprise and Related
Information established standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to stockholders. It
also established standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in assessing
performance.

Following a comprehensive review of its business strategy,
Solectron realigned from a business unit structure to a more integrated
organizational structure. Previously, the Company had the following four
reportable operating segments: Global Operations, Technology Solutions, Global
Services and MicroSystems. The Company is now organized into one operating
unit, Worldwide Operations, to deliver integrated solutions to its customers.
Worldwide Operations consists of worldwide manufacturing and post-manufacturing
services and is supported by the following functions  Worldwide Design and
Engineering Services; Worldwide Sales and Account Management; Worldwide
Strategy and Marketing; Finance; and Human Resources. Consistent with
Solectrons business strategy, Solectron is in the process of divesting a
majority of the assets in the previous Global Services, Technology Solutions
and MicroSystems operating segments. These assets being divested are reported
as discontinued operations.

Solectrons chief operating decision maker is the Chief Executive Officer. As a
result of Solectrons organizational realignment, the Chief Executive Officer
evaluates financial information on a company-wide basis for purposes of making
decisions and assessing financial performance. Accordingly, Solectron revised
its presentation of operating and reportable segments from four to one to
reflect how the Company now manages its business.

Geographic information for continuing operations as of and for the periods
presented is as follows (in millions):

|                              |  |             |         |           |  |   |         | 
|----------------------------- |  | ----------- | ------- | --------- |  | - | ------- | 
|                              |  | November 30 |         | August 31
|                              |  | 2003        |         | 2003     
|                              |  |             |         |          
|Long-term assets:             |  |             |         |           |  |   |         | 
|United States                 |  | $           | 459.9   |           |  | $ | 428.7   | 
|Other North and Latin America |  |             | 253.8   |           |  |   | 265.3   | 
|Europe                        |  |             | 206.6   |           |  |   | 219.8   | 
|Asia Pacific                  |  |             | 404.9   |           |  |   | 399.0   | 
|                              |  |             |         |           |  |   |         | 
|                              |  | $           | 1,325.2 |           |  | $ | 1,312.8 | 
|                              |  |             |         |           |  |   |         | 

|                              |  |                                |         |      |  |   |         | 
|----------------------------- |  | ------------------------------ | ------- | ---- |  | - | ------- | 
|                              |  | Three Months Ended November 30
|                              |  |                               
|                              |  | 2003                           |         | 2002
|                              |  |                                |         |     
|Geographic net sales:         |  |                                |         |      |  |   |         | 
|United States                 |  | $                              | 763.4   |      |  | $ | 869.8   | 
|Other North and Latin America |  |                                | 382.5   |      |  |   | 388.8   | 
|Europe                        |  |                                | 435.3   |      |  |   | 456.3   | 
|Malaysia                      |  |                                | 395.1   |      |  |   | 321.6   | 
|China                         |  |                                | 368.9   |      |  |   | 273.6   | 
|Other Asia Pacific            |  |                                | 351.6   |      |  |   | 358.0   | 
|                              |  |                                |         |      |  |   |         | 
|                              |  | $                              | 2,696.8 |      |  | $ | 2,668.1 | 
|                              |  |                                |         |      |  |   |         | 

Certain customers accounted for 10% or more of our net sales. The following
table includes these customers and the percentage of net sales attributed to
them:

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|                |  |                                |      |      |  |  |      |  
|--------------- |  | ------------------------------ | ---- | ---- |  |  | ---- | -
|                |  | Three Months Ended November 30
|                |  |                               
|                |  | 2003                           |      | 2002
|                |  |                                |      |     
|Nortel Networks |  |                                | 10.6 | %    |  |  | 12.8 | %
|Cisco Systems   |  |                                | 11.4 | %    |  |  | 10.4 | %

NOTE 6  Long-Term Debt

Liquid Yield Option Notes (LYONs)

In November 2000, Solectron issued 2.9 million LYONs at an issue price of
$524.78 per note, which resulted in gross proceeds to Solectron of
approximately $1.5 billion. These notes are unsecured and unsubordinated
indebtedness of Solectron. Solectron will pay no interest prior to maturity.
Each note has a yield of 3.25% with a maturity value of $1,000 on November 20,
2020. Each note is convertible to common shares at any time by the holder at a
conversion rate of 11.7862 shares per note. Holders may require Solectron to
purchase all or a portion of their notes on May 20, 2004, November 20, 2005 and
2010, at prices of $587.46, $616.57 and $724.42 per note, respectively, payable
in cash or common stock at the option of Solectron. Also, each holder may
require Solectron to repurchase all or a portion of such holders notes if a
change in control of Solectron occurs on or before May 20, 2004. Solectron, at
its option, may redeem all or a portion of the notes at any time on or after
May 20, 2004. Solectron is amortizing the issuance cost through May 20, 2004.
During the first quarter of fiscal 2004, Solectron did not repurchase any
portion of these notes. The accreted value of these notes was $939 million as
of November 30, 2003 and Solectron may be obligated to purchase these notes on
May 20, 2004 for $953 million in cash or common stock or a combination of both.
Accordingly, the carrying amount of $939 million was classified as short-term
debt as of November 30, 2003.

Adjustable Conversion-Rate Equity Securities (ACES)

During the second quarter of fiscal 2002, Solectron closed its public offering
of $1.1 billion, or 44 million units, of 7.25% ACES. Each ACES unit has a
stated amount of $25.00 and consists of (a) a contract requiring the holder to
purchase, for $25.00, a number of shares of Solectron common stock to be
determined on November 15, 2004, based on the average trading price of
Solectrons common stock at that time and certain specified settlement rates
ranging from 2.1597 shares of Solectrons common stock per purchase contract to
2.5484 shares of Solectrons common stock per purchase contract (subject to
certain anti-dilution adjustments); and (b) a $25 principal amount of 7.25%
subordinated debenture due 2006. Solectron received gross proceeds of
approximately $1.1 billion from the transaction. Solectron allocated $46.9
million to the fair value of the purchase contracts and recorded this amount in
additional paid-in capital. The debentures initially were held and pledged for
Solectrons benefit to secure the holders obligation to purchase Solectrons
common stock on November 15, 2004. On or about August 15, 2004, the ACES
debentures will be remarketed and, if the remarketing is successful, the
interest rate will be reset at then current rates as described in the
indentures and the proceeds from the remarketing will be used to satisfy the
holders obligation to purchase Solectrons common stock in November 2004. If
the debentures are not successfully remarketed, the interest rate will not be
reset and Solectron may use the pledged debentures to satisfy the holders
obligation to purchase Solectrons common stock in November 2004. As of
November 30, 2003, the entire carrying amount of these ACES of $1.1 billion was
classified as long-term debt.

9.625% Senior Notes

On February 8, 2002, Solectron issued an aggregate principal amount of $500
million of 9.625% senior notes due 2009. Solectron is required to pay interest
on the notes in cash on February 15 and August 15 of each year. The indenture
governing the terms of these notes contains restrictive provisions, which limit
Solectron and its subsidiaries from making distributions on their capital
stock, investments, incurring debt, issuing preferred stock and engaging in
assets sales, among other provisions.

7.375% Senior Notes

In March 1996, Solectron issued $150 million aggregate principal amount of
senior notes. These notes are in denominations and have a maturity value of
$1,000 each and are due on March 1, 2006. Interest is payable semiannually at a
rate of 7.375% per annum. The notes may not be redeemed prior to maturity.

Solectron obtained amendments related to the minimum cash interest coverage
ratio covenants applicable to various debt and lease agreements and as a result
of such waivers, Solectron was in compliance with all applicable covenants as
of November 30, 2003.

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NOTE 7  Derivative Instruments

Solectron enters into foreign exchange forward contracts intended to reduce the
short-term impact of foreign currency fluctuations on foreign currency
receivables, investments and payables. The gains and losses on the foreign
exchange forward contracts are intended to largely offset the transaction gains
and losses on the foreign currency receivables, investments, and payables
recognized in earnings. Solectron does not enter into foreign exchange forward
contracts for speculative purposes. Solectrons foreign exchange forward
contracts related to current assets and liabilities are generally three months
or less in original maturity.

As of November 30, 2003, Solectron had outstanding foreign exchange forward
contracts with a total notional amount of approximately $655 million related to
continuing operations.

Solectron also uses interest rate swaps to hedge its mix of short-term and
long-term interest rate exposures resulting from Solectrons debt obligations.
During the third quarter of fiscal 2002, Solectron entered into interest rate
swap transactions under which it pays variable rates and receives fixed rates.
The interest rate swaps have a total notional amount of $1 billion. $500
million relates to the Companys $1.1 billion ACES and expires on November 15,
2004 and $500 million relates to the 9.625% $500 million senior notes expiring
on February 15, 2009. Under each of these swap transactions, Solectron pays an
interest rate equal to the 3-month LIBOR rate plus a fixed spread. In exchange,
Solectron receives fixed interest rates of 7.25% on the first $500 million and
9.625% on the second $500 million. These swap transactions effectively replace
the fixed interest rates that the Company must pay on a portion of its ACES and
all its 9.625% senior notes with variable interest rates. These swaps are
designated as fair value hedges under SFAS No. 133.

The fair values of the derivatives referred to above were not significant.

For all derivative transactions, Solectron is exposed to counterparty credit
risk to the extent that the counter parties may not be able to meet their
obligations towards Solectron. To manage the counterparty risk, Solectron
limits its derivative transactions to those with major financial institutions.
Solectron does not expect to experience any material adverse financial
consequences as a result of default by Solectrons counterparties.

NOTE 8  Intangible Assets

The Companys intangible assets, which are classified in other assets in the
condensed consolidated balance sheets, are categorized into three main classes:
supply agreements, intellectual property agreements and other. The intellectual
property agreements resulted from Solectrons acquisitions of various IBM
facilities. The other intangible assets consist of miscellaneous acquisition
related costs from Solectrons various asset purchases.

The following tables summarize the gross amounts and accumulated amortization
for each main class as of November 30, 2003 and August 31, 2003 (in millions):

November 30, 2003:

|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ------ | --------------------- |  | ----- | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  | Supply     |        | Intellectual Property |  |       |       |       |  |   |       |  
|                         |  | Agreements |        | Agreements            |  | Other |       | Total
|                         |  |            |        |                       |  |       |       |      
|Gross amount             |  | $          | 228.1  |                       |  | $     | 108.5 |       |  | $ | 126.7 |   |  | $ | 463.3  |  
|Accumulated amortization |  |            | (85.8  | )                     |  |       | (48.5 | )     |  |   | (73.2 | ) |  |   | (207.5 | )
|Prior year impairment    |  |            | (140.4 | )                     |  |       |      |       |  |   | (31.3 | ) |  |   | (171.7 | )
|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  
|Carrying value           |  | $          | 1.9    |                       |  | $     | 60.0  |       |  | $ | 22.2  |   |  | $ | 84.1   |  
|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  

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August 31, 2003:

|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  
|------------------------ |  | ---------- | ------ | --------------------- |  | ----- | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                         |  | Supply     |        | Intellectual Property |  |       |       |       |  |   |       |  
|                         |  | Agreements |        | Agreements            |  | Other |       | Total
|                         |  |            |        |                       |  |       |       |      
|Gross amount             |  | $          | 228.1  |                       |  | $     | 108.5 |       |  | $ | 126.1 |   |  | $ | 462.7  |  
|Accumulated amortization |  |            | (85.7  | )                     |  |       | (45.6 | )     |  |   | (71.5 | ) |  |   | (202.8 | )
|Impairment               |  |            | (140.4 | )                     |  |       |      |       |  |   | (31.3 | ) |  |   | (171.7 | )
|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  
|Carrying value           |  | $          | 2.0    |                       |  | $     | 62.9  |       |  | $ | 23.3  |   |  | $ | 88.2   |  
|                         |  |            |        |                       |  |       |       |       |  |   |       |   |  |   |        |  

The Company expects that its annual amortization expense, reportable as
required by SFAS No. 142 for these intangibles, would be approximately $19.0
million for each of the next three fiscal years and $15.9 million for each of
the two subsequent fiscal years. Amortization expense for the first quarter of
fiscal 2004 was $4.7 million.

NOTE 9  Discontinued Operations

During the fourth quarter of fiscal 2003 and first quarter of fiscal 2004, as a
result of a full review of its portfolio of businesses, Solectron committed to
a plan to divest a number of business operations that are outside its core
competencies. These businesses are Dy 4 Systems Inc., Kavlico Corporation,
C-MAC Microtechnology Holdings Inc., Smart Modular Technologies Inc., Stream
International Inc., our 65% interest in US Robotics Corporation, and one
additional company that will be disclosed when it is further along in the
divestiture process. The divestitures of these companies will allow Solectron
to offer a more focused and integrated set of supply chain solutions for its
customers.

