10-Q

________________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended February 25, 2005
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission file number 1-11098

SOLECTRON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2447045
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

847 Gibraltar Drive

Milpitas, California 95035

(Address of principal executive offices including zip code)

(408) 957-8500

(Registrant’s telephone number, including area code)

     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 þ          No o

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

      Yes þ          No o

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

      At April 1, 2005, 972,207,403 shares of Common Stock of the Registrant were outstanding (including approximately 23.2 million shares of Solectron Global Services Canada, Inc., which are exchangeable on a one-to-one basis for the Registrant’s common stock)

SOLECTRON CORPORATION

INDEX TO FORM 10-Q

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

2

PART I.     FINANCIAL INFORMATION

Item 1. Financial Statements

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

See accompanying notes to condensed consolidated financial statements.

3

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

See accompanying notes to condensed consolidated financial statements.

4

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

      Accumulated unrealized foreign currency translation losses were $122.3 million at February 28, 2005 and $148.1 million at August 31, 2004. 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.

5

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

See accompanying notes to condensed consolidated financial statements.

6

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 — Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

      The accompanying financial data as of February 28, 2005 and for the three and six months ended February 28, 2005 and 2004 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 consolidated 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, 2004 condensed consolidated balance sheet was derived from audited consolidated 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, 2004.

      In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair consolidated statement of financial position as of February 28, 2005, the results of operations, comprehensive income (loss) and cash flows for the six months ended February 28, 2005 and 2004 have been made. The consolidated results of operations for the three and six months ended February 28, 2005 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

      Solectron’s second quarters of fiscal 2005 and 2004 ended on February 25, 2005 and February 27, 2004, respectively. Solectron’s fiscal year ended on August 27, 2004. For clarity of presentation, Solectron has indicated its second quarters as having ended on February 28 and its fiscal year as having ended on August 31.

      Selling, general and administrative expense includes $8.4 million and $15.2 million of research and development expenses for the three and six months ended February 28, 2005, respectively, and $6.8 million and $11.6 million for the three and six months ended February 28, 2004, respectively.

      The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

      In September 2004, the EITF reached a consensus on Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share.” EITF 04-8 requires that all issued securities that have embedded conversion features that are contingently exercisable upon the occurrence of a market-price condition should be in the calculation of diluted earnings per share, regardless of whether the market price trigger has been met. Solectron adopted EITF 04-8 on February 25, 2005. The adoption of EITF 04-8 added 0.3 million shares to the basic and diluted EPS calculation for the three and six month period ended February 28, 2005. The adoption of EITF 04-8 did not have a material impact on Solectron’s calculation of basic and diluted EPS.

      In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS 151, amends ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as current period charges. In addition, SFAS 151 requires that allocation of fixed production overhead to the cost of conversion be based on the normal capacity of the production facilities. The provision of SFAS 151 shall be effective for Solectron

7

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

beginning on September 1, 2005. Solectron is currently evaluating whether this statement will have a material effect on its consolidated financial statements.

      In December 2004, the FASB issued SFAS No. 123R, “Share Based Payment: An Amendment of FASB Statements No. 123 and 95.” This statement requires that the cost resulting from all share-based payment transactions be recognized in the consolidated financial statements. This statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. Solectron is currently evaluating the impact of this statement on its consolidated financial statements.

      In December 2004, the FASB issued FASB Staff Position 109-2 (“FSP 109-2”), “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (“AJCA”)”. FSP 109-2 allows Solectron until August 26, 2005 to evaluate the effect of the AJCA on our plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109 “Accounting for Income Taxes.” Management has evaluated the effects of the repatriation provisions and determined that the Company will not elect to repatriate qualified earnings under these provisions, but will continue with its policy of indefinite reinvestments of foreign earnings.

NOTE 2 — Restatement of Prior Period Financial Statements

      As described in Amendment No. 1 on Form 10-K/ A to our Annual Report on Form  10-K for the year ended August 31, 2004 (the “2004 10-K/ A”), we have restated our consolidated financial statements for the years 2002 through 2004 and for the first quarter of 2005 (the “Restatement”). This Note should be read in conjunction with Note 2, “Restatement of Financial Statements” in the notes to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” of the 2004 10-K/ A, filed concurrently with this Form 10-Q and which provides further information on the nature and impact of the Restatement.

      The determination to restate these financial statements was made as a result of management’s identification of errors primarily related to untimely account analysis of financial statement balances for fiscal years 2004, 2003 and 2002 through the Company’s self-assessment and self-testing of its internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.

      In the Restatement, we have corrected errors primarily related to unreconciled differences in intercompany balances, foreign currency translations, accounts payable, accrued liabilities, fixed assets, other assets, deferred tax assets, deferred tax liabilities, interest expense, inventory, goodwill and intangible assets. In addition, there have been reclassifications of certain balance sheet accounts.

      Certain amounts in other notes to our condensed consolidated financial statements within this Form 10-Q have been restated to reflect the Restatement adjustments.

      The Restatement increased our net income for the first quarter of fiscal 2005 by $2.3 million. The Restatement increased our net loss from continuing operations before income taxes for the second quarter of fiscal 2004 and the first quarter of fiscal 2004 by $9.3 million and $6.6 million, respectively. Additionally, the Restatement increased our net loss for the second quarter of fiscal 2004 by $8 million and increased our net loss for the first quarter of 2004 by $5.7 million.

NOTE 3 — Stock-Based Compensation

      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

8

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

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

      Stock-based employee compensation expense determined under the fair value method, net of related tax effects, included $2.4 and $5.0 million of expense relating to discontinued operations during the three and six months ended February 28, 2004, respectively. There was no stock-based compensation expense related to discontinued operations for the corresponding periods in fiscal 2005.

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

9

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

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

      During fiscal 2003, Solectron provided restricted stock awards to certain eligible executives. These restricted shares are not transferable until fully vested and are subject to the Company Repurchase Option for all unvested shares upon certain early termination events and also subject to accelerated vesting in certain other circumstances. During the three and six months ended February 28, 2005, compensation expense related to the restricted stock awards amounted to approximately $0.3 million and $0.9 million for each period, respectively. Compensation expense related to the restricted stock awards for the corresponding periods in fiscal 2004 were $0.6 million and $1.2 million, respectively.

      During fiscal 2004 and the first and second quarter of fiscal 2005, Solectron issued stock options to certain executives at a price below the market value on the day of the stock option grant. Compensation expense resulting from the difference between the market value on the date of the discounted stock option grant and the purchase price is being amortized over the vesting period. The compensation expense associated with all discounted stock options issued by Solectron is not significant.

