Jabil unloading services unit for $725M; FQ2 guidance disappoints


In tandem with its FQ1 report, Jabil (JBL) announces it's selling its aftermarket services unit (does warranty repair for consumer electronics) for $725M ($675M in cash, $50M in preferred stock yielding 8% for 9 years) to outsourcing firm iQor Holdings.

Jabil declares the business, which produced $1.1B in FY13 sales, isn't "aligned with [its] strategy to focus on diversified manufacturing solutions," and says the sale should provide it with "the financial flexibility to potentially add more engineering intensive capabilities," which in turn will allow it to expand its manufacturing ops.

The company adds it plans to pursue more acquisitions similar to Nypro, a precision plastic products maker it bought in February for $665M.

Jabil's FQ2 guidance might help explain its interest in shaking things up. The company expects revenue of $3.5B-$3.7B and EPS of $0.05-$0.15. Those numbers, which exclude the aftermarket services business (now a discounted unit), are well below a consensus of $4.28B and $0.52.

Both Jabil's diversified manufacturing and high velocity businesses are expected to see 25% Y/Y FQ2 revenue drops. Enterprise & infrastructure sales are expected to be flat.

Jabil is also announcing a new $200M buyback; it's good for acquiring 5.5% of outstanding shares at current levels.

JBL -9% AH. CC at 4:30PM ET. FQ1 results, PR.

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