These businesses each qualify as a discontinued operation component of
Solectron under SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Solectron has reported the results of operations and
financial position of these businesses in discontinued operations within the
statements of operations and the balance sheets for all periods presented. In
addition, Solectron has excluded the cash flow activity from these businesses
from the statements of cash flows for all periods presented. After these
businesses are sold, Solectron will not have any significant continuing
involvement in these operations.

The results from discontinued operations were as follows (in millions):

|                                  |                    |                                               |       |                                |       |      |       |      |      |  
|--------------------------------- | ------------------ | --------------------------------------------- | ----- | ------------------------------ | ----- | ---- | ----- | ---- | ---- | -
|                                  |                    |                                               |       | Three Months Ended November 30
|                                  |                    |                                               |       |                               
|                                  |                    |                                               |       | 2003                           |       | 2002
|                                  |                    |                                               |       |                                |       |     
|Net sales                         |                    | $                                             | 535.7 |                                |       | $    | 468.5 |     
|Cost of sales                     |                    |                                               | 470.6 |                                |       |      | 396.9 |     
|                                  |                    |                                               |       |                                |       |      |       |     
|Gross profit                      |                    |                                               | 65.1  |                                |       |      | 71.6  |     
|                                  | Operating expenses |                                               |       | 128.3                          |       |      |       | 72.8 |     
|                                  |                    |                                               |       |                                |       |      |       |     
|                                  |                    | Operating loss                                |       |                                | (63.2 | )    |       |      | (1.2 | )
|Interest income                   |                    |                                               | 0.7   |                                |       |      | 5.0   |     
|Interest expense                  |                    |                                               | (0.5  | )                              |       |      | (1.2  | )   
|Other expense - net               |                    |                                               | (4.3  | )                              |       |      | (0.1  | )   
|                                  |                    |                                               |       |                                |       |      |       |     
|Income (loss) before income taxes |                    |                                               | (67.3 | )                              |       |      | 2.5   |     
|Income tax expense                |                    |                                               | 0.3   |                                |       |      | 6.1   |     
|                                  |                    |                                               |       |                                |       |      |       |     
|                                  |                    | Loss from discontinued operations, net of tax |       | $                              | (67.6 | )    |       | $    | (3.6 | )
|                                  |                    |                                               |       |                                |       |      |       |     

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The current and non-current assets and liabilities of discontinued operations
as of November 30, 2003 and August 31, 2003, were as follows (in millions):

|                                                  |                                                          |   |             |       |           |   |       |       | 
|------------------------------------------------- | -------------------------------------------------------- | - | ----------- | ----- | --------- | - | ----- | ----- | 
|                                                  |                                                          |   | November 30 |       | August 31
|                                                  |                                                          |   | 2003        |       | 2003     
|                                                  |                                                          |   |             |       |          
|Cash, cash equivalents and short-term investments |                                                          | $ | 47.5        |       |           | $ | 36.4  |      
|Accounts receivable, net                          |                                                          |   | 295.1       |       |           |   | 276.2 |      
|Inventories                                       |                                                          |   | 137.5       |       |           |   | 121.4 |      
|Prepaid expenses and other current assets         |                                                          |   | 15.9        |       |           |   | 18.1  |      
|                                                  |                                                          |   |             |       |           |   |       |      
|                                                  | Total current assets of discontinued operations          |   | $           | 496.0 |           |   | $     | 452.1 | 
|                                                  |                                                          |   |             |       |           |   |       |      
|Property and equipment, net                       |                                                          | $ | 94.8        |       |           | $ | 126.5 |      
|Goodwill                                          |                                                          |   | 74.0        |       |           |   | 112.2 |      
|Other assets                                      |                                                          |   | 24.4        |       |           |   | 24.2  |      
|                                                  |                                                          |   |             |       |           |   |       |      
|                                                  | Total non-current assets of discontinued operations      |   | $           | 193.2 |           |   | $     | 262.9 | 
|                                                  |                                                          |   |             |       |           |   |       |      
|Short-term debt                                   |                                                          | $ | 5.7         |       |           | $ | 6.1   |      
|Accounts payable                                  |                                                          |   | 181.2       |       |           |   | 168.1 |      
|Accrued employee compensation                     |                                                          |   | 30.2        |       |           |   | 41.4  |      
|Accrued expenses                                  |                                                          |   | 44.0        |       |           |   | 55.2  |      
|Other current liabilities                         |                                                          |   | 71.3        |       |           |   | 63.1  |      
|                                                  |                                                          |   |             |       |           |   |       |      
|                                                  | Total current liabilities of discontinued operations     |   | $           | 332.4 |           |   | $     | 333.9 | 
|                                                  |                                                          |   |             |       |           |   |       |      
|                                                  | Total non-current liabilities of discontinued operations |   | $           | 21.0  |           |   | $     | 22.6  | 
|                                                  |                                                          |   |             |       |           |   |       |      

NOTE 10  Restructuring and Impairment

Beginning in the second quarter of fiscal 2001, Solectron recorded
restructuring and impairment costs as it rationalized operations in light of
customer demand declines and the economic downturn. The measures, which
included reducing the workforce, consolidating facilities and changing the
strategic focus of a number of sites, was largely intended to align Solectrons
capacity and infrastructure to anticipated customer demand as well as to
rationalize its footprint worldwide. The restructuring and impairment costs
include employee severance and benefit costs, costs related to leased
facilities that will be abandoned and subleased, owned facilities no longer
used by us which will be disposed of, costs related to leased equipment that
has been or will be abandoned, and impairment of owned equipment that will be
disposed of. For owned facilities and equipment, the impairment loss recognized
was based on the fair value less costs to sell, with fair value estimated based
on existing market prices for similar assets. Severance and benefit costs and
other costs associated with restructuring activities initiated prior to January
1, 2003 were recorded in compliance with Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity. Severance and benefit costs
associated with restructuring activities initiated on or after January 1, 2003
are recorded in accordance with SFAS No. 112, Employers Accounting for
Postemployment Benefits, as Solectron concluded that it had a substantive
severance plan. For leased facilities that will be abandoned and subleased, the
estimated lease loss accrued represents future lease payments subsequent to
abandonment less any estimated sublease income. In order to estimate future
sublease income, Solectron works with an independent broker to estimate the
length of time until it can sublease a facility and the amount of rent it can
expect to receive. Estimates of expected sublease income could change based on
factors that affect Solectrons ability to sublease those facilities such as
general economic conditions and the real estate market, among others.

The following summarizes Solectrons restructuring charges:

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Three months ended November 30, 2003 and 2002

During the three months ended
November 30, 2003, Solectron recorded restructuring and
impairment costs of $27 million relating to continuing operations. The
following table summarizes restructuring charges included in the accompanying
condensed consolidated statements of operations (in millions):

|                                       |  |                                |      |      |  |        |      |  |  |          |  | 
|-------------------------------------- |  | ------------------------------ | ---- | ---- |  | ------ | ---- |  |  | -------- |  | 
|                                       |  | Three Months Ended November 30 |      |      |  |       
|                                       |  |                                |      |      |  |       
|                                       |  | 2003                           |      | 2002 |  | Nature
|                                       |  |                                |      |      |  |       
|Impairment of equipment and facilities |  | $                              | (2.5 | )    |  | $      | 12.1 |  |  | non-cash
|Severance and benefit costs            |  |                                | 10.1 |      |  |        | 61.2 |  |  | cash    
|Loss on leased equipment               |  |                                | 0.3  |      |  |        | 2.9  |  |  | cash    
|Loss on leased facilities              |  |                                | 4.5  |      |  |        | 6.5  |  |  | cash    
|Other exit costs                       |  |                                | 14.6 |      |  |        | 11.8 |  |  | cash    
|                                       |  |                                |      |      |  |        |      |  |  |          |  | 
|Total                                  |  | $                              | 27.0 |      |  | $      | 94.5 |  |  |          |  | 
|                                       |  |                                |      |      |  |        |      |  |  |          |  | 

During the three months ended November 30, 2003 certain equipment and
facilities were reclassified from held for sale to held-and-used.

The employee severance and benefit costs included in the restructuring charges
recorded in the first quarter of fiscal 2004 related to approximately 850
full-time positions worldwide, all of which have been eliminated. Approximately
68% of the positions were in the Americas region, 24% were in Europe and 8%
were in Asia/Pacific.

Fiscal 2003 and 2002

The following table summarizes restructuring charges relating to continuing
operations recorded in fiscal 2003 and 2002 (in millions):

|                                              |  |                       |       |      |  |        |       |  |  |          |  | 
|--------------------------------------------- |  | --------------------- | ----- | ---- |  | ------ | ----- |  |  | -------- |  | 
|                                              |  | Years ended August 31 |       |      |  |       
|                                              |  |                       |       |      |  |       
|                                              |  | 2003                  |       | 2002 |  | Nature
|                                              |  |                       |       |      |  |       
|Impairment of equipment                       |  | $                     | 67.4  |      |  | $      | 127.8 |  |  | non-cash
|Impairment of facilities                      |  |                       | 80.0  |      |  |        | 81.0  |  |  | non-cash
|Impairment of other long-lived assets         |  |                       | 26.9  |      |  |        | 162.5 |  |  | non-cash
|                                              |  |                       |       |      |  |        |       |  |  |          |  | 
|Impairment of equipment, facilities and other |  | $                     | 174.3 |      |  | $      | 371.3 |  |  |          |  | 
|Severance and benefit costs                   |  | $                     | 234.0 |      |  | $      | 119.8 |  |  | cash    
|Loss on leased equipment                      |  |                       | 2.3   |      |  |        | 23.8  |  |  | cash    
|Loss on leased facilities                     |  |                       | 24.3  |      |  |        | 80.3  |  |  | cash    
|Other exit costs                              |  |                       | 34.7  |      |  |        | 20.7  |  |  | cash    
|                                              |  |                       |       |      |  |        |       |  |  |          |  | 
|Total                                         |  | $                     | 469.6 |      |  | $      | 615.9 |  |  |          |  | 
|                                              |  |                       |       |      |  |        |       |  |  |          |  | 

The employee severance and benefit costs included in the restructuring charges
recorded in fiscal 2003 relate to the elimination of approximately 9,500
full-time positions worldwide and all such positions have now been eliminated
under this plan. Approximately 57% of the positions eliminated were in the
Americas region, 31% were in Europe and 12% were in Asia/Pacific. Facilities
and equipment subject to restructuring were primarily located in the Americas
and Europe. For leased facilities that will be abandoned and subleased, the
lease costs represent future lease payments subsequent to abandonment less
estimated sublease income. For owned facilities and equipment, the impairment
loss recognized was based on the fair value less costs to sell, with fair value
based on estimates of existing market prices for similar assets.

The employee severance and benefit costs included in the restructuring charges
recorded in fiscal 2002 related to approximately 15,000 full-time positions
worldwide, all of which have been eliminated. Approximately 69% of the
positions were in the Americas region, 20% were in Europe and 11% were in
Asia/Pacific. The employment reductions primarily affected employees in

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manufacturing and back office support functions. Facilities and equipment
subject to restructuring were primarily located in the Americas and Europe.

The following table summarizes the restructuring accrual balance for continuing
operations as of November 30, 2003 (in millions):

|                                        |  |              |       |                |  |                |      |            |  |       |      |   |  |   |       |   |  |   |       |  
|--------------------------------------- |  | ------------ | ----- | -------------- |  | -------------- | ---- | ---------- |  | ----- | ---- | - |  | - | ----- | - |  | - | ----- | -
|                                        |  | Severance    |       | Lease Payments |  | Lease Payments |      | Other Exit |  |       |      |  
|                                        |  | and Benefits |       | on Facilities  |  | on Equipment   |      | Costs      |  | Total
|                                        |  |              |       |                |  |                |      |            |  |      
|Balance of accrual at August 31, 2003   |  | $            | 73.1  |                |  | $              | 32.5 |            |  | $     | 29.3 |   |  | $ | 10.5  |   |  | $ | 145.4 |  
|Q1FY2004 Provison                       |  |              | 10.1  |                |  |                | 4.5  |            |  |       | 0.3  |   |  |   | 14.6  |   |  |   | 29.5  |  
|Q1FY2004 Cash payments                  |  |              | (23.5 | )              |  |                | (1.3 | )          |  |       | (8.8 | ) |  |   | (16.9 | ) |  |   | (50.5 | )
|                                        |  |              |       |                |  |                |      |            |  |       |      |   |  |   |       |   |  |   |       |  
|Balance of accrual at November 30, 2003 |  | $            | 59.7  |                |  | $              | 35.7 |            |  | $     | 20.8 |   |  | $ | 8.2   |   |  | $ | 124.4 |  
|                                        |  |              |       |                |  |                |      |            |  |       |      |   |  |   |       |   |  |   |       |  

NOTE 11  Loss Per Share Calculation

The calculation of loss per share for the three months ended November 30, 2003
did not include the weighted average impact of the 19.3 million common shares
issuable upon conversion of Solectrons LYONs, 112.1 million common shares
issuable upon conversion of the Companys ACES and 7.0 million options to
purchase common stock, as the effect would have been antidilutive.