      On February 22, 2005, Solectron’s Executive Compensation and Management Resources Committee approved accelerating the vesting of all outstanding “out-of-the-money”, unvested stock options, except for options held by independent, non-employee directors. An option was considered “out-of-the-money” if the stated option price was greater than the closing price, $4.91, of Solectron’s common stock on February 18, 2005, which was the last trading day before the Executive Compensation and Management Resources Committee approved the acceleration. The accelerated vesting was effective as of February 22, 2005.

      The decision to accelerate vesting of those options was made primarily to avoid recognizing compensation cost with respect to those options in Solectron’s consolidated statement of operations in future financial statements upon the effectiveness of SFAS 123R. In addition, because these options have exercise prices in excess of current market values and are not fully achieving their original objectives of incentive compensation and employee retention, the acceleration may have a positive effect on employee morale and retention. The future compensation expense that will be avoided, based on Solectron’s implementation date for SFAS 123R of September 1, 2005, is approximately $11 million, $10 million, and $5 million in fiscal 2006, 2007, and 2008, respectively. As the options were accelerated to vest immediately, an additional compensation cost amounting to approximately $35 million, which represented the unamortized cost of accelerated unvested options, was recognized in the pro forma income statement for the three months ended February 28, 2005.

NOTE 4 — Inventories

      Inventories related to continuing operations as of February 28, 2005 and August 31, 2004, consisted of (in millions):

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

10

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 5 — Accounts Receivable, Net

      Accounts receivable, net related to continuing operations as of February 28, 2005 and August 31, 2004 consisted of the following (in millions):

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

NOTE 6 — Property and Equipment, Net

      Property and equipment, net related to continuing operations as of February 28, 2005 and August 31, 2004 consisted of the following (in millions):

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

NOTE 7 — Commitments and Contingencies

Synthetic Leases

      Solectron has synthetic lease agreements relating to four manufacturing sites in continuing operations. The synthetic leases have expiration dates in August 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 for each facility, 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 is liable to the lessor for any shortfall not to exceed 85% of the Termination Value. Solectron has provided loans to the lessor equaling approximately 85% of the Termination Value for each synthetic lease. 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 Values payable if Solectron purchases the properties. The approximate aggregate Termination Values and loan amounts were $101.3 million and $86.1 million, respectively, as of February 28, 2005.

      In addition, cash collateral of $15.2 million is pledged for the difference between the aggregate 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. Solectron was in compliance with all applicable covenants as of February 28, 2005. Monthly lease payments are generally based on the Termination Value and 30-day LIBOR index (2.59% as of February 28, 2005) 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 Termination Value for each synthetic lease.

      During fiscal 2004, Solectron determined that it is probable that the expected fair value of the properties under the synthetic lease agreements will be less than the Termination Value at the end of the lease term. The accretion expense for the current quarter was approximately $1.1 million.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

      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 restricted cash and restricted cash equivalents, respectively, in the condensed consolidated balance sheets.

Future Minimum Lease Obligations

      Future minimum payments for operating lease obligations (excluding restructured leases) related to continuing operations, including the synthetic leases discussed above, are as follows (in millions):

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

Legal Proceedings

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

      Solectron has settled the previously reported shareholder derivative lawsuit entitled Lifshitz v. Cannon et al., Case No. CV815693, filed in the Santa Clara County, California Superior Court, on terms not considered to be material to Solectron. Court approval of the settlement terms was obtained on December 16, 2004.

      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, as amended (the “Exchange Act”), 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 Solectron’s former 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, as amended (the “Securities Act”), 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 former Technology Solutions business unit, the Consolidated Amended Complaint adds allegations of inadequate disclosure and failure to properly account for excess and obsolete inventory at Solectron’s other business units. The complaint seeks an unspecified amount of damages on behalf of the putative class. Solectron believes it has valid defenses to the plaintiffs’ claims. 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, consolidated financial condition and results of operations. In addition, Solectron may be forced to incur substantial litigation expenses in defending this litigation.

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Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 8 — 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 consolidated 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.

      Solectron’s chief operating decision maker is the Chief Executive Officer. The Chief Executive Officer evaluates financial information on a company-wide basis for purposes of making decisions and assessing financial performance. Accordingly, Solectron has one operating segment.

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

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

      Geographic net sales are attributable to the country in which the product is manufactured.

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

      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:

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

***  Less than 10%

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

      Solectron has concentrations of credit risk due to sales to the customers listed above as well as to Solectron’s other significant customers. In particular, Nortel Networks accounted for approximately 11.1% of total accounts receivable related to continuing operations as of February 28, 2005.

NOTE 9 — Long-Term Debt

9.625% Senior Notes

      On February 6, 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. As of February 28, 2005, the carrying amount of the notes was $498.2 million and the $9.5 million fair market value of the interest rate swap (See Note 10, “Derivative Instruments”) were classified as long-term debt. Additionally, Solectron was in compliance with the restrictive provisions of the indenture at February 28, 2005.

0.5% Convertible Senior Notes due 2034

      On February 17, 2004, Solectron issued $450 million of convertible senior notes, or 450,000 notes in $1,000 denomination, to qualified buyers in reliance on Rule 144A under the Securities Act. The notes are unsecured and unsubordinated indebtedness of Solectron and will mature on February 15, 2034.

      On February 10, 2005, Solectron completed an exchange offer with respect to its outstanding 0.5% convertible senior notes due 2034 (the “Original Notes”) for an equal amount of its newly issued 0.5% convertible senior notes, Series B due 2034 (the “New Notes”) and cash. Solectron accepted for exchange $447,298,000 aggregate principal amount of outstanding notes, representing approximately 99.4% of the total outstanding notes. In accordance with the terms of the exchange offer, Solectron has accepted for exchange all the validly tendered outstanding notes. Upon conversion of the New Notes, Solectron will deliver $1,000 in cash for the principal amount, and at its election, either common stock or cash, for the conversion value above the principal amount.

      After the exchange offer was complete, there were approximately $2,702,000 aggregate principal amount of Original Notes outstanding. Interest on both the Original Notes and the New Notes (together, the “convertible notes”) will be paid on February 15 and on August 15 of each year. On or after February 20, 2011, Solectron will have the option to redeem all or a portion of the convertible notes that have not been previously purchased, repurchased or converted, at 100% of the principal amount of the convertible notes to be redeemed plus accrued and unpaid interest and liquidated damages owed, if any, up to, but excluding, the date of the purchase. Holders of the convertible notes may require Solectron to purchase all or a portion of the convertible notes for cash on each of February 15, 2011, 2014, 2019, 2024, and 2029 at a price equal to 100% of the principal amount of the convertible notes to be repurchased plus accrued and unpaid interest, and liquidated damages owed, if any, up to, but excluding, the date of repurchase. Holders will have the option, subject to certain conditions, to require Solectron to repurchase any convertible notes held by such holder in the event of a “change in control”, as defined, at a price of 100% of the principal amount of the convertible notes plus accrued and unpaid interest and liquidated damages owed, if any, up to, but excluding, the date of repurchase. The convertible notes are convertible into shares of common stock of Solectron at any time prior to maturity, subject to the terms of the notes.

