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Here are two excerpts from Jabil Circuit's earnings conference call in which CFO Forbes Alexander is asked by analysts to discuss the outlook for the networking and consumer electronics markets. When you read these comments, bear in mind that Cisco (NASDAQ:CSCO), Nokia (NYSE:NOK) and Phillips Electronics (NYSE:PHG) are significant Jabil customers. Nokia and Phillips were 10% customers during Jabil's fiscal year, and an analyst's assertion on the call that Jabil has won a large lean outsourcing contract from Cisco was not challenged by Jabil's management:

Steven Fox - Merrill Lynch

Good afternoon, a couple of questions. On the top line, can you talk about networking and consumer trends, specifically if you took out the Cisco lean transfer, what was networking looking like, up sequentially or was it flat? Why was consumer down 5%?

Forbes Alexander

With regard to the lean initiative, sequentially that was up approximately about 8% or 9% if we take out the lean initiative, quarter over quarter.

Timothy L. Main

Consumer was down principally due to some inventory corrections from several of our customers, principally in Europe, primarily in home entertainment products.

Steven Fox - Merrill Lynch

Talking about the full year guidance of 20%, it sort of assumes a slowing growth rate as you go through the year based on your first quarter outlook. Can you talk about the level of conservatism in saying 20%, and what could turn that into a higher number?

Forbes Alexander

Your initial observation is correct. What I would point you to and caution investors on is that our first fiscal quarter is typically a very large quarter for the company, in particular with the element of consumer business we have. We were 36% last year and continued growth in that sector, so we are seeing the seasonal demand.

The shape of our year may turn out better than we are looking at here in terms of this 20% guidance, very much dependent upon how we see consumer demand responding in the latter part of the November timeframe and into December and January. Over the last couple of fiscal years, we have seen that consumer business -- I assert it as the tail, but certainly holding there in terms of the demand profile for the company.

But certainly, from where we sit now, 20% seems like a very reasonable number with the visibility we have, and yes, there is opportunity to grow that beyond there.

Timothy L. Main

Really, Steve, if you look at fiscal 2006, it was really an extremely hot year. I mean, the kind of revenue growth we put up was extremely high. It has not been that high since -- probably since the dot-com communications explosion.

We started 2006 with an expectation that was quite a bit below where we ended up. I mean, it was about a $9 billion year. We ended up at 10. The previous year, I think our initial guidance was $5.7 billion to 6.2, we ended up at over 7.

Given the macro-economic trends, I think it is appropriate to be relatively conservative. The focus this year probably will not be on revenue growth. The management focus this year will be earnings growth, capital efficiency, and making sure that the revenue that we have generated predictably delivers better profitability and return on invested capital than we had in ’06.

And later:

Brian White - Jefferies & Co.

Tim, if you look at the different markets in ’07, what market do you think will grow the fastest?

Timothy L. Main

For Jabil, even with the lean initiative, we will see, on absolute dollar basis, the networking segment grow quite a bit during the year. I would expect to see organic revenue growth in the segment, even excluding the lean initiative.

I think we will still see very strong growth out of the instrumentation and medical segment. I think we will see strong growth in consumer, and I think in computing and storage, which is growing as a segment, we will see high double-digit or high-teens, low-twenties type of year-over-year revenue growth in that segment. That happens to be a very strong segment for us and we are making significant progress in enterprise computing and storage, and that is a great segment for us.

Brian White - Jefferies & Co.

Tim, if you look at the different markets in ’07, what market do you think will grow the fastest?

Timothy L. Main

For Jabil, even with the lean initiative, we will see, on absolute dollar basis, the networking segment grow quite a bit during the year. I would expect to see organic revenue growth in the segment, even excluding the lean initiative.

I think we will still see very strong growth out of the instrumentation and medical segment. I think we will see strong growth in consumer, and I think in computing and storage, which is growing as a segment, we will see high double-digit or high-teens, low-twenties type of year-over-year revenue growth in that segment. That happens to be a very strong segment for us and we are making significant progress in enterprise computing and storage, and that is a great segment for us.

Brian White - Jefferies & Co.

When you talk about 20% growth for the year, what are you assuming in terms of end markets?

Timothy L. Main

It is a fairly conservative view of end markets. It does not discount the recession, to state the obvious. We are looking for very moderate, slow-to-moderate GDP kind of growth.

For more, see the entire Jabil Circuit conference call transcript (free). A full list of the most recent conference call transcripts on Seeking Alpha is here.

Source: Jabil Circuit on the Networking and Consumer Electronics Markets