The calculation of loss per share for the three months ended November 30, 2002
did not include the weighted average impact of the 38.5 million common shares
issuable upon conversion of Solectrons LYONs, 112.1 million common shares
issuable upon conversion of the Companys ACES and 69.5 million options to
purchase common stock, as the effect would have been antidilutive.

NOTE 12  Income Taxes

SFAS No. 109, Accounting for Income Taxes, requires that a valuation
allowance be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized. A review of all available
positive and negative evidence needs to be considered, including a companys
performance, the market environment in which the company operates, the
utilization of past tax credits, length of carryback and carryforward periods,
and existing contracts or sales backlog that will result in future profits,
among other factors. It further states that forming a conclusion that a
valuation allowance is not needed is difficult when there is negative evidence
such as cumulative losses in recent years in the jurisdictions to which the
deferred tax assets relate. Therefore, cumulative losses weigh heavily in the
overall assessment. As a result of the review undertaken after the end of the
third quarter of the preceding fiscal year, Solectron concluded that it was
appropriate to establish a full valuation allowance for most of the net
deferred tax assets arising from its operations in the jurisdictions to which
the deferred tax assets relate. The total valuation allowance is approximately $1.4 billion
as of November 30, 2003. In addition,
Solectron expects to continue to provide a full valuation allowance on future
tax benefits until it can demonstrate a sustained level of profitability that
establishes its ability to utilize the assets in the jurisdictions to which the
assets relate. Solectron incurred net tax expenses in certain countries in
which it has profitable operations during the period ended November 30, 2003.




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 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;                        
| | - |  | -----------------------------------------------------------
|
| |  |  | future prospects and growth;                               
|
| |  |  | the capabilities and capacities of our business operations;

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| |  |  | any financial or other guidance;                                                                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our shift from business units to a functionally aligned organizational structure;                                                                     
|
| |  |  | our business strategy and our ability to execute on such strategy;                                                                                    
|
| |  |  | our ability to successfully divest certain operations;                                                                                                
|
| |  |  | the anticipated financial impact of recent and future acquisitions and divestitures;                                                                  
|
| |  |  | the timing and amount of our planned restructuring activities and related estimated cost savings;                                                     
|
| |  |  | the expansion of our low-cost manufacturing capacity and redirection of our manufacturing operations to lower-cost facilities;                        
|
| |  |  | our ability to weather the current economic downturn with a sustainable
long-term cost structure to support improved operating efficiency and
margins;
|
| |  |  | the anticipated production levels and revenues of manufacturing and supply agreements with customers;                                                 
|
| |  |  | the potential impact of, and our strategies for addressing, our current litigation and environmental liability exposure; 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. 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, 8-K, 10-Q, S-3, S-4 and S-8. 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.

Critical Accounting Policies

Management is required to make judgments, assumptions and estimates that affect
the amounts reported when we prepare financial statements and related
disclosures in conformity with generally accepted accounting principles in the
United States. Note 1, Summary of Significant Accounting Policies, to the
consolidated financial statements in our Annual Report on Form 10-K for the
fiscal year ended August 31, 2003 describes the significant accounting policies
and methods used in the preparation of our consolidated financial statements.
Estimates are used for, but not limited to, our accounting for contingencies,
allowance for doubtful accounts, inventory valuation, goodwill and other
intangible asset impairments, restructuring costs, and income taxes. Actual
results could differ from these estimates. The following critical accounting
policies are impacted significantly by judgments, assumptions and estimates
used in the preparation of our consolidated financial statements.

Revenue Recognition

Our net sales from continuing operations are primarily derived from product
manufacturing including, but not limited to, PCBA, sub-system and system
assembly. We also offer services consisting of repair and warranty services.
Revenue from manufacturing services and product sales is generally recognized
upon shipment of the manufactured product. Revenue from other services is
recognized as the services are performed.

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Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the
ordinary course of business. We consider the likelihood and our ability to
reasonably estimate the amount of loss in determining the necessity for, and
amount of any loss contingencies. Estimated loss contingencies are accrued when
it is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. We regularly evaluate information available to us to
determine whether any such accruals should be adjusted. Such revisions in the
estimates of the potential loss contingencies could have a material impact in
our results of operations and financial position.

Inventory Valuation

Our inventories are stated at the lower of weighted average cost or market. Our
industry is characterized by rapid technological change, short-term customer
commitments and rapid changes in demand, as well as any other lower of cost or
market considerations. We make provisions for estimated excess and obsolete
inventory based on our regular reviews of inventory quantities on hand and the
latest forecasts of product demand and production requirements from our
customers. Our provisions for excess and obsolete inventory are also impacted
by our contractual arrangements with our customers including our ability or
inability to re-sell such inventory to them. If actual market conditions or our
customers product demands are less favorable than those projected or if our
customers are unwilling or unable to comply with any contractual arrangements
related to excess and obsolete inventory, additional provisions may be
required.

Allowance for Doubtful Accounts

We evaluate the collectability of our accounts receivable based on a
combination of factors. Where we are aware of circumstances that may impair a
specific customers ability to meet its financial obligations to us, we record
a specific allowance against amounts due to us and thereby reduce the net
receivable to the amount we reasonably believe is likely to be collected. For
all other customers, we recognize allowances for doubtful accounts based on the
length of time the receivables are outstanding, industry and geographic
concentrations, the current business environment and our historical experience.
If the financial condition of our customers deteriorates or if economic
conditions worsen, additional allowances may be required.

Goodwill

We perform a goodwill impairment test annually during the fourth quarter of our
fiscal year and more frequently if an event or circumstance indicates that an
impairment loss has occurred. Such events or circumstances may include
significant adverse changes in the general business climate or a prolonged
depressed market capitalization, among others. The tests are performed by
determining the fair values of our reporting units using a discounted future
cash flow model and comparing those fair values to the carrying values of the
reporting units, including goodwill. If the fair value of a reporting unit is
less than its carrying value, we then allocate the fair value of the unit to
all the assets and liabilities of that unit (including any unrecognized
intangible assets) as if the reporting units fair value was the purchase price
to acquire the reporting unit. The excess of the fair value of the reporting
unit over the amounts assigned to its assets and liabilities is the implied
fair value of the goodwill. If the carrying amount of the reporting units
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The process of evaluating the
potential impairment of goodwill is subjective and requires judgment at many
points during the test including future revenue forecasts, discount rates and
various reporting unit allocations.

Intangible Assets

Our intangible assets consist primarily of intellectual property and other
intangible assets obtained from asset acquisitions. Intangible assets are
evaluated for impairment whenever events or changes in circumstances indicate
the carrying value of an asset may not be recoverable. Such an asset is
considered impaired if the carrying amount of the asset grouping including the
intangible asset exceeds the sum of the undiscounted cash flows expected to
result from the use and ultimate disposition of the assets. If such assets are
considered to be impaired, the impairment to be recognized is the amount by
which the carrying amount of the assets exceeds fair value determined using a
discounted cash flow model. While our cash flow assumptions and estimated
useful lives are consistent with our business plans, there is significant
judgment involved in determining these cash flows.

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Restructuring and Related Impairment Costs

We have recorded restructuring and impairment costs as we continue to
rationalize our operations in light of customer demand declines and the recent
economic downturn. These restructuring and impairment charges include employee
severance and benefit costs, costs related to leased facilities that will be
abandoned and subleased, owned facilities no longer used by us which will be
disposed of, costs related to leased equipment that has been or will be
abandoned, and impairment of owned equipment that will be disposed of. For
owned facilities and equipment, the impairment loss recognized was based on the
fair value less costs to sell, with fair value estimated based on existing
market prices for similar assets. Severance and benefit costs and other costs
associated with restructuring activities initiated prior to January 1, 2003
were recorded in compliance with Emerging Issues Task Force (EITF) Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity. Severance and benefit costs associated with
restructuring activities initiated on or after January 1, 2003 are recorded in
accordance with SFAS No. 112, Employers Accounting for Postemployment
Benefits, as we concluded that we had a substantive severance plan. For leased
facilities that will be abandoned and subleased, the estimated lease loss
accrued represents future lease payments subsequent to abandonment less any
estimated sublease income. In order to estimate future sublease income, we work
with an independent broker to estimate the length of time until we can sublease
a facility and the amount of rent we can expect to receive. Our estimates of
expected sublease income could change based on factors that affect our ability
to sublease those facilities such as general economic conditions and the real
estate market, among others.

Income Taxes

We currently have significant deferred tax assets in certain jurisdictions
resulting from tax credit carryforwards, net operating losses and other
deductible temporary differences, which will reduce taxable income in such
jurisdictions in future periods. In previous reporting periods, we had provided
valuation allowances for future tax benefits resulting from foreign net
operating loss carryforwards and for certain other U.S. and foreign deductible
temporary differences where we believed future realizability was in doubt. We
had believed it was more likely than not that the remaining net deferred tax
assets would be realized principally based upon forecasted taxable income,
generally within the twenty-year net operating loss carryforward periods. SFAS
No. 109 requires a valuation allowance be established when it is more likely
than not that all or a portion of deferred tax assets will not be realized,
and further provides that it is difficult to conclude that a valuation
allowance is not needed when there is negative evidence in the form of
cumulative losses in recent years. Therefore, cumulative losses weigh heavily
in the overall assessment. We identified several significant developments,
which we considered in determining the need for nearly a full valuation
allowance recorded in the third quarter of fiscal 2003, including the
continuing market conditions, the absence of material growth in quarterly
revenue levels, the necessity for further cost reduction actions to attain
profitability, and the resulting inability to accurately predict sustainable
profit levels in the countries in which the deferred tax assets arose
sufficient to establish, to the requisite level of certainty, that we would be
able to utilize those deferred tax assets. As a result of our assessment, we
increased our total valuation allowance on deferred tax assets arising from
continuing operations to approximately $1.4 billion at November 30, 2003. We
expect to record a full valuation allowance on future tax benefits until we
reach a sustained level of profitability in the countries in which deferred tax
assets arise.

Results of Operations

The electronics industry is subject to rapid technological change, product
obsolescence and price competition. These and other factors affecting the
electronics industry, or any of Solectrons major customers in particular could
materially harm Solectrons results of operations. See Risk Factors for
additional factors relating to possible fluctuations of our operating results.

The following table summarizes certain items in the condensed consolidated
statements of operations as a percentage of net sales. The financial
information and the discussion below should be read in conjunction with the
accompanying condensed consolidated financial statements and notes thereto. The
discussion following the table is provided separately for continuing and
discontinued operations. For all periods presented, our condensed consolidated
statements of operations exclude the results from certain operations we plan to
divest which have been classified as discontinued operations. Information
related to the discontinued operations results is provided separately;
following the continuing operations discussion below.