      As of February 28, 2005, the total carrying amount of the notes is $450.0 million and is classified as long-term debt.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

7.375% Senior Notes

      In February 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. As of February 28, 2005, the carrying amount of the notes of $150.0 million was classified as long-term debt.

Adjustable Conversion-Rate Equity Securities (ACES)

      On August 31, 2004, there were 2.6 million ACES units remaining. Each ACES unit has a stated amount of $25.00 and consisted 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 7.97% subordinated debenture due 2006.

      On November 15, 2004, Solectron issued 6.6 million shares of its common stock at a settlement rate of 2.5484 shares per ACES unit as defined above. Solectron received cash proceeds of $64.3 million which resulted in a corresponding increase in additional paid in capital. The equity component of the ACES has been settled. Accordingly, the remaining obligation of the original ACES is the 7.97% debentures.

      As of February 28, 2005, there was $63.3 million outstanding of the 7.97% subordinate debentures due November 2006 which were classified as long-term debt.

Liquid Yield Option Notes (LYONs)

      On February 28, 2005, Solectron has $8.9 million aggregate accreted value of LYONs outstanding with an interest rate of 2.75%. These notes are unsecured and unsubordinated indebtedness of Solectron. Solectron will pay no interest prior to maturity. Each note has a yield of 2.75% with a maturity value of $1,000 on May 8, 2020. Each note is convertible at any time by the holder to common shares at a conversion rate of 12.3309 shares per note. Holders will be able to require Solectron to purchase all or a portion of their notes on May 8, 2010, at a price of $761.00 per note. Solectron, at its option, may redeem all or a portion of the notes at any time on or after May 8, 2003. As of February 28, 2005, the accreted value of the 2.75% LYONs is classified as long-term debt on the condensed consolidated balance sheet.

NOTE 10 — Derivative Instruments

Fair Value of Financial Instruments

      The fair value of Solectron’s cash, cash equivalents, accounts receivable, accounts payable and borrowings under lines of credit approximates the carrying amount due to the relatively short maturity of these items.

Derivatives

      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, payables, and indebtedness recognized in operating results. 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.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

      As of February 28, 2005, Solectron had outstanding foreign exchange forward contracts with a total notional amount of approximately $579.0 million related to continuing operations.

      Solectron uses interest rate swaps to hedge its mix of short-term and long-term interest rate exposures resulting from Solectron’s debt obligations. As of February 28, 2005, Solectron had an interest rate swap outstanding under which it pays variable rates and receives fixed rates. The interest rate swap has a total notional amount of $500 million, relating to the 9.625% $500 million senior notes expiring on February 15, 2009. Under the swap transaction, Solectron pays an interest rate equal to the 3-month LIBOR rate plus a fixed spread. In exchange, Solectron receives a fixed interest rate of 9.625% on the $500 million. The swap effectively replaces the fixed interest rate on all the 9.625% senior notes with a variable interest rate. The swap is designated as a fair value hedge under SFAS No. 133.

      The fair value of the outstanding derivative referred to above was not significant.

      For all derivative transactions, Solectron is exposed to counterparty credit risk to the extent that the counterparties 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.

      Financial instruments that potentially subject Solectron to concentrations of credit risk consist of cash, cash equivalents and trade accounts receivable. Concentrations of credit risk in accounts receivable resulting from sales to major customers are discussed in Note 8, “Segment Information and Geographic Information”. Solectron generally does not require collateral for sales on credit. However, for customers that have limited financial resources, Solectron may require coverage for this risk including standby letters of credit, prepayments and consignment of inventories. Solectron also monitors extensions of credit and the financial condition of its major customers.

NOTE 11 — Intangible Assets

      Solectron’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 intangibles from Solectron’s various asset purchases.

      The following tables summarize the gross amounts and accumulated amortization for each main class as of February 28, 2005 and August 31, 2004 (in millions):

February 28, 2005:

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

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Notes to Condensed Consolidated Financial Statements — (Continued)

August 31, 2004:

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

      Amortization expense for the three and six months ended February 28, 2005 was approximately $2.4 million and $4.6 million, respectively. Annual amortization expense for these intangibles over the next five years would be approximately $5.4 million, $3.7 million, $3.5 million, $3.2 million, $2.0 million, and $0.5 million thereafter.

NOTE 12 — Discontinued Operations

      In the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004, Solectron designated the following businesses as discontinued operations: Dy 4 Systems Inc., Kavlico Corporation, the Solectron MicroTechnology division, SMART Modular Technologies Inc., Stream International Inc., Solectron’s 63% interest in US Robotics Corporation, and Force Computers, Inc. In fiscal 2004, all of the businesses were sold except Solectron’s MicroTechnology division.

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

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

      During the second quarter of fiscal 2005, Solectron sold a building that was subject to a synthetic lease agreement. The synthetic lease agreement was associated with a discontinued operation that has been sold. As a result of the transaction, Solectron recorded a gain of approximately $0.9 million in operating expenses (income) — net as disclosed above.

      During the first quarter of fiscal 2005, Solectron completed the sale of its MicroTechnology division, for cash proceeds of $30.0 million resulting in a $10.1 million pre-tax gain which is included in operating (income) expenses — net for the quarter ended November 30, 2004 as disclosed above. As a result of this disposition, Solectron transferred approximately $28.3 million from accumulated foreign currency translation

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

gains, included in accumulated other comprehensive losses within Stockholder’s Equity and recognized that amount as part of the pre-tax gain. The sales agreement for this divesture provides for a possible adjustment to the proceeds and gain based upon final settlement of each divesture’s working capital at closing. Resolution of this possible working capital adjustment and other reconciling items pursuant to the sales agreement, if any, are expected to be included in future period results.

      During fiscal 2004, Solectron completed the sale of the previous six discontinued operations. During the first six months of fiscal 2005, Solectron decreased the net loss on disposal of those discontinued operations by approximately $1.0 million resulting from a few insignificant adjustments pursuant to the terms of the disposal transaction. The adjustment to the net loss on these discontinued operations is recorded in operating (income) expenses — net as disclosed above.

      The sales agreements for all seven divestitures contain certain indemnification provisions under which Solectron may be required to indemnify the buyer of the divested business for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. In aggregate, Solectron is contingently liable for up to $94.8 million for a period of 12 to 24 months subsequent to the completion of the sale. As of February 28, 2005, there were no significant liabilities recorded under these indemnification obligations. Additionally, Solectron may be required to indemnify a buyer for environmental remediation costs for a period up to 10 years and not to exceed $13 million. Solectron maintains an insurance policy to cover environmental remediation liabilities in excess of reserves previously established upon the acquisition of these properties. Solectron did not record any environmental charges upon disposition of these properties.

      The current and non-current assets and liabilities of discontinued operations as of February 28, 2005 and August 31, 2004, were as follows (in millions):

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

NOTE 13 — Restructuring and Impairment

      Over the past few years, Solectron has 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 and transition our operations to lower cost regions. The restructuring and impairment costs include employee severance and

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

benefit costs, costs related to leased facilities abandoned and subleased, impairment of owned facilities no longer used by Solectron which will be disposed, costs related to leased equipment that has been abandoned, and impairment of owned equipment that will be disposed. 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 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. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, the estimated lease loss accrued for leased facilities abandoned and subleased after December 31, 2002 represents the fair value of the lease liability as measured by the present value of future lease payments subsequent to abandonment less the present value of any estimated sublease income. For those facilities abandoned and subleased before January 1, 2003, as part of restructuring activities under EITF Issue No. 94-3, the estimated lease loss represents payments subsequent to abandonment less any estimated sublease income. In order to estimate future sublease income, Solectron works with a real estate 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.

      See also Note 11, “Intangible Assets,” for discussion of intangible asset impairment charges.

Three and six months ended February 28, 2005 and 2004

      During the three months ended February 28, 2005, Solectron incurred $39.6 million in impairment charges related to a sale agreement of a facility in Japan in the second quarter of fiscal 2005. As a result of the pending sale, Solectron transferred approximately $12.3 million from accumulated foreign currency translation losses included in accumulated other comprehensive losses within Stockholders Equity and recognized that amount as part of the impairment charge. The remaining $27.3 million impairment charge was recorded against property and equipment, net.

      In addition, Solectron continued to incur expected restructuring charges in the second quarter of fiscal 2005 as a result of amendments to the current plan and revisions of previous estimates along with idle facility common area maintenance costs. Total restructuring and impairment costs of $43.2 million and $43.9 million were charged against continuing operations during the three and six months ended February 28, 2005, respectively.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

      The following table summarizes restructuring charges included in the accompanying condensed consolidated statements of operations (in millions):

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

      The employee severance and benefit costs included in the restructuring charges recorded in the second quarter of fiscal 2005 related to approximately 1,800 full-time positions in Asia, Eastern Europe and Mexico, all of which have been eliminated. Solectron has one restructuring plan of approximately $18.0 million to complete as of February 28, 2005. The severance costs for Asia, Eastern Europe and Mexico were amendments to the current restructuring plan. Cumulative restructuring costs recorded under this plan as of February 28, 2005 were approximately $22 million.

Fiscal 2004 and 2003

      The following table summarizes restructuring charges relating to continuing operations recorded in fiscal 2004 and 2003 (in millions):

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

2004

      During fiscal 2004, Solectron recorded restructuring and impairment charges (excluding intangible asset impairment charges) of $130.4 million related to continuing operations.

      In the fourth quarter of fiscal 2004, Solectron committed to a plan to incur approximately $20.0 million in new restructuring charges. At the end of fiscal 2004, Solectron recorded approximately $19.0 million of restructuring charges related to this plan. These restructuring actions are to further consolidate facilities, reduce the workforce in Europe and North America and impair certain long-lived assets. These new restructuring actions will result in future savings in salaries and benefits and depreciation expense, and will result in cash expenditures of approximately $14.4 million. Solectron expects to complete this new plan by the end of fiscal 2005.

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

      The employee severance and benefit costs included in the 2004 restructuring charges previous to the above-mentioned plan relate to the elimination of approximately 2,100 full-time positions worldwide and all such positions have been eliminated under this plan. The positions eliminated were primarily in the Americas and European regions.

      Under both restructuring activities mentioned above, 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 the present value of 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 other exit costs mainly represent program transfer activity between global operation sites, which are recorded as the charges are incurred.

2003

      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 other exit costs mainly represent program transfer activity between global operation sites, which are recorded as the charges are incurred.

Restructuring Accrual

      The following table summarizes the restructuring accrual balance for continuing operations as of February 28, 2005 (in millions):

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

      Accruals related to restructuring activities were recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheet. Solectron expects to pay approximately $38 million in the

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

next year related to severance and benefits, lease commitment costs and other exit costs. The remaining balance, primarily consisting of lease commitment costs on facilities is expected to be paid out through 2012.

NOTE 14 — Income (Loss) Per Share Calculation

      Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period.

      The computation of diluted earnings per share calculates the effect of dilutive securities on weighted average shares. Dilutive securities would include options to purchase common stock and shares issuable upon conversion of Solectron’s LYONs and ACES. If certain conversion events occur, dilutive securities would also include shares issuable upon conversion of Solectron’s 0.5% senior notes.

      Earnings per share data for continuing operations were computed as follows (in millions, except per share amounts):

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

      The following table summarizes the weighted average dilutive securities that were excluded from the above computation of diluted earnings per share because their inclusion would have an anti-dilutive effect (in millions):

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

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SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 15 — Income Taxes

      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 the 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 fiscal 2003, 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 $1.6 billion as of February 28, 2005. 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 incurs tax expense in certain countries which are not subject to the aforementioned valuation allowance during the three and six months ended February 28, 2005.

      Certain of Solectron’s non-US operations are reporting taxable profits, mostly arising in low-cost locations. Accordingly, Solectron anticipates some tax expense in future quarters related to those operations. Solectron will not be able to offset this tax expense with unrecognized deferred tax assets described above, because, for the most part, those assets did not arise in the jurisdictions where Solectron is realizing taxable profits.

      In addition, Solectron has established contingency reserves for income taxes in various jurisdictions in accordance with SFAS No. 5 “Accounting for Contingencies.” The estimate of appropriate tax reserves is based upon the amount of prior tax benefit that might be at risk upon audit and upon the reasonable estimate of the amount at risk. Solectron periodically reassess the amount of such reserves and adjust reserve balances as necessary.

      On October 22, 2004, the American Jobs Creation Act (“the AJCA”) was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. The Company may elect to apply this provision to qualifying earnings repatriations in either the balance of fiscal 2005 or in fiscal 2006. Management has evaluated the effects of the repatriation provisions and determined that the Company will not elect to repatriate qualified earnings under these provisions, but will continue with its policy of indefinite reinvestments of foreign earnings.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

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

•  future sales and operating results;

•  our anticipation of the timing and amounts of our future obligations and commitments;

•  our belief that our cash and cash equivalents, lines of credit and cash to be generated from continuing operations will be sufficient for us to meet our obligations for the next twelve months;

•  the capabilities and capacities of our business operations;

•  the adequacy of our restructuring provisions;

•  the anticipated financial impact of recent and future acquisitions and divestitures and the adequacy of our provisions for indemnification obligations pursuant to such transactions;

•  the consummation of pending transactions;

•  our ability to comply with certain requirements of the Sarbanes-Oxley Act of 2002;

•  our exposure of foreign currency exchange rate fluctuations;

•  our belief that our current environmental liability exposure related to our facilities will not be material to our business, financial condition or results of operations; and

•  various other forward-looking statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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

Overview

      We provide a range of worldwide manufacturing and integrated supply chain services to companies who design and market electronic products. Our revenue is generated from sales of our services primarily to customers in the Computing & Storage, Networking, Communications, Consumer, Industrial, and Automotive markets. As a result of the services we perform for our customers, we are impacted by our customer’s ability to appropriately predict market demand for their products. While we work with our customers to

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understand their demand needs, we are removed from the actual end-market served by our customers. Consequently, determining future trends and estimates of activity can be very difficult.