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|                                                              |                                     |                                     |       |                                |      |      |       |     |      |   
|------------------------------------------------------------- | ----------------------------------- | ----------------------------------- | ----- | ------------------------------ | ---- | ---- | ----- | --- | ---- | --
|                                                              |                                     |                                     |       | Three Months Ended November 30
|                                                              |                                     |                                     |       |                               
|                                                              |                                     |                                     |       | 2003                           |      | 2002
|                                                              |                                     |                                     |       |                                |      |     
|Net sales                                                     |                                     |                                     | 100.0 | %                              |      |      | 100.0 | %  
|Cost of sales                                                 |                                     |                                     | 95.3  |                                |      |      | 93.8  |    
|                                                              |                                     |                                     |       |                                |      |      |       |    
|Gross profit                                                  |                                     |                                     | 4.7   |                                |      |      | 6.2   |    
|Operating expenses:                                           |                                     |                                     |       |                                |      |      |       |    
|                                                              | Selling, general and administrative |                                     |       | 4.2                            |      |      |       | 6.0 |     
|                                                              | Restructuring and impairment costs  |                                     |       | 1.0                            |      |      |       | 3.5 |     
|                                                              |                                     |                                     |       |                                |      |      |       |    
|                                                              |                                     | Operating loss                      |       |                                | (0.5 | )    |       |     | (3.3 | ) 
|Interest income                                               |                                     |                                     | 0.1   |                                |      |      | 0.2   |    
|Interest expense                                              |                                     |                                     | (1.6  | )                              |      |      | (2.1  | )  
|Other income-net                                              |                                     |                                     | 0.2   |                                |      |      | 1.4   |    
|                                                              |                                     |                                     |       |                                |      |      |       |    
|Operating loss from continuing operations
before income taxes |                                     |                                     | (1.8  | )                              |      |      | (3.8  | )  
|Income tax expense (benefit)                                  |                                     |                                     | 0.1   |                                |      |      | (1.3  | )  
|                                                              |                                     |                                     |       |                                |      |      |       |    
|                                                              |                                     | Net loss from continuing operations |       |                                | (1.9 | )%   |       |     | (2.5 | )%
|Discontinued operations:                                      |                                     |                                     |       |                                |      |      |       |    
|Income (loss) from discontinued operations                    |                                     |                                     | (2.5  | )                              |      |      | 0.1   |    
|Income tax expense                                            |                                     |                                     |      |                                |      |      | 0.3   |    
|                                                              |                                     |                                     |       |                                |      |      |       |    
|                                                              |                                     | Net loss                            |       |                                | (4.4 | )%   |       |     | (2.7 | )%
|                                                              |                                     |                                     |       |                                |      |      |       |    

Net Sales  Continuing Operations

Net sales increased to $2.70 billion for the three months ended November 30,
2003 from $2.67 billion in the corresponding period of fiscal 2003. The
increase was driven by the Consumer and PC/Computing markets generating
approximately $69 million and $48 million, respectively, more in revenue during
the first quarter of fiscal 2004. This growth can be attributed to the ramp-up
of 3G cell phone business and set-top boxes in the Consumer market, along with
strong demand for low-end/mid-range servers and personal computers in the
PC/Computing market. The increase in these markets was offset by decreases in
the networking and communications markets due to the continuing weakness in the
communications infrastructure industries.

International Sales  Continuing Operations

In the three months ended November 30, 2003, our international locations
contributed approximately 72% of net sales compared to approximately 67% for
the corresponding period of fiscal 2003. Net sales from our international
sites, as a percentage of consolidated net sales, have grown primarily in the
Asia/Pacific region where we have invested to take advantage of lower cost of
operations. Our international operations are subject to various risks of doing
business abroad. See Risk Factors for additional factors relating to possible
fluctuations of our international operating results. While these dynamics have
not materially harmed our results of operations, we cannot ensure that there
will not be such an impact in the future.

Major Customers  Continuing Operations

Certain customers accounted for 10% or more of our net sales. The following
table includes these customers and the percentage of net sales attributed to
them:

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|                |  |                                |      |      |  |  |      |  
|--------------- |  | ------------------------------ | ---- | ---- |  |  | ---- | -
|                |  | Three Months Ended November 30
|                |  |                               
|                |  | 2003                           |      | 2002
|                |  |                                |      |     
|Nortel Networks |  |                                | 10.6 | %    |  |  | 12.8 | %
|Cisco Systems   |  |                                | 11.4 | %    |  |  | 10.4 | %

Our top ten customers accounted for approximately 58% of net sales for the
three months ended November 30, 2003 compared to approximately 60% in the
corresponding period of fiscal 2003. We are dependent upon continued revenues
from the customers listed above as well as our other large customers. Sales to
these or any other customers could increase or decrease as a percentage of
consolidated net sales either individually or as a group. Consequently, any
material decrease in sales to these or other customers could materially harm
our results of operations.

We believe that our ability to grow depends on increasing sales to existing
customers and on successfully attracting new customers. Customer contracts can
be canceled and volume levels can be changed or delayed. The timely replacement
of delayed, canceled or reduced orders with new business cannot be ensured. In
addition, we cannot assume that any of our current customers will continue to
utilize our services. Consequently, our results of operations may be materially
adversely affected.

Gross profit  Continuing Operations

Gross profit varies from period to period and is affected by a number of
factors, including product mix, production efficiencies, component costs and
delivery linearity, product life cycles, unit volumes, expansion and
consolidation of manufacturing facilities, utilization of manufacturing
capacity, pricing, competition, unanticipated restructuring or inventory
charges and new product introductions.

Our gross margin percentage decreased to 4.7% for the three months ended
November 30, 2003, compared to 6.2% for the corresponding period in fiscal
2003. Our margins were negatively affected by our sales mix and continued
pricing pressure in our industry. We increased sales in the Consumer and
PC/Computing markets which yield lower profit margins than other markets. In
addition, we have experienced price increases from our suppliers thereby
reducing the gross profit contributed by material revenue. Our gross margins
have been negatively impacted due to the under-absorption of fixed costs as a
consequence of the excess capacity resulting from the recent economic downturn.

Over time, gross margins at the individual sites and for Solectron as a whole
may continue to fluctuate. Increases in the systems-build business or turnkey
projects, additional costs associated with new projects and price erosion
within the electronics industry could harm our gross margins.

Sales of inventory previously written down or written off have not been
significant and have not had any material impact on our gross margins to date.

Selling, General and Administrative Expenses  Continuing Operations

Selling, general and administrative (SG&A) expenses decreased $44.2 million or
27.8% for the three months ended November 30, 2003 compared to the
corresponding period in fiscal 2003. As a percentage of net sales, SG&A
decreased to 4.2% for the three months ended November 30, 2003 compared to 6.0%
the corresponding period in fiscal 2003. The decrease was primarily due to
headcount and other SG&A expense reductions resulting from our cost containment
activities.

Restructuring and Impairment  Continuing Operations

Beginning in the second quarter of fiscal 2001, we initiated the restructuring
of our operations in light of the economic downturn. The measures, which
included reducing the workforce, consolidating facilities and changing the
strategic focus of a number of sites, have been intended to align our capacity
and infrastructure to anticipated customer demand, transition our operations to
lower cost regions, and rationalize our footprint worldwide. For leased
facilities that will be abandoned and subleased, lease costs charged to
restructuring expense represent future lease payments subsequent to abandonment
less estimated sublease income. For facilities and equipment held for disposal,
the impairment loss recognized was based on the fair value less costs to sell
with fair value based on estimates of existing market prices for similar
assets. We continue to evaluate our cost structure relative to current
anticipated revenue levels and to adjust our manufacturing footprint between
high cost and low cost areas and may take additional restructuring charges in
the future. If our estimates about future restructuring charges prove to be
inadequate, our financial condition and results of operations may suffer.

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During the three months ended
November 30, 2003, we continued our restructuring
activities and total restructuring and impairment costs of $27 million were
charged against operations which were related to the closure and consolidation
of, and impairment of certain long-lived assets at various manufacturing sites.

See Note 10, Restructuring and Impairment, for further discussion of our
restructuring activities.

Interest Income  Continuing Operations

Interest income decreased $2.8 million to $2.4 million for the three months
ended November 30, 2003 from $5.2 million in the corresponding period in fiscal
2003. The decreases were due to reduced average cash, cash equivalent and
short-term investment balances and lower average interest rates in fiscal 2004
as compared to fiscal 2003.

Interest Expense  Continuing Operations

Interest expense decreased $11.4 million to $43.9 million for the three months
ended November 30, 2003 from $55.3 million in the corresponding period in
fiscal 2003. The decrease was primarily due to the retirement of approximately
$1.8 billion aggregate principal amount of our Liquid Yield Option Notes
(LYONs) during fiscal 2003.

Other Income - net Continuing Operations

Other income - net decreased $30.2 million to $6.0 million for the three months
ended November 30, 2003 from $36.2 million in the corresponding period in
fiscal 2003. For the three months ended November 30, 2002, other
income - net
primarily consisted of gains on retirement of our LYONs. The following table
provides the details of the retirement of our 4.0% LYONs due 2019, 2.75% LYONs
due 2020 and our 3.25% LYONs due 2020 in each period presented in the
accompanying condensed consolidated financial statements (in millions):

|                                  |  |                                |   |      |  |   |       | 
|--------------------------------- |  | ------------------------------ | - | ---- |  | - | ----- | 
|                                  |  | Three Months Ended November 30
|                                  |  |                               
|                                  |  | 2003                           |   | 2002
|                                  |  |                                |   |     
|Principal amount at maturity      |  | $                              |  |      |  | $ | 390.1 | 
|                                  |  |                                |   |      |  |   |       | 
|Carrying value                    |  | $                              |  |      |  | $ | 216.2 | 
|Cash paid                         |  |                                |  |      |  |   | 182.0 | 
|                                  |  |                                |   |      |  |   |       | 
|Gain included in other income-net |  | $                              |  |      |  | $ | 34.2  | 
|                                  |  |                                |   |      |  |   |       | 

The remaining components of other
income - net fluctuate primarily due to
foreign currency gains and losses.

Income Taxes  Continuing Operations

Our income tax expense was $2.5 million for the three months ended November 30,
2003 as compared to an income tax benefit of $35 million for the three months
ended November 30, 2002. Managements decision to provide a valuation allowance
on certain deferred tax assets resulted in the tax expense incurred in the
third quarter of fiscal 2003. Subsequent to the third quarter of fiscal 2003,
we established a full valuation allowance for most of the net deferred tax
assets arising from operations. Income tax expense that would otherwise be
incurred over the next several quarters will be reduced to the extent of
offsetting valuation allowance reductions. The company incurred net tax expense
in certain countries in which it has profitable operations during the period
ended November 30, 2003.

In prior quarters, the effective income tax rate had been largely a function of
the balance between income and losses from domestic and international
operations. Our international operations, taken as a whole, have been subject
to tax at a lower rate than operations in the United States, primarily due to
tax holidays granted to several of our overseas sites in Malaysia, Singapore
and China. The Malaysian tax holiday is effective through July 2011, subject to
some conditions, including maintaining certain levels of research and

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development expenditures. The Singapore tax holiday is effective through March
2011, subject to some conditions. Seven of our China sites have separate tax
holiday agreements. Each agreement expires five years from the first profitable
year for each site.

Liquidity and Capital Resources  Continuing Operations

Cash and cash equivalents decreased to approximately $1.3 billion at November
30, 2003 from approximately $1.4 billion at August 31, 2003. Our restricted
cash and cash equivalents of $35.7 million included in cash, cash equivalents
and short-term investments in the accompanying condensed consolidated balance
sheets are restricted primarily in connection with the terms of our leasing
transactions.

Cash used in operating activities was $114.3 million and $59.1 million during
the three months ended November 30, 2003 and November 30, 2002, respectively.
The increase in cash used for operating activities in the current fiscal year
was primarily due to increases in current assets, including accounts receivable
and inventories. In addition, we recognized a gain on the retirement of LYONs
debt during the period ended November 30, 2002 which did not occur during the
period ended November 30, 2003.

Cash provided by investing activities was $14.7 million and $238.6 million
during the three months ended November 30, 2003 and November 30, 2002,
respectively. The decrease in cash provided by investing activities is
primarily due to reduction of cash provided by short-term investments and
restricted cash between the two periods. During the first quarter of fiscal
2003, we reduced our cash investments in order to retire a portion of the LYONs
debt. Capital expenditures during the period ended November 30, 2003 primarily
related to equipment expenditures supporting increased demand and new
programs.
Cash used in financing activities was $11.8 million and $233.8 million during
the three months ended November 30, 2003 and November 30, 2002, respectively.
The decrease in cash used for financing activities was primarily due to
repurchasing a portion of the LYONs debt during the period ended November 30,
2002 which did not occur during the period ending November 30, 2003.

As of November 30, 2003, we had available a $200 million revolving credit
facility that expires on February 11, 2004, and a $250 million revolving credit
facility that expires on February 14, 2005. Each of our revolving credit
facilities is guaranteed by certain of our domestic subsidiaries and secured by
the pledge of domestic accounts receivable, inventory and equipment, the pledge
of equity interests in certain of our subsidiaries and notes evidencing
intercompany debt. Borrowings under the credit facilities bear interest, at our
option, at the London Interbank offering rate (LIBOR) plus a margin of 2.125%
based on our current senior unsecured debt ratings, or the higher of the
Federal Funds Rate plus 1/2 of 1% or Bank of America N.A.s publicly announced
prime rate. As of November 30, 2003, there were no borrowings outstanding under
these facilities. We are subject to compliance with certain financial covenants
set forth in these facilities including, but not limited to, capital
expenditures, consolidated tangible net worth, cash interest coverage,
leverage, liquidity, and minimum cash. Prior to the end of the first quarter of
fiscal 2004, we amended the minimum cash interest coverage ratio covenant for
each of the revolving credit facilities. As a result of these amendments, we
were in compliance with all applicable covenants as of November 30, 2003.

On October 28, 2003 Standard and Poors downgraded our senior unsecured debt
rating to B+ with a stable outlook. On October 31, 2003 Moodys downgraded
our senior unsecured debt rating to B1 with a stable outlook. These rating
downgrades increase our cost of capital should we borrow under our revolving
lines of credit, and may make it more expensive for us to raise additional
capital in the future. Such capital raising activities may be on terms that may
not be acceptable to us or otherwise not available.