      Industry analysts have acknowledged that the lack of growth in the EMS industry has been impacted by a deceleration of OEM growth from the levels seen in 2004. Analyst consensus has put the 2005 OEM growth rate for most market segments at low single digits. With few exceptions, EMS companies’ growth rates are also seen to be higher than OEM growth rates because of additional outsourcing from both industries that have traditionally utilized the outsourcing models and from newer industries that have recently embraced the outsourcing model.

      Given that growth rates have decelerated from 2004, industry analysts believe that most EMS companies continue to operate with excess capacity. While the capacity utilization rate has improved since the tech downturn because of industry restructuring, capacity utilization continues to be suboptimal especially in a slower growth environment.

      Analysts acknowledge that progress has been made toward improving margins in the EMS industry. The significant restructuring in the past 2-3 years and intense focus on margin improvement have positioned EMS companies to improve financial performance. While the industry is characterized by intense competition where OEM’s negotiate attractive agreements, pricing has been seen as relatively stable and rational.

Restatement of Prior Periods

      We have restated our consolidated financial statements for the fiscal years 2004, 2003 and 2002 and for the first quarter of 2005. In addition, certain amounts in the notes to our consolidated financial statements within this Form 10-Q have been restated to reflect the Restatement adjustments.

      In the Restatement, we have corrected errors primarily related to unreconciled differences in intercompany balances, foreign exchange translation, accounts payable, accrued liabilities, fixed assets, other assets, deferred tax assets, deferred tax liabilities, interest expense, inventory, goodwill and intangible assets. In addition, there have been reclassifications of certain balance sheet accounts.

      The determination to restate these financial statements was made as a result of management’s identification of errors primarily related to untimely account analysis of financial statement balances for fiscal years 2004, 2003 and 2002 through the company’s self-assessment and self-testing of its internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.

      The Restatement increased our net income for the first quarter of fiscal 2005 by $2.3 million. The Restatement increased our net loss from continuing operations before income taxes for the second quarter of fiscal 2004 and the first quarter of fiscal 2004 by $9.3 million and $6.6 million, respectively. Additionally, the restatement increased our net loss for the second quarter of fiscal 2004 by $8 million and increased our net loss for the first quarter of fiscal 2004 by $5.7 million. The effect of the Restatement on the consolidated statements of operations for the three months ended February 28, 2004 and November 30, 2003 are shown in a table in the accompanying note to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” of the 2004 10-K/ A, which we are filing concurrently with this Form 10-Q and which provides further information on the nature and impact of the Restatement.

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Summary of Results and Key Performance Indicators

      The following table sets forth, for the three-month and six-month periods indicated certain key operating results and other financial information (in millions):

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

      Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators.

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

      Inventory turns are calculated as the ratio of cost of sales compared to the average inventory for the quarter. During the second quarter of fiscal 2005, inventory turns increased due to decreases in inventory levels resulting from Lean initiatives and sales of excess inventory. DSO is calculated as the ratio of average accounts receivable for the quarter compared to daily revenue for the quarter. DSO has decreased from the prior quarter due to higher revenues and the higher mix of customers with shorter payment terms in the quarter. DPO is calculated as the ratio of average accounts payable during the quarter compared to daily cost of sales for the quarter. DPO has decreased from the prior quarter due to higher daily cost of sales resulting from an increase of inventory turns. The C2C cycle is determined by taking the ratio of 360 days compared to inventory turns plus DSO minus DPO. The C2C cycle has decreased from the prior quarter primarily as a result of lower DSO and higher inventory turns, partially offset by the decrease in DPO.

Critical Accounting Policies

      Management is required to make judgments, assumptions and estimates that affect the amounts reported when we prepare consolidated 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, 2004 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 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.

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

26

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

      In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, we review the carrying amount of goodwill for impairment on an annual basis during the fourth quarter (as of June 1). Additionally, we perform an impairment assessment of goodwill whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Significant changes in circumstances can be both internal to our strategic and financial direction, as well as changes to the competitive and economic landscape. With the change in operating segments as of Sept 1, 2003, we determined that there was a single reporting unit for the purpose of goodwill impairment tests under SFAS No. 142. For purposes of assessing the impairment of our goodwill, we estimate the value of the reporting unit using our market capitalization as the best evidence of fair value. This fair value is then compared to the carrying value of the reporting unit. If the fair value of the 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 agreements 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. Impairment is measured by comparing the intangible assets carrying amounts to the fair values as determined using discounted cash flow models. There is significant judgment involved in determining these cash flows.

Restructuring and Related Impairment Costs

      Over the past few years, we have recorded restructuring and impairment costs as we rationalized our operations in light of customer demand declines and the economic downturn. These restructuring and impairment charges include employee severance and benefit costs, costs related to leased facilities that have been abandoned and subleased, owned facilities no longer used by us which will be disposed of, costs related to leased equipment that has been abandoned or returned to the lessor, 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

27

and benefit costs and other costs associated with restructuring activities initiated prior to January 1, 2003 were recorded in compliance with 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. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, the estimated lease loss accrued for leased facilities that have been abandoned and subleased after January 1, 2003 represents the fair value of the lease liability as measured by the present value of future lease payments subsequent to abandonment less the present value of any estimated sublease income. For those facilities abandoned and subleased as part of restructuring activities under EITF Issue No. 94-3, the estimated lease loss represents payments subsequent to abandonment less any estimated sublease income. In order to estimate future sublease income, we work with a real estate 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 carry-forwards, net operating losses and other deductible temporary differences, which will reduce taxable income in such jurisdictions in future periods. We have provided valuation allowances for future tax benefits resulting from foreign net operating loss carry-forwards and for certain other U.S. and foreign deductible temporary differences where we believe future realizability is in doubt. SFAS No. 109 requires a valuation allowance to 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 established a valuation allowance in the third quarter of fiscal 2003 for most of our deferred tax assets because prior losses and an uncertain future outlook did not support projections of profitability sufficient to establish our ability to use those deferred tax assets in future periods. We have not yet established sustained profitability since that time which would support recognition of deferred tax assets generated in prior and current periods.

      We have established contingency reserves for income taxes in various jurisdictions in accordance with SFAS No. 5 “Accounting for Contingencies”. The estimate of appropriate tax reserves is based upon the amount of prior tax benefit that might be at risk upon audit and upon the reasonable estimate of the amount at risk. We periodically reassess the amount of such reserves and adjust reserve balances as necessary.

Loss Contingencies

      We are subject to the possibility of various loss contingencies arising in the ordinary course of business (for example, environmental and legal matters). 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 consolidated results of operations and financial position.

Results of Operations

      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

28

which have been classified as discontinued operations. Information related to the discontinued operations results is provided separately; following the continuing operations discussion below.

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

Net Sales — Continuing Operations

      Net sales decreased slightly to $2.8 billion and $5.4 billion for the three and six months ended February 28, 2005, respectively, from $2.9 billion and $5.6 billion in the corresponding periods of fiscal 2004. The net sales dollars have not varied significantly between periods; however, the sales mix between end-markets has changed. We saw revenue dollar increases in the communications, networking, industrial, automotive and other end-markets of 8.7% and 10.9% for the three and six months ended February 28, 2005, respectively, compared to the corresponding periods in fiscal 2004. The networking end-market was the biggest contributor to this increase due to increases in demand for routers, switches, and optical transport products from our largest customer. We have seen a decline in the computing and storage end-market of 10.6% and 16.5% for the three and six months ended February 28, 2005, respectively, compared to the corresponding periods in fiscal 2004. The decline in the computing and storage end-market is due primarily to the disengagement of certain low-margin programs. The consumer end-market business decreased approximately 26.7% in the second quarter of fiscal 2005 compared to second quarter of fiscal 2004 but only 11.7% for the six months ended February 28, 2005 compared to the same period in fiscal 2004. Our consumer business was impacted by lower sales in set top boxes and cellular handsets to our customers.

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      The following table depicts, for the periods indicated, revenue by market expressed as a percentage of net sales. The distribution of revenue across our markets has fluctuated, and will continue to fluctuate, as a result of numerous factors, including but not limited to: increased business from new and existing customers; fluctuations in customer demand; seasonality; and growth in outsourcing.

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

International Sales — Continuing Operations

      In the three and six months ended February 28, 2005, our international locations contributed approximately 69.9% and 70.3% of net sales compared to approximately 73.3% and 72.7%, respectively, for the corresponding period of fiscal 2004.

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:

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

***  Less than 10%

      Our top ten customers accounted for approximately 63.5% and 61.5% of net sales for the three and six months ended February 28, 2005, compared to approximately 62.0% and 60.0% in the corresponding periods of fiscal 2004.

      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

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and consolidation of manufacturing facilities, utilization of manufacturing capacity, pricing, competition, and unanticipated restructuring or inventory charges.

      Our gross profit percentage increased to 5.7% and 5.8% for the three and six months ended February 28, 2005, respectively compared to 4.4% and 4.6% for the corresponding periods in fiscal 2004, respectively. The gross profit improvement was the result of effectively implementing the Lean Initiative in our manufacturing sites around the world and increasing discipline in our quote process for new business.

      Sales of inventory previously written down or written off have not been significant and have not had any material impact on our gross profits for the three and six months ended February 28, 2005.

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

      SG&A expenses decreased $9.1 million, or 8.0%, for the three months ended February 28, 2005 compared to the corresponding period in fiscal 2004. SG&A expenses decreased $27.9 million, or 12.2% for the six months ended February 28, 2005, compared to the corresponding period in fiscal 2004. As a percentage of net sales, SG&A expenses decreased to 3.8% and 3.7% for the three and six months ended February 28, 2005, respectively, compared to 3.9% and 4.1% in the corresponding periods in fiscal 2004. The decrease in SG&A as a percentage of sales between the six month periods is a result of the full realization of our cost reduction initiatives that began in fiscal year 2003.

Restructuring and Impairment — Continuing Operations

      During the second quarter of fiscal 2005, restructuring and impairment costs of $43.2 million were charged against operations. The charges are primarily related to an impairment charge of approximately $40 million resulting from a sales agreement involving a facility in Japan in the second quarter of fiscal 2005. The remaining costs relate to severance charges in Asia, Eastern Europe and Mexico due to site closings and transfer of business to other Solectron sites.

      We continue to evaluate our cost structure relative to future financial results and customer demand. If our estimates about future financial results and customer demand prove to be inadequate, our condensed consolidated financial condition and results of operations may suffer.

Interest Income — Continuing Operations

      Interest income increased $5.4 million to $9.1 million for the three months ended February 28, 2005 from $3.7 million in the corresponding period in fiscal 2004. Interest income increased $8.7 million to $14.9 million for the six months ended February 28, 2005 from $6.2 million in the corresponding period in fiscal 2004. The increase was due to increased average cash and cash equivalent balances and higher interest rates.

Interest Expense — Continuing Operations

      Interest expense decreased $27.7 million to $16.7 million for the three months ended February 28, 2005 from $44.4 million in the corresponding period in fiscal 2004. Interest expense decreased $55.3 million to $33.0 million for the six months ended February 28, 2005 from $88.3 million in the corresponding period in fiscal 2004. The decrease was primarily due to the retirement of approximately $1.6 billion aggregate principal amount of our LYONs and the settlement of approximately 94% of our ACES debentures during fiscal 2004.

Other Income — net — Continuing Operations

      Other income — net decreased $0.9 million to $1.1 million for the three months ended February 28, 2005 from $2.0 million in the corresponding period in fiscal 2004. Other income — net decreased $0.4 million to $5.8 million for the six months ended February 28, 2005 from $6.2 million in the corresponding period in fiscal 2004. The fluctuation is primarily due to foreign currency gains and losses.

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Income Taxes — Continuing Operations

      Our income tax expense was $6.6 million and $12.5 million, respectively, for the three and six months ended February 28, 2005 as compared to an income tax expense of $0.5 million and $2.1 million, respectively, for the three and six months ended February 28, 2004. We incurred net tax expense in certain countries in which we had profitable operations during the periods ended February 28, 2005.

      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 January 2012, subject to certain conditions, including maintaining certain levels of research and development expenditures. The Singapore tax holiday is effective through March 2011, subject to certain conditions. Several of our China sites have separate tax holiday agreements.

      Certain of our offshore operations are reporting taxable profits, mostly arising in low-cost locations. Accordingly, we are recognizing some tax expense related to those operations. We will not be able to offset this tax expense with unrecognized deferred tax assets described above, because, for the most part, those assets did not arise in the jurisdictions where we are realizing taxable profits.

      In addition, Solectron has established contingency reserves for income taxes in various jurisdictions. The estimate of appropriate tax reserves is based upon the amount of prior tax benefit that might be at risk upon audit and upon the reasonable estimate of the amount at risk. Solectron periodically reassess the amount of such reserves and adjust reserve balances as necessary.