In addition, we had $36.6 million in committed and $236.7 million in
uncommitted foreign lines of credit and other bank facilities as of November
30, 2003 relating to continuing operations. A committed line of credit
obligates a lender to loan us amounts under the credit facility as long as we
adhere to the terms of the credit agreement. An uncommitted line of credit is
extended to us at the sole discretion of a lender. The interest rates range
from the banks prime lending rate to the banks prime rate plus 2.0%. As of
November 30, 2003, borrowings and guaranteed amounts were $12.1 million under
committed and $40.1 million under uncommitted foreign lines of credit.
Borrowings are payable on demand. The weighted-average interest rate was 5.6%
for committed and 0.6% for uncommitted foreign lines of credit as of November
30, 2003.

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Based on the aggregate amount outstanding on November 30, 2003, holders of our
3.25% LYONs due November 2020 will have the option to require us to repurchase
their notes on May 20, 2004 in an amount of $587.46 per $1,000 principal amount
for a total of approximately $953 million. Instead of repurchasing these LYONs
with cash, we could elect to offer holders our common stock or a combination of
our cash and common stock. However, we expect to satisfy such obligation in
cash. See Risk Factors - We Have Significant Debt Leverage and Debt Service
Obligations. Conversely, satisfying these obligations with cash could impair
our liquidity.

Our 7.25% subordinated ACES debentures are due November 15, 2006. On or about
August 15, 2004, the ACES debentures are scheduled to be remarketed and if the
remarketing is successful, the interest rate will be reset at the then current
rates as described in the indenture and the proceeds from the remarketing will
be used to satisfy the holders obligation to purchase our common stock in
November 2004. If the debentures are not successfully remarketed, the interest
rate will not be reset and we expect to use the pledged debentures to satisfy
the holders obligation to purchase our common stock in November 2004. In
addition, our $500 million aggregate principal amount of 9.625% senior notes is
due on February 15, 2009 and our $150 million aggregate principal amount of
7.375% senior notes is due on March 1, 2006.

During fiscal 2002, we restructured our synthetic lease agreements relating to
four manufacturing sites. The synthetic leases have expiration dates in 2007.
At the end of the lease term, we have an option, subject to certain conditions,
to purchase or to cause a third party to purchase the facilities subject to the
synthetic leases for the Termination Value, which approximates the lessors
original cost, or we may market the property to a third party at a different
price. We are entitled to any proceeds from a sale of the properties to third
parties in excess of the Termination Value and liable to the lessor for any
shortfall. In connection with the
restructuring of these synthetic leases, we provided loans to the lessor
equaling approximately 85% of its Termination Value. These loans are repayable
solely from the sale of the properties to third parties in the future, are
subordinated to the amounts payable to the lessor at the end of the synthetic
leases, and may be credited against the Termination Value payable if we
purchase the properties. The approximate Termination Values and loan amounts
are $102 million and $86 million, respectively, as of November 30, 2003.

In addition, cash collateral of $16 million is pledged for the difference
between the Termination Values and the loan amounts. Each synthetic lease
agreement contains various affirmative and financial covenants. A default under
a lease, including violation of these covenants, may accelerate the termination
date of the arrangement. Prior to the end of the first quarter of fiscal 2004,
we obtained a waiver to the minimum cash interest coverage ratio covenant for
the quarter. As a result of the amendment, we were in compliance with all
applicable covenants as of November 30, 2003. Monthly lease payments are
generally based on the Termination Value and 30-day LIBOR index (1.17% as of
November 30, 2003) plus an interest-rate margin, which may vary depending upon
our Moodys Investors Services and Standard and Poors ratings, and are
allocated between the lessor and us based on the proportion of the loan amount
to the total Termination Value for each synthetic lease.

We account for these synthetic lease arrangements as operating leases in
accordance with SFAS No. 13, Accounting for Leases, as amended. Our loans to
the lessor and cash collateral were included in other long-term assets and
cash, cash equivalents and short-term investments, respectively, in the
condensed consolidated balance sheets. If we should determine that it is
probable that the expected fair value of the property at the end of the lease
term will be less than the Termination Value, any expected loss will be
recognized on a straight-line basis over the remaining lease term.

We believe that our current cash, cash equivalents, short-term investments,
lines of credit and cash anticipated to be generated from continuing operations
and divestitures of our discontinued operations will satisfy our expected
working capital, capital expenditures, debt service and investment requirements
through at least the next 12 months.

The following is a summary of certain obligations and commitments as of
November 30, 2003 for continuing operations:

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Payments Due by Period(in millions)

|                    |  |       |         |      |  |          |         |      |  |      |      |      |  |            |       |  |  |   |         |  |  |   |      |  |  |   |       | 
|------------------- |  | ----- | ------- | ---- |  | -------- | ------- | ---- |  | ---- | ---- | ---- |  | ---------- | ----- |  |  | - | ------- |  |  | - | ---- |  |  | - | ----- | 
|                    |  |       |         |      |  | 9 months |         |      |  |      |      |      |  |            |       |  |  |   |         |  |  |   |      |  |  |  
|                    |  | Total |         | FY04 |  | FY05     |         | FY06 |  | FY07 |      | FY08 |  | Thereafter
|                    |  |       |         |      |  |          |         |      |  |      |      |      |  |           
|Short-term debt (1) |  | $     | 973.8   |      |  | $        | 973.8   |      |  | $    |     |      |  | $          |      |  |  | $ |        |  |  | $ |     |  |  | $ |      | 
|Long-term debt (2)  |  |       | 1,833.4 |      |  |          |        |      |  |      | 35.5 |      |  |            | 162.4 |  |  |   | 1,111.0 |  |  |   | 10.2 |  |  |   | 514.3 | 
|Operating lease     |  |       | 180.0   |      |  |          | 53.8    |      |  |      | 28.3 |      |  |            | 17.2  |  |  |   | 15.4    |  |  |   | 14.0 |  |  |   | 51.3  | 
|                    |  |       |         |      |  |          |         |      |  |      |      |      |  |            |       |  |  |   |         |  |  |   |      |  |  |   |       | 
|                    |  | $     | 2,987.2 |      |  | $        | 1,027.6 |      |  | $    | 63.8 |      |  | $          | 179.6 |  |  | $ | 1,126.4 |  |  | $ | 24.2 |  |  | $ | 565.6 | 
|                    |  |       |         |      |  |          |         |      |  |      |      |      |  |            |       |  |  |   |         |  |  |   |      |  |  |   |       | 



|(1) |  | Since the holders of our 3.25% LYONs due November 2020 have the option to
require us to repurchase on May 20, 2004 their notes in an amount of
$587.46 per $1,000 principal amount at maturity, the payment due includes
a total of approximately $953 million from such commitment based on the
carrying amount outstanding as of November 30, 2003.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Assumes a successful remarketing of the ACES in August 2004. In the event
of this successful remarketing, we will receive up to $1.1 billion
proceeds from the exercise of the stock purchase contracts included in
each ACES unit in fiscal 2005. See Note 6, Long-Term Debt, for further
discussion of our ACES.                                 

In addition, we guarantee committed and uncommitted lines of credit and debt
for our continuing operations subsidiaries totaling $273.3 million as of
November 30, 2003. We also guarantee performance of certain of our continuing
operations subsidiaries in various transactions such as leases, totaling
$243.5 million as of November 30, 2003.

Off-Balance Sheet Arrangements and Contractual Obligations

Our off-balance sheet arrangements consist of our synthetic and operating
leases, subsidiary guarantees (leases and subsidiary guarantees are both
described in the Liquidity and Capital Resources portion of Managements
Discussion and Analysis of Financial Condition and Results of Operations), our
interest rate swap instruments related to our long-term debt (described in the
We are exposed to interest rate fluctuations Risk Factor), and our foreign
exchange contracts (described in the We are exposed to fluctuations in foreign
currency exchange rates Risk Factor).

A tabular presentation of our contractual obligations is provided in the
Liquidity and Capital Resources portion of Managements Discussion and
Analysis of Financial Condition and Results of Operations.

Discontinued Operations

During the fourth quarter of fiscal 2003, as a result of a full review of our
portfolio of businesses, we committed to a plan to divest a number of business
operations that are no longer part of our strategic plan for the future. In
accordance with SFAS No. 144, we have reported the results of operations and
financial position of these businesses in discontinued operations within the
condensed consolidated statements of operations and balance sheets for all
periods presented. As a result of further divestment activity during the first
quarter of fiscal 2004, we identified certain additional operations, which were
included in continuing operations in fiscal 2003 that now qualify for
classification as discontinued operations. The companies that we are in the
process of divesting and that are included in discontinued operations are: Dy 4
Systems Inc., Kavlico Corporation, C-MAC Microtechnology Holdings Inc., Smart
Modular Technologies Inc.,
Stream International Inc., our 65% interest in US Robotics Corporation, and one
additional company that will be disclosed when it is further along in the
divestiture process.

The collective results from all discontinued operations for all periods
presented were as follows (in millions):

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|                                  |                    |                                               |                |       |                                |       |       |      |      |      |  
|--------------------------------- | ------------------ | --------------------------------------------- | -------------- | ----- | ------------------------------ | ----- | ----- | ---- | ---- | ---- | -
|                                  |                    |                                               |                |       | Three Months Ended November 30
|                                  |                    |                                               |                |       |                               
|                                  |                    |                                               |                |       | 2003                           |       | 2002 
|                                  |                    |                                               |                |       |                                |       |      
|Net sales                         |                    | $                                             | 535.7          |       |                                | $     | 468.5 |     
|Cost of sales                     |                    |                                               | 470.6          |       |                                |       | 396.9 |     
|                                  |                    |                                               |                |       |                                |       |       |     
|Gross profit                      |                    |                                               | 65.1           |       |                                |       | 71.6  |     
|                                  | Operating expenses |                                               |                | 128.3 |                                |       |       | 72.8 |     
|                                  |                    |                                               |                |       |                                |       |       |     
|                                  |                    |                                               | Operating loss |       |                                | (63.2 | )     |      |      | (1.2 | )
|Interest income                   |                    |                                               | 0.7            |       |                                |       | 5.0   |     
|Interest expense                  |                    |                                               | (0.5           | )     |                                |       | (1.2  | )   
|Other expense - net               |                    |                                               | (4.3           | )     |                                |       | (0.1  | )   
|                                  |                    |                                               |                |       |                                |       |       |     
|Income (loss) before income taxes |                    |                                               | (67.3          | )     |                                |       | 2.5   |     
|Income tax expense                |                    |                                               | 0.3            |       |                                |       | 6.1   |     
|                                  |                    |                                               |                |       |                                |       |       |     
|                                  |                    | Loss from discontinued operations, net of tax |                | $     | (67.6                          | )     |       | $    | (3.6 | )   
|                                  |                    |                                               |                |       |                                |       |       |     

Sales from discontinued operations increased in the first quarter of fiscal
2004 from fiscal 2003 primarily due to an increase in demand that affected all
of our operations. Gross profit of discontinued operations decreased $6.5
million or 9.1% for the first quarter of fiscal 2004 compared to the first
quarter of fiscal 2003. The decrease is primarily due to continued pricing
pressure from our customers that affected all of our operations. Operating
expenses increased significantly in the first quarter of fiscal 2004 primarily
due to approximately $68 million of restructuring and impairment
costs relating to discontinued operations which was recorded in the
first quarter of fiscal 2004 while only
$7 million was recorded in the first quarter of fiscal 2003.

Recent Developments

On December 3, 2003, we signed a definitive agreement to sell our Dy 4 Systems
business to Curtiss-Wright Corporation. The transaction is expected to close in
early 2004. Under the terms of the agreement, Curtiss-Wright will acquire Dy 4
for $110 million.

RISK FACTORS

WE ARE EXPOSED TO GENERAL ECONOMIC CONDITIONS, WHICH COULD HAVE A MATERIAL
ADVERSE IMPACT ON OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION.

As a result of the recent economic downturn in the U.S. and internationally,
and reduced capital spending as well as end-market demand, our customers and
therefore our sales have declined significantly from prior years. In
particular, we depend on the telecommunications and computing industries, where
the decline began in the second quarter of fiscal 2001. If there were to be
continued or resumed weakness in these industries or any further deterioration
in the business or financial condition of our customers, it could have a
material adverse impact on our business, operating results and financial
condition. In addition, if the economic conditions in the United States and the
other markets we serve worsen, we may experience a material adverse impact on
our business, operating results and financial condition.

WE HAVE SIGNIFICANT DEBT LEVERAGE AND DEBT SERVICE OBLIGATIONS.

For the first quarter of fiscal 2004 and fiscal 2003, our fixed charges
exceeded our earnings from continuing operations by approximately $165 million
and $166 million, respectively. The fixed charge excesses are primarily due to
our operating losses. We compute the ratio of earnings from continuing
operations to fixed charges by dividing earnings available for fixed charges by
fixed charges. When the ratio is negative, we report the excess of fixed
charges over earnings rather than a negative ratio. The computations include
our consolidated subsidiaries. For these ratios, earnings represents (1) loss
before tax expense (benefit) and before adjustments for minority interests,
plus (2) fixed charges (excluding capitalized interest), plus (3) amortization
of capitalized interest.

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Fixed charges consist of (1) interest on all
indebtedness and amortization of debt discount and expense, plus (2)
capitalized interest, plus (3) an interest factor attributable to rentals under
operating leases.

As of November 30, 2003, we had approximately $1 billion of short-term
indebtedness, primarily consisting of our obligation related to our 3.25% LYONs
due 2020 (which are putable to us on May 20, 2004) and approximately $1.8
billion of long-term indebtedness. We will require substantial amounts of cash
to fund scheduled payments of principal and interest on this outstanding
indebtedness, as well as future capital expenditures and any increased working
capital requirements.

We repurchased LYONs with approximately $1.8 billion aggregate principal amount
at maturity in fiscal 2003 for approximately $1 billion in cash. We repurchased
LYONs with approximately $5.2 billion aggregate principal amount at maturity in
fiscal 2002 for approximately $2.8 billion in cash. As a result, we have
repurchased substantially all of the 2.75% LYONs due 2020 and the 4.0% LYONs
due 2019 leaving only a portion of our 3.25% LYONs due 2020 outstanding. Based
on the aggregate amount outstanding on November 30, 2003, holders of our 3.25%
LYONs will have the option to require us to repurchase their notes on May 20,
2004 in an amount of $587.46 per $1,000 principal amount for a total of
approximately $953 million. While we have the right to satisfy these
obligations with shares of our common stock, because this could result in
significant dilution to our stockholders, which in turn could significantly
reduce our earnings per share, we are likely, given recent prices of our common
stock, to choose to satisfy these obligations with cash. Satisfying these
obligations with cash, however, could impair our liquidity.

In addition, the entire principal amount of $500 million of our 9.625% senior
notes issued in February 2002 is due on February 15, 2009 and the entire $150
million principal amount of our 7.375% senior notes are due on March 1, 2006.

WE MAY NOT BE ABLE TO MEET OUR CASH REQUIREMENTS BECAUSE OF A NUMBER OF
FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.

Our ability to meet our cash requirements (including our debt service
obligations) is dependent upon our future performance, which will be subject to
financial, business and other factors affecting our operations, many of which
are beyond our control. If we are unable to meet our cash requirements from
operations, we would be required to fund these cash requirements by alternative
financings. The degree to which we may be leveraged could materially and
adversely affect our ability to obtain financing for working capital,
acquisitions or other purposes, could make us more vulnerable to industry
downturns and competitive pressures, or could limit our flexibility in planning
for, or reacting to, changes and opportunities in the electronics manufacturing
industry, which may place us at a competitive disadvantage compared to our
competitors. There can be no assurance that we will be able to obtain
alternative financing, that any such financing
would be on acceptable terms, or that we will be permitted to do so under the
terms of our existing financing arrangements. In the absence of such financing,
our ability to respond to changing business and economic conditions, make
future acquisitions, react to adverse operating results, meet our debt service
obligations or fund required capital expenditures or increased working capital
requirements may be adversely affected.

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 FINANCIAL CONDITION.

The majority of our inventory purchases and commitments are based upon demand
forecasts that our customers provide to us. The customers forecasts, and any
changes to the forecasts, including cancellations, may lead to on-hand
inventory quantities and on-order purchase commitments that are in excess of
the customers revised needs, or that become obsolete.

We generally enter into supply agreements with our significant customers. Under
these supply agreements, the extent of our customers responsibility for excess
or obsolete inventory related to raw materials that were previously purchased
or ordered to meet that customers demand forecast is defined. If our customers
do not comply with their contractual obligations to purchase excess or obsolete
inventory back from us and we are unable to use or sell such inventory, our
financial condition could be materially harmed. Some of our customers are in
the telecommunications industry, an industry that in recent years has
experienced declining revenue, large losses, negative cash flows, and several
bankruptcies or defaults on borrowing arrangements. There is a risk that these
or other customers may not purchase inventory back from us despite contractual
obligations, which could harm our financial condition if we are unable to sell
the inventory at carrying value. In addition, enforcement of these supply
agreements may result in material expenses, delays in payment for inventory
and/or disruptions in our customer relationships.

We are responsible for excess and obsolete inventory resulting from inventory
purchases in excess of inventory needed to meet customer demand forecasts at
the time the purchase commitments were made, as well as any inventory purchases
not made pursuant to the customers responsibility under our supply agreements.
For inventory which is not the customers responsibility, provisions are

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made
when required to reduce any such excess or obsolete inventory to its estimated
net realizable value, based on the quantity of such inventory on hand, our
customers latest forecasts of production requirements, and our assessment of
available disposition alternatives such as use of components on other programs,
the ability and cost to return components to the vendor, and our estimates of
resale values and opportunities. These assessments are necessarily based upon
various assumptions and market conditions which are subject to rapid change,
and/or which may ultimately prove to be inaccurate. Any material changes in our
assumptions or market conditions could have a significant effect on our
estimates of net realizable value, could necessitate material changes in our
allowances for excess and obsolete inventory, and could have a material adverse
impact on our financial condition. In addition, in the normal course of
business, bona fide disagreements may arise over the amount and/or timing of
such claims, and in order to avoid litigation expenses, collection risks, or
disruption of customer relationships, we may elect to settle such disputes for
lesser amounts than we believe we should be entitled to recover. In these
instances, we must bear the economic loss of any such excess or obsolete
inventory, which could have a material adverse impact on our financial
condition. For example, we recorded a charge of $76 million related to excess
and obsolete inventory during the second quarter of fiscal 2003, and there can
be no assurance that such charges might not be necessary in future periods.

OUR SUBSTANTIAL DEBT COULD HAVE MATERIAL ADVERSE CONSEQUENCES.

Our substantial debt could have material adverse consequences. For example, it
could:



| |  |  | require us to dedicate a substantial portion of our cash flow from
operations and other capital resources to debt service, thereby reducing
our ability to fund working capital, capital expenditures and other cash
requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increase our vulnerability to adverse economic and industry conditions;                                                                                                                                                           
|
| |  |  | make it more difficult or impossible for us to make payments on indebtedness or obligations;                                                                                                                                      
|
| |  |  | limit our flexibility in planning for, or reacting to, changes and
opportunities in, the electronics manufacturing industry, which may place
us at a competitive disadvantage compared to our competitors; and                    
|
| |  |  | limit our ability to incur additional debt on commercially reasonable
terms, if at all.                                                                                                                                           

We and our subsidiaries may be able to incur substantial indebtedness in the
future, including our ability to borrow under our secured credit facilities. If
new debt is added to our and our subsidiaries current debt levels, the related
risks that we and they now face could intensify.

THE AGREEMENTS GOVERNING OUR EXISTING AND FUTURE DEBT CONTAIN AND WILL CONTAIN
VARIOUS COVENANTS THAT LIMIT OUR DISCRETION IN THE OPERATION OF OUR BUSINESS.

The agreements and instruments governing our existing and future debt and our
secured credit facilities contain and will contain various restrictive
covenants that, among other things, require us to comply with or maintain
certain financial tests and ratios and restrict our ability to:



| |  |  | incur debt;                                                  
| | - |  | -------------------------------------------------------------
|
| |  |  | incur or maintain liens;                                     
|
| |  |  | redeem and/or prepay debt;                                   
|
| |  |  | make acquisitions of businesses or entities;                 
|
| |  |  | make investments, including loans, guarantees and advances;  
|
| |  |  | make capital expenditures;                                   
|
| |  |  | engage in mergers, consolidations or certain sales of assets;
|
| |  |  | engage in transactions with affiliates;                      

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| |  |  | pay dividends or engage in stock redemptions; and
| | - |  | -------------------------------------------------
|
| |  |  | enter into certain restrictive agreements.       

Our secured credit facilities are secured by a pledge of all of the capital
stock of our material domestic subsidiaries, 65% of the capital stock of
certain of our material foreign subsidiaries, certain of our intercompany loans
and certain additional assets, including inventory, accounts receivable and
equipment of us and our domestic subsidiaries. The covenants governing our
secured credit facilities also restrict the operations of certain of our
subsidiaries, including, in some cases, limiting the ability of our
subsidiaries to make distributions to us.

Our ability to comply with covenants contained in our secured credit facilities
and other indebtedness to which we are or may become a party may be affected by
events beyond our control, including prevailing economic, financial and
industry conditions. Our failure to comply with our debt-related obligations
could result in an event of default which, if not cured or waived, could result
in an acceleration of our indebtedness and cross-defaults under our other
indebtedness, which could have a material adverse effect on our financial
condition. We obtained amendments related to the minimum cash interest coverage
ratio covenants applicable to various debt and lease agreements as described in
Liquidity and Capital Resources, and as a result of such waivers, we were in
compliance with all applicable covenants as of November 30, 2003.

Even if we are able to comply with all applicable covenants, the restrictions
on our ability to operate our business in our sole discretion could harm our
business by, among other things, limiting our ability to take advantage of
financings, mergers, acquisitions and other corporate opportunities.

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.

Most of our annual net sales come from a small number of our customers. Our ten
largest customers accounted for approximately 58% and 60% of net sales from
continuing operations in the first quarters of fiscal 2004 and 2003,
respectively. Some of these customers individually account for more than ten
percent of our annual net sales. Any material delay, cancellation or reduction
of orders from these or other major customers could cause our net sales to
decline significantly, and we may not be able to reduce the accompanying
expenses at the same time. We cannot guarantee that we will be able to retain
any of our largest customers or any other accounts, or that we will be able to
realize the expected revenues under existing or anticipated supply agreements
with these customers. Our business, market share, financial condition and
results of operations will continue to depend significantly on our ability to
obtain orders from new customers, retain existing customers, realize expected
revenues under existing and anticipated supply agreements, as well as on the
financial condition and success of our customers and their customers.

Net sales may not improve, and could decline, in future periods if there is

continued or resumed weakness in customer demand, particularly in the
telecommunications and computing sectors, resulting from worldwide economic
conditions. In addition, net sales were adversely affected due to our unwinding
of our optical products supply agreement with Lucent during fiscal 2003, which
had previously been expected to generate $2 billion in revenues over the
original three-year contract period. Sales, gross profit and operating loss
from this supply agreement were $92 million, $1 million and $7 million,
respectively, in fiscal 2003. Production under this supply agreement
substantially ceased in March 2003.

OUR CUSTOMERS MAY CANCEL THEIR ORDERS, CHANGE PRODUCTION QUANTITIES OR
LOCATIONS, OR DELAY PRODUCTION.

To remain competitive, EMS companies must provide increasingly rapid product
turnaround, at increasingly competitive prices, for their customers. We
generally do not have long-term contractual commitments from our top customers.
As a result, we cannot guarantee that we will continue to receive any net sales
from our customers. Customers may cancel their orders, change production
quantities or delay production for a number of reasons. Many of our customers
industries have recently experienced a significant decrease in demand for their
products and services, as well as substantial price competition. The generally
uncertain economic condition of several of our customers industries has
resulted, and may continue to result, in some of our customers delaying
purchases on some of the products we manufacture for them, and placing purchase
orders for lower volumes of products than previously anticipated.
Cancellations, reductions or delays by a significant customer or by a group of
customers would seriously harm our results of operations by reducing the
volumes of products manufactured by us for the customers and delivered in that
period, as well as causing a delay in the repayment of our expenditures for
inventory in preparation for customer orders and lower asset utilization

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resulting in lower gross margins. In addition, customers may require that
manufacturing of their products be transitioned from one facility to another to
achieve cost and other objectives. Such transfers, if unanticipated or not
flawlessly executed, can result in various inefficiencies and costs, including
excess capacity and overhead at one facility and capacity constraints and
related strains on our resources at the other, disruption and delays in product
deliveries and sales, deterioration in product quality and customer
satisfaction, and increased manufacturing and scrap costs.

OUR STRATEGIC RELATIONSHIPS WITH MAJOR CUSTOMERS CREATE RISKS.