      On October 22, 2004, the American Jobs Creation Act (“the AJCA”) was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. The Company may elect to apply this provision to qualifying earnings repatriations in either the balance of fiscal 2005 or in fiscal 2006. Management has evaluated the effects of the repatriation provisions and determined that the Company will not elect to repatriate qualified earnings under these provisions, but will continue with its policy of indefinite reinvestments of foreign earnings.

Liquidity and Capital Resources — Continuing Operations

      Cash and cash equivalents increased to approximately $2.0 billion at February 28, 2005 from approximately $1.4 billion at August 31, 2004. The table below, for the periods indicated, provides selected condensed consolidated cash flow information (in millions):

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

      Net cash provided by operating activities was $476.6 million during the six months ended February 28, 2005. This cash was generated by a $44.4 million income from continuing operations, a $161.3 million decrease in accounts receivable, a $213.9 million decrease in inventories, a $14.9 million decrease in prepaids and other current assets, a $40.8 million change in the carrying value of property and equipment, goodwill and other long-term assets, and non-cash depreciation and amortization charges of $99.6 million. These were offset by a $55.5 million decrease in accounts payable, and a $44.4 million decrease in accrued expenses and other current liabilities. The decrease in inventory levels and accounts payable is due to lower levels of material purchases resulting from lower first quarter revenue. Accounts receivable has decreased in conjunction with lower revenues in the quarter.

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      Net cash used in investing activities of $16.7 million during the six months ended February 28, 2005 primarily consisted of net proceeds of $30.0 million received from the disposition of one of our discontinued operations, $16.0 million received from the sale of our investment in ECS Holdings, a $19.9 million settlement of a receivable related to synthetic leases and $9.3 million in proceeds from the sale of property and equipment. These were offset by $66.1 million in capital expenditures and $22.9 million in advances to discontinued operations.

      Net cash provided by financing activities of $54.0 million during the six months ended February 28, 2005 primarily consisted of the proceeds from issuance of common stock of $64.3 million related to the retirement of ACES securities, $8.1 million of proceeds from the stock issued under option and employee purchase plans, offset by $16.5 million of repayment of debt related to various debt facilities.

      As of February 28, 2005, we had available a $500 million revolving credit facility that expires on August 20, 2007. Our revolving credit facility 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 facility bear interest, at our option, at the London Interbank offering rate (LIBOR) plus a margin of 2.25% based on our current senior secured 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 February 28, 2005, there were no borrowings outstanding under this facility. We are subject to compliance with certain financial covenants set forth in this facility including, but not limited to, capital expenditures, cash interest coverage and leverage. We were in compliance with all applicable covenants as of February 28, 2005.

      In addition, we had $10.2 million in committed and $176.6 million in uncommitted foreign lines of credit and other bank facilities as of February 28, 2005 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 1.0%. As of February 28, 2005, borrowings and guaranteed amounts were $3.5 million under committed and $0 under uncommitted foreign lines of credit.

      Borrowings are payable on demand. The weighted-average interest rate was 2.29% for committed foreign lines of credit as of February 28, 2005.

      During the first quarter of fiscal 2005, we issued 6.6 million shares of common stock for total net proceeds of $64.3 million in connection with the settlement and retirement of the equity component of our remaining outstanding ACES units, as defined in the ACES agreement.

      $150.0 million aggregate principal amount of 7.375% senior notes is due on March 1, 2006, our $500.0 million aggregate principal amount of 9.625% senior notes is due on February 15, 2009, and our $450.0 million aggregate principal amount of 0.5% convertible senior notes is callable by the holders on February 15, 2011. On April 6, 2005, the Board of Directors approved the redemption of our outstanding 9.625% senior notes due 2009, in aggregate principal amount of $500 million, in accordance with the terms of the indenture under which the notes were issued. We anticipate effecting the redemption during the third quarter of fiscal 2005.

      We have synthetic lease agreements relating to four manufacturing sites for continuing operations. 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 first party to purchase the facilities subject to the synthetic leases for the “Termination Value,” which approximates the lessor’s original cost for each facility, or we may market the property to a first party at a different price. We are entitled to any proceeds from a sale of the properties to first parties in excess of the Termination Value and liable to the lessor for any shortfall. We provided loans to the lessor equaling approximately 85% of the Termination Value for each synthetic lease. These loans are repayable solely from the sale of the properties to first 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

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payable if we purchase the properties. The approximate aggregate Termination Values and loan amounts are $101.3 million and $86.1 million, respectively, as of February 28, 2005.

      Cash collateral of $15.2 million is pledged for the difference between the aggregate 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. We were in compliance with all applicable covenants as of February 28, 2005. Monthly lease payments are generally based on the Termination Value and 30-day LIBOR index (2.59% as of February 28, 2005) 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 Termination Value for each synthetic lease.

      We have determined that it is probable that the expected fair value of the properties at the end of each of the various synthetic lease terms will be less than the applicable Termination Value. Accretion expense during the quarter ending February 28, 2005 was $1.1 million.

      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 and cash equivalents, respectively, in the condensed consolidated balance sheets.

      We believe that our current cash, cash equivalents, lines of credit and cash anticipated to be generated from continuing operations and divestitures of our discontinued operation 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 February 28, 2005 for continuing operations:

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

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

      Other long-term liabilities of $47.5 million disclosed on the consolidated financial statements includes deferred tax liabilities related to timing differences, which due to their nature are not projected.

Off-Balance Sheet Arrangements and Contractual Obligations

      Our off-balance sheet arrangements and contractual obligations consist of our synthetic and operating leases, our interest rate swap instrument related to our long-term debt (described in the “We are exposed to interest rate fluctuations” Risk Factor), our foreign exchange contracts (described in the “We are exposed to fluctuations in foreign currency exchange rates” Risk Factor), and certain indemnification provisions related to our seven divestures (described in the “Discontinued Operations” portion below).

      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.

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Discontinued Operations

      In the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004, we designated the following businesses as discontinued operations: Dy 4 Systems Inc., Kavlico Corporation, our MicroTechnology division, SMART Modular Technologies Inc., Stream International Inc., our 63% interest in US Robotics Corporation, and Force Computers, Inc. In fiscal 2004, all of the businesses were sold except the MicroTechnology division.

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

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

      Net sales, gross profit, operating expenses (income) — net, interest income — net, other income (expense) net, and income tax expense from discontinued operations decreased for the three months ended February 28, 2005 as compared to the same period in fiscal 2004 primarily due to the fact that all of the discontinued operations were sold in previous fiscal periods. During the second quarter of fiscal 2005, Solectron sold a building that was subject to a synthetic lease agreement. The synthetic lease agreement was associated with a discontinued operation that has been sold. As a result of the transaction, Solectron recorded a gain of approximately $0.9 million in operating expenses (income) — net as disclosed above.