In the past several years, we completed several strategic transactions with OEM
customers. Under these arrangements, we generally acquired inventory, equipment
and other assets from the OEM, and leased (or in some cases acquired) their
manufacturing facilities, while simultaneously entering into multi-year supply
agreements for the production of their products. There has been strong
competition among EMS companies for these transactions, and this competition
may continue to be a factor in customers selection of their EMS providers.
These transactions contributed to a significant portion of our past revenue
growth, as well as to a significant portion of our more recent restructuring
charges and goodwill and intangible asset impairments. While we do not
anticipate our acquisitions of OEM plants and equipment in the near future to
return to the levels at which they occurred in the recent past, there may be
occasions on which we determine it to be advantageous to complete acquisitions
in selected geographic and/or industry markets. As part of such arrangements,
we would typically enter into supply agreements with the divesting OEMs, but
such agreements generally do not require any minimum volumes of purchases by
the OEM and the actual volume of purchases may be less than anticipated.
Arrangements which may be entered into with divesting OEMs typically would
involve many risks, including the following:



| |  |  | we may pay a purchase price to the divesting OEMs that exceed 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.

As a result of these and other risks, we may be unable to achieve anticipated
levels of profitability under such arrangements and they may not result in
material revenues or contribute positively to our earnings. Additionally, other
OEMs may not wish to obtain logistics or operations management services from
us.

IF WE ARE UNABLE TO MANAGE OUR ACQUISITIONS AND DIVESTITURES, AND
COST-EFFECTIVELY RUN OUR OPERATIONS AND DISPOSE OF NON-STRATEGIC ASSETS, OUR
PROFITABILITY COULD BE ADVERSELY AFFECTED.

Until fiscal 2002, we experienced rapid growth over many years. During fiscal
2002, we completed our acquisition of C-MAC, as well as other smaller
transactions. While we may consider future acquisitions of companies and
strategic assets on a selective basis, subject to compliance with any
restrictions that may exist under certain of our financing instruments, we are
presently focused on divestiture activity. We are in the process of divesting
certain parts of our current operations that we do not believe to be strategic
or synergistic to our primary business focus, and we believe such divestments,
if successfully and timely completed at the presently anticipated valuations
and without undue disruption of operations, present us with the opportunity to
improve our liquidity and reduce our interest and operating expenses.

In order to achieve anticipated revenue and other financial performance
targets, we must continue to manage our assets and operations efficiently while
simultaneously preparing parts of our operations for divestiture. Our
divestiture activities are expected to place a heavy strain on various
personnel and management resources, and must be carefully managed in order to
avoid or minimize disruptions in the business operations of the affected
businesses, customer relations and cash flows, and to enable us to maximize the

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value which we may be able to realize from the divestments. There can be no
assurance that such divestment activities will be able to be consummated
without an adverse impact on the near-term operations of the affected
businesses or on Solectron as a whole. Any failure to successfully manage and
consummate the divestments in a timely manner could harm our financial
condition and results of operations, as well as adversely impact the realizable
value of the divested operations. In addition, there can be no assurance that
we will be successful in realizing the presently anticipated benefits from our
divestment activities, as such transactions involve significant risks and
uncertainties with respect to valuation of the entities to be divested,
particularly given the potential disruption of operations inherent in the
divestiture process, and may result in significant costs, expenses and charges
that may significantly reduce the value which we may realize in connection with
the anticipated divestiture transactions. In the event we fail to consummate a
divestment, we may need to incur restructuring charges.

Our ability to manage and integrate our acquisitions, as well as any future
acquisitions, will require progressive increases in manufacturing and logistics
infrastructure, as well as enhancements or upgrades of accounting and other
internal management systems and the implementation of a variety of procedures
and controls. We cannot guarantee that significant problems in these areas will
not occur. Any failure to enhance or expand these systems and implement such
procedures and controls in an efficient manner and at a pace consistent with
our business activities could harm our financial condition and results of
operations. In addition, we may experience inefficiencies from the management
of geographically dispersed facilities and incur substantial infrastructure and
working capital costs. We incurred approximately $27 million of restructuring
and impairment costs relating to continuing operations in the first quarter of
fiscal 2004. See also the Risk Factor entitled If We Incur More
Restructuring-Related Charges Than Currently Anticipated, Our Financial
Condition and Results of Operations May Suffer.

POSSIBLE FLUCTUATION OF OPERATING RESULTS FROM QUARTER TO QUARTER AND FACTORS
OUT OF OUR CONTROL COULD AFFECT THE MARKET PRICE OF OUR SECURITIES.

Our quarterly earnings and/or stock price may fluctuate in the future due to a
number of factors including the following:



| |  |  | differences in the profitability of the types of manufacturing
services we provide. For example, high velocity and low complexity
printed circuit boards and systems assembly services have lower gross
margins 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;                                                                                                                                                                                      

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| |  |  | 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.                                                       

If our operating results in the future are below the expectations of securities
analysts and investors, the market price of our outstanding securities could be
harmed.

IF WE INCUR MORE RESTRUCTURING-RELATED CHARGES THAN CURRENTLY ANTICIPATED, OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY SUFFER.

In furtherance of the continued implementation of the series of restructuring
plans which we have initiated commencing in fiscal 2001, we expect to continue
to incur restructuring-related charges in fiscal 2004, primarily to consolidate
facilities and reduce our workforce in North America and Europe, although no
certainty can be attributed to an amount or the timing of its recognition. We
continue to evaluate our cost structure relative to our revenue levels and may
take additional restructuring charges in the future. If our estimates about
future restructuring charges prove to be inadequate, our financial condition
and results of operations may suffer. In addition, if we are unable to
successfully move production from higher cost to lower cost facilities without
experiencing degradation of quality or timeliness of our service to our
customers, our business could be harmed.

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 are dependent on certain suppliers, including limited and sole source
suppliers, to provide key components used in our products. We have experienced,
and may continue to experience, delays in component deliveries, which in turn
could cause delays in product shipments and require the redesign of certain
products. In addition, if we are unable to procure necessary components under
favorable purchase terms, including at favorable prices and with the order
lead-times needed for the efficient and profitable operation of our factories,
our results of operations could suffer. The electronics industry has
experienced in the past, and may experience in the future, shortages in
semiconductor devices, including application-specific integrated circuits,
DRAM, SRAM, flash memory, certain passive devices such as tantalum capacitors,
and other commodities that may be caused by such conditions as overall market
demand surges or supplier production capacity constraints. The inability to
continue to obtain sufficient components as and when required, or to develop
alternative sources as and when required, could cause delays, disruptions or
reductions in product shipments or require product redesigns which could damage
relationships with current or prospective customers, and increase inventory
levels and costs, thereby causing harm to our business.

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

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

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

We compete with different contract manufacturers, depending on the type of
service we provide or the geographic locale of our operations, in an industry
which is intensely competitive. These competitors may have greater
manufacturing, financial, R&D and/or marketing resources than we have. In
addition, we may not be able to offer prices as low as some of our competitors
because those competitors may have lower cost structures as a result of their
geographic location or the services they provide, or because such competitors
are willing to accept business at lower margins in order to utilize more of
their excess capacity. In that event, our net sales could decline. We also
expect our competitors to continue to improve the performance of their current
products or services, to reduce

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their current products or service sales prices and to introduce new products or
services that may offer greater value-added performance and improved pricing.
Any of these could cause a decline in sales, loss of market acceptance of our
products or services and corresponding loss of market share, or profit margin
compression.

WE DEPEND ON THE CONTINUING TREND OF OEMS TO OUTSOURCE.

A substantial factor in our past revenue growth was attributable to the
transfer of manufacturing and supply-based management activities from our OEM
customers. Future growth is partially dependent on new outsourcing
opportunities. To the extent that these opportunities are not available, our
future growth would be unfavorably impacted.

OUR NON-U.S. LOCATIONS REPRESENT A SIGNIFICANT PORTION OF OUR NET SALES; WE ARE
EXPOSED TO RISKS ASSOCIATED WITH OPERATING INTERNATIONALLY.

Approximately 72% and 67% of our net sales from continuing operations came from
sites outside the United States during the first quarters of fiscal 2004 and
2003, respectively. As a result of our foreign sales and facilities, our
operations are subject to a variety of risks and costs that are unique to
international operations, including the following:



| |  |  | adverse movement of foreign currencies against the U.S. dollar in which our results are reported;           
| | - |  | ------------------------------------------------------------------------------------------------------------
|
| |  |  | import and export duties, and value added taxes;                                                            
|
| |  |  | import and export regulation changes that could erode our profit margins or restrict exports 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; and                  
|
| |  |  | economic and political risks in emerging or developing economies.                                           

We have been granted tax holidays, which are effective through 2011 subject to
some conditions, for our Malaysian and Singapore sites. We have also been
granted various tax holidays in China. These tax holidays are effective for
various terms and are subject to some conditions. It is possible that the
current tax holidays will be terminated or modified or that future tax holidays
that we may seek will not be granted. If the current tax holidays are
terminated or modified, or if additional tax holidays are not granted in the
future or when our current tax holidays expire, our future effective income tax
rate could increase.

WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES.

We enter into foreign exchange forward contracts intended to reduce the
short-term impact of foreign currency fluctuations on foreign currency cash,
receivables, investments and payables. The gains and losses on the foreign
exchange forward contracts are intended to offset the transaction gains and
losses on the foreign currency cash, receivables, investments, and payables
recognized in earnings. We do not enter into foreign exchange forward contracts
for speculative purposes. Our foreign exchange forward contracts related to
current assets and liabilities are generally three months or less in original
maturity.

As of November 30, 2003, we had outstanding foreign exchange forward contracts
with a total notional amount of approximately $655 million related to
continuing operations. The change in value of the foreign exchange forward
contracts resulting from a hypothetical 10% change in foreign exchange rates
would be offset by the remeasurement of the related balance sheet items, the
result of which would not be significant.

As of November 30, 2003, the majority of our foreign currency hedging contracts
were scheduled to mature in approximately three months and there were no
material deferred gains or losses. In addition, our international operations in
some instances act as a natural

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hedge because both operating expenses and a portion of sales are denominated in
local currency. In these instances, although an unfavorable change in the
exchange rate of a foreign currency against the U.S. dollar will result in
lower sales when translated to U.S. dollars, operating expenses will also be
lower in these circumstances. Although approximately 25% of our net sales from
continuing operations in the first quarter of fiscal 2004 were denominated in
currencies other than U.S. dollar, we do not believe our total exposure to be
significant because of natural hedges.

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

WE ARE EXPOSED TO INTEREST RATE FLUCTUATIONS.

The primary objective of our investment activities is to preserve principal,
while at the same time maximize yields without significantly increasing risk.
To achieve this objective, we maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including government and
corporate obligations, certificates of deposit and money market funds. As of
November 30, 2003, substantially our entire total portfolio was scheduled to
mature in less than three months. A hypothetical 10% change in interest rates
would not have a material effect on the fair value of our investment
portfolios.

As of November 30, 2003, we had no cash equivalents and short-term investments
that are subject to interest rate risk (defined as risk of loss of investment fair
value due to interest rate movements). The fair value of our cash equivalents
and short-term investments approximated the carrying value as of November 30,
2003.

Interest on long-term debt instruments is payable at fixed rates. In addition,
the amount of principal to be repaid at maturity is also fixed. During the
third quarter of fiscal 2002, we entered into interest rate swap transactions
under which we pay variable rates and we receive fixed rates. The interest
swaps effectively converted $1 billion of our long-term debt with fixed
interest rates into debt with variable rates of interest. Our interest rate
swaps have a total notional amount of $1 billion. The first $500 million of
swap transactions relate to our 7.25% $1.1 billion ACES and expire on November

15, 2004. The second $500 million of swap transactions relate to our 9.625%
$500 million senior notes and expire on February 15, 2009. Under each of these
swap transactions; we pay an interest rate equal to the 3-month LIBOR rate plus
a fixed spread. In exchange, we receive fixed interest rates of 7.25% on the
$500 million related to the ACES and 9.625% on the $500 million related to the
senior notes. On November 15, 2002, the original swaps related to the senior
notes were settled. This settlement resulted in cash received and a gain of
approximately $26 million, which is being amortized over the remaining life of
the senior notes. Also on November 15, 2002, Solectron entered into swaps with
terms similar to the original swap transactions used to hedge the interest paid
on the senior notes and designated the swaps as fair value hedges under SFAS
No. 133.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS.

Our ability to effectively compete may be affected by our ability to protect
our proprietary information. We (including companies included in discontinued
operations) hold a number of patents and possess various other trade secrets
and license rights. These patents, trade secrets, and license rights may not
provide meaningful protection for our manufacturing processes and equipment
innovations, which could result in litigation. Any resulting litigation could
be lengthy and costly and could harm our financial condition.

WE COULD BECOME INVOLVED IN INTELLECTUAL PROPERTY DISPUTES.

In the past we have been and may from time to time continue to be, notified of
claims that we may be infringing patents, copyrights or other intellectual
property rights owned by other parties. In the event of an infringement claim,
we may be required to spend a significant amount of money to develop a
non-infringing alternative, to obtain licenses, and/or to defend against the
claim. We may not be successful in developing such an alternative or obtaining
a license on reasonable terms, if at all. Any litigation, even where an
infringement claim is without merit, could result in substantial costs and
diversion of resources. Accordingly, the resolution or adjudication of
intellectual property disputes could have a material adverse effect on our
business, financial condition and results of operations.

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FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD HARM OUR BUSINESS.

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

We own and lease some contaminated sites (for some of which we have been
indemnified by third parties for required remediation), sites for which there
is a risk of the presence of contamination, and sites with some levels of
contamination for which we may be liable and which may or may not ultimately
require any remediation. We have obtained environmental insurance to reduce
potential environmental liability exposures posed by some of our operations and
facilities. We believe, based on our current knowledge, that the cost of any
groundwater or soil clean up that may be required at our facilities would not
materially harm our business, financial condition and results of operations.
Nevertheless, the process of remediating contamination in soil and groundwater
at facilities is costly and cannot be estimated with high levels of confidence,
and there can be no assurance that the costs of such activities would not harm
our business, financial condition and results of operations in the future.

OUR RATING DOWNGRADES MAKE IT MORE EXPENSIVE FOR US TO BORROW MONEY.

On October 28, 2003 Standard and Poors downgraded our senior unsecured debt
rating to B+ with a stable outlook. On October 31, 2003 Moodys downgraded
our senior unsecured debt rating to B1 with a stable outlook. These rating
downgrades increase our cost of capital should we borrow under our revolving
lines of credit, and may make it more expensive for us to raise additional
capital in the future. Such capital raising activities may be on terms that may
not be acceptable to us or otherwise not available.

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

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




Item 3. Quantitative and Qualitative Disclosures about Market Risk

See Risk Factors  We Are Exposed to Fluctuations in Foreign Currency
Exchange Rates, and We Are Exposed to Interest Rate Fluctuations, for
factors related to fluctuations in the exchange rates of foreign currency and
fluctuations in interest rates.




Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Based on their evaluation as
of the end of the period covered by this Report, Solectrons principal
executive officer and principal financial officer have concluded that
Solectrons disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act))
are effective to ensure that information required to be disclosed by Solectron
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

Changes in Internal Controls. There were no changes in Solectrons internal
controls over financial reporting during the first quarter of fiscal 2004 or in
other factors that could have materially affected or are reasonably likely to
materially affect our internal controls over financial reporting.

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PART II. OTHER INFORMATION




Item 1. Legal Proceedings

Solectron is from time to time involved in various litigation and legal
matters, including those described below. By describing the particular matters
set forth below, Solectron does not intend to imply that the Company or its
legal advisors have concluded or believe that the outcome of any of those
particular matters is or is not likely to have a material adverse impact upon
Solectrons business or financial condition.

On September 19, 2002, one of Solectrons former employees filed a complaint
against Solectron in the Superior Court of the State of California, Santa Clara
County, asserting two claims for wrongful termination. The case is encaptioned
Ronald Sorisho v. Solectron Corporation et al., Case No. CV811243. In the
complaint, plaintiff alleges that he was wrongfully terminated by Solectron in
supposed retaliation for his alleged efforts to ensure that Solectron timely
recognized a charge for excess, obsolete and slow moving inventory in the
Technology Solutions business unit. Plaintiffs complaint seeks compensatory
damages in an amount not less than $2.5 million as well as punitive damages.
Solectron believes Mr. Sorishos claims of wrongful termination are without
merit and intends to vigorously defend itself. Solectron filed a motion with
the court challenging the sufficiency of Mr. Sorishos complaint, and in
response to this motion, Mr. Sorisho filed an amended complaint in which he
dropped one of his two original wrongful termination claims, but added a new
claim for purported defamation based upon statements attributed to Solectron in
a news article regarding Mr. Sorishos allegations against Solectron. Solectron
tendered the defense of the defamation claim to its insurance carrier and the
insurance carrier has assumed the defense of the defamation claim, subject to a
reservation of rights. Solectron is also continuing to vigorously defend
against Mr. Sorishos wrongful termination claim.

On March 6, 2003, a putative shareholder class action lawsuit was filed against
Solectron and certain of its officers in the United States District Court for
the Northern District of California alleging claims under Section 10(b) and
20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder. The case is entitled Abrams v. Solectron Corporation et al., Case
No. C-03-0986 CRB. The complaint alleged that the defendants issued false and
misleading statements in certain press releases and SEC filings issued between
September 17, 2001 and September 26, 2002. In particular, plaintiff alleged
that the defendants failed to disclose and to properly account for excess and
obsolete inventory in the Technology Solutions business unit during the
relevant time period. Additional complaints making similar allegations were
subsequently filed in the same court, and pursuant to an order entered June 2,
2003, the Court appointed lead counsel and plaintiffs to represent the putative
class in a single consolidated action. The Consolidated Amended Complaint,
filed September 8, 2003, alleges an expanded class period of June 18, 2001
through September 26, 2002, and purports to add a claim for violation of
Section 11 of the Securities Act of 1933 on behalf of a putative class of
former shareholders of C-MAC Industries, Inc., who acquired Solectron stock
pursuant to the October 19, 2001 Registration Statement filed in connection
with Solectrons acquisition of C-MAC Industries, Inc. In addition, while the
initial complaints focused on alleged inventory issues at the Technology
Solutions business unit, the Consolidated Amended Complaint adds allegations of
inadequate disclosure and failure to properly account for excess and obsolete
inventory at the Companys other business units. The complaint seeks an
unspecified amount of damages on behalf of the putative class. Solectron
intends to vigorously defend against the consolidated lawsuit. There can be no
assurance, however, that the outcome of the lawsuit will be favorable to
Solectron or will not have a material adverse effect on Solectrons business,
financial condition and results of operations. In addition, Solectron may be
forced to incur substantial litigation expenses in defending this litigation.

On March 21, 2003, Solectron, all of the current members of its Board of
Directors, and two former officers, were named as defendants in a shareholder
derivative lawsuit entitled Lifshitz v. Cannon et al.,Case No. CV815693, filed
in the Santa Clara County, California Superior Court. The plaintiff alleged
that he should be permitted to pursue litigation, purportedly for the benefit
of Solectron, against the individual director and officer defendants for
alleged mismanagement and waste of corporate assets during the period from May
2001 to the present, purported breaches of fiduciary duty, constructive
fraud, abuse of control, and alleged violations of the California
Corporations Code by certain of the individual defendants who sold some of
their Solectron stockholdings during the period from September 2001 through
September 2002. On May 19, 2003, Solectron and the individual defendants moved
to dismiss the Lifshitzcomplaint. In the meantime, two substantively identical
derivative lawsuits, entitled Schactner v. Cannon, et al., Case No. CV817112,
and Nims v. Cannon, et al.,Case No. CV817158, were filed in the same Court on
May 14 and May 15, respectively. Counsel for the plaintiffs in all three suits
subsequently advised the Court that they would be filing a consolidated amended
complaint, and accordingly, defendants motion to dismiss was taken off
calendar pending the filing of the consolidated amended complaint combining the
three lawsuits. On June 27, 2003, the plaintiffs served their consolidated
amended complaint now alleging that since January of 1999 all of the current
members of Solectrons Board of Directors, as well as four former officers and
directors, purportedly breached their fiduciary duties and participated in or
permitted constructive fraud, unjust enrichment, and alleged violations of
the California Corporations Code. The consolidated complaint alleged an
unspecified amount of compensatory

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and punitive damages, and sought the relinquishment of all profits realized by
those individual defendants who sold Solectron stock during the relevant
period, together with statutory penalties under California Corporations Code
section 25402 which plaintiff alleged to be applicable to those sales of
Solectron stock. Solectron moved to dismiss the Consolidated Amended Complaint
because Solectron does not believe plaintiffs have adequately alleged a basis
for plaintiffs to appropriate for themselves the duties of Solectrons Board of
Directors under applicable Delaware law, and believes that the consolidated
complaint contains various factual errors and legal deficiencies. On October 7,
2003, the California Superior Court granted Solectrons motion to dismiss, but
granted the plaintiffs an opportunity to try to cure the deficiencies in their
Consolidated Amended Complaint through a further amended complaint. Solectron
anticipates that the plaintiffs will file a further amended complaint within
the next 60 days, after which Solectron expects to seek dismissal of that
complaint because Solectron does not believe plaintiffs can show a sufficient
basis to allow them to appropriate for themselves the duties of Solectrons
Board of Directors under applicable Delaware law. Solectron may be forced to
incur substantial litigation expenses in defending this litigation.




Item 6. Exhibits and Reports on Form 8-K

(a)  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        |  | Sixth Amendment to Credit Agreement, dated as of November 21, 2003, among
Solectron, Goldman Sachs Credit Partners L.P., JPMorgan Chase Bank, The
Bank of Novia Scotia, Bank of America, N.A. and certain other lenders                                 
|            |  |                                                                                                                                                                                                                                                         
|10.2        |  | Third Amendment to Credit Agreement, dated as of November 21, 2003, among
Solectron, Bank of America Securities LLC, Goldman Sachs Credit Partners
L.P., JP Morgan Chase Bank, The Bank of Novia Scotia, Bank of America,
N.A. and certain other lenders
|            |  |                                                                                                                                                                                                                                                         
|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 from Exhibit 3.3 filed with Solectrons Annual
Report on Form 10-K for fiscal year ended August 31, 2001.                                                                                                                                                                 

(b)  Reports on Form 8-K

On September 25, 2003, Solectron filed a report on Form 8-K with the Securities
and Exchange Commission announcing the Companys results of operations for its
fiscal year ended August 31, 2003.

On October 16, 2003, Solectron filed a report on Form 8-K with the Securities
and Exchange Commission regarding the press release issued on September 30,
2003 announcing an agreement intended to extend Solectrons role as an
electronics manufacturing services provider to Nortel Networks.

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Solectron Corporation announced the Companys results of operations for its
fiscal year ended August 31, 2003 on September 25, 2003. On November 14, 2003,
Solectron filed a report on Form 8-K/A with the Securities and Exchange
Commission regarding revisions to the Companys announcement of results of
operations for its fiscal year ended August 31, 2003. In the first revision,
sales and cost of sales were adjusted downward by $35.9 million resulting in no
gross profit impact. The second revision appropriately classifies $292.5
million between the goodwill impairment and restructuring and impairment
costs line items within its statement of operations for the twelve-month
period ended August 31, 2003. This revision reduces goodwill impairment and
increases restructuring and impairment costs each by $292.5 million. These
specific line items are the only affected information and operating loss is not
affected as both line items are within operating expenses.

On December 18, 2003, Solectron filed a report on Form 8-K with the Securities
and Exchange Commission announcing the Companys results of operations for its
fiscal quarter ended November 30, 2003.

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SOLECTRON CORPORATION




SIGNATURE

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

|                       |  |                                   |  |                                                                                           
|---------------------- |  | --------------------------------- |  | ------------------------------------------------------------------------------------------
|                       |  | SOLECTRON CORPORATION(Registrant)
|                       |  |                                   |  |                                                                                           
|Date: January 12, 2004 |  |                                   |  |                                                                                           
|                       |  |                                   |  |                                                                                           
|                       |  | By                                |  | /s/ Kiran Patel                                                                           
|                       |  |                                   |  |                                                                                           
|                       |  |                                   |  | Kiran PatelExecutive Vice President, Chief
Financial Officer
(Principal Financial Officer)
|                       |  |                                   |  |                                                                                           
|                       |  | By                                |  | /s/ Warren Ligan                                                                          
|                       |  |                                   |  |                                                                                           
|                       |  |                                   |  | Warren LiganCorporate Vice President,
Corporate Controller
(Principal Accounting Officer) 

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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        |  | Sixth Amendment to Credit Agreement, dated as of November 21, 2003, among
Solectron, Goldman Sachs Credit Partners L.P., JPMorgan Chase Bank, The
Bank of Novia Scotia, Bank of America, N.A. and certain other lenders                                 
|            |  |                                                                                                                                                                                                                                                         
|10.2        |  | Third Amendment to Credit Agreement, dated as of November 21, 2003, among
Solectron, Bank of America Securities LLC, Goldman Sachs Credit Partners
L.P., JP Morgan Chase Bank, The Bank of Novia Scotia, Bank of America,
N.A. and certain other lenders
|            |  |                                                                                                                                                                                                                                                         
|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 from Exhibit 3.3 filed with Solectrons Annual
Report on Form 10-K for fiscal year ended August 31, 2001.