      Net sales, gross profit, operating expenses (income) — net, interest income — net, other income (expense) net, and income tax expense from discontinued operations decreased for the six months ended February 28, 2005 as compared to the same period in fiscal 2004 primarily due to the fact that the final discontinued operation was sold in the first quarter of fiscal 2005. Furthermore, we recorded $10.1 million pre-tax gain from the sale of the discontinued operations recorded in operating (income) expenses — net in the first quarter of fiscal 2005. As a result of this disposition, we transferred approximately $28.3 million from accumulated foreign currency translation gains, included in accumulated other comprehensive losses within Stockholders Equity and recognized that amount as part of the pre-tax gain.

      During fiscal 2004, we completed the sale of six discontinued operations. During the first quarter of fiscal 2005, we decreased the net loss on the disposal of these discontinued operations by approximately $1.0 million resulting from a few insignificant adjustments pursuant to the terms of the disposal transaction. For the six months ended February 28, 2005, the adjustment to the net loss on these discontinued operations is recorded in operating (income) expenses — net as disclosed above.

      The sale agreements for all seven divestitures contain certain indemnification provisions under which we may be required to indemnify the buyer of the divested business for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. In aggregate, we are contingently liable for up to $94.8 million for a period of 12 to 24 months subsequent to the completion of the sale. As of February 28, 2005 there were no

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significant liabilities recorded under these indemnification obligations. Additionally, we may be required to indemnify a buyer for environmental remediation costs for a period up to 10 years and not to exceed $13 million. We maintain an insurance policy to cover environmental remediation liabilities in excess of reserves previously established upon the acquisition of these properties. We did not record any environmental charges upon disposition of these properties.

      The sale agreements of the discontinued operations generally include terms which may result in adjustments to the gain or loss in fiscal quarters subsequent to the closing of the sale.

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RISK FACTORS

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

      Most of our annual net sales come from a small number of our customers. Our ten largest customers accounted for approximately 63.5% and 62.0% of net sales from continuing operations in the second quarter of fiscal 2005 and 2004, respectively. During the second quarter of fiscal 2005, two of these customers individually accounted for more than ten percent of our 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, consolidated 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 consolidated 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 domestic or worldwide economic conditions.

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 outside of our control. 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. Furthermore, delays in the repayment of our expenditures for inventory in preparation for customer orders and lower asset utilization in those periods would result in lower gross profits. 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 properly executed, could 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.

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

      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

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unable to use or sell such inventory, our consolidated 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. In the past, some of our customers have defaulted on their obligations to purchase inventory back from us. There is a risk that, in the future, these or other customers may not purchase inventory back from us despite contractual obligations, which could harm our consolidated 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 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 provisions for excess and obsolete inventory, and could have a material adverse impact on our consolidated 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 consolidated financial condition.

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

      Approximately 69.9% and 73.3% of our net sales from continuing operations are the result of services and products manufactured in countries outside the United States during the second quarter of fiscal 2005 and 2004, 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;

•  economic and political risks in emerging or developing economies; and

•  risks of conflict and terrorism that could disrupt our or our customers’ and suppliers’ businesses.

      We have been granted tax holidays, which are effective through 2012 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

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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 general economic conditions, which could have a material adverse impact on our business, operating results and consolidated financial condition.

      As a result of the recent economic conditions in the U.S. and internationally, and reduced capital spending as well as uncertain end-market demand, our customers’ and therefore our sales have been difficult to forecast with accuracy. If there were to be continued or resumed weakness in the industries we serve, 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 consolidated 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 consolidated financial condition.

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

      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 profit than low volume/complex printed circuit boards and systems assembly services;

•  our ability to maximize the hours of use of our equipment and facilities is dependent on the duration of the production run time for each job and customer;

•  the amount of automation that we can use in the manufacturing process for cost reduction varies, depending upon the complexity of the product being made;

•  our customers’ demand for our products and their ability to take delivery of our products and to make timely payments for delivered products;

•  our ability to optimize the ordering of inventory as to timing and amount to avoid holding inventory in excess of immediate production needs;

•  our ability to offer technologically advanced, cost-effective, quick response, manufacturing services;

•  fluctuations in the availability and pricing of components;

•  timing of expenditures in anticipation of increased sales;

•  cyclicality in our target markets;

•  fluctuations in our market share;

•  expenses and disruptions associated with acquisitions and divestitures;

•  announcements of operating results and business conditions by our customers;

•  announcements by our competitors relating to new customers or technological innovation or new services;

•  economic developments in the electronics industry as a whole;

•  credit rating and stock analyst downgrades;

•  political and economic developments in countries in which we have operations; and

•  general market conditions.

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      If 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 consolidated financial condition and results of operations may suffer.

      We incurred approximately $43.2 million of restructuring and impairment costs relating to continuing operations in the second quarter of fiscal 2005 and approximately $74.0 million during the second quarter of fiscal 2004. If our estimates about previous restructuring charges prove to be inadequate, our consolidated financial condition and results of operations may suffer. While we believe our capacity is appropriate for current revenue levels, we continue to evaluate our cost structure relative to future financial results and customer demand. If our estimates about future financial results and customer demand prove to be inadequate, our consolidated financial condition and consolidated results of operations may suffer.

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

      We 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 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 have experienced instances in which customers have transferred certain portions of their business to competitors in response to more attractive pricing quotations than we have

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been willing to offer, and there can be no assurance that we will not lose business in the future in response to such competitive pricing or other inducements which may be offered by our competitors.

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 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 exceeds the value we are ultimately able to realize from the future business of the OEM;

•  the integration into our business of the acquired assets and facilities may be time-consuming and costly;

•  we, rather than the divesting OEM, would bear the risk of excess capacity;

•  we may not achieve anticipated cost reductions and efficiencies;

•  we may be unable to meet the expectations of the OEM as to volume, product quality, timeliness and cost reductions; and

•  if demand for the OEM’s products declines, the OEM may reduce its volume of purchases, and we may not be able to sufficiently reduce the expenses of operating the facility or use the facility to provide services to other OEMs, and we might find it appropriate to close, rather than continue to operate, the facility, and any such actions would require us to incur significant restructuring and/or impairment charges.

      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 future acquisitions, and cost-effectively run our operations, our profitability could be adversely affected.

      Our ability to manage and integrate future acquisitions will require successful integration of such acquisitions into our manufacturing and logistics infrastructure, and may require 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

41

consistent with our business activities could harm our consolidated 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.

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

      The sale agreement for each of our divested businesses contains indemnification provisions under which we may be required to indemnify the buyer of the divested business for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. While we believe, based upon the facts presently known to us, that we have made adequate provision for any such potential indemnification obligations, it is possible that other facts may become known in the future which may subject us to claims for additional liabilities or expenses beyond those presently anticipated and provided for. Should any such unexpected liabilities or expenses be of a material amount, our finances could be adversely affected.

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

      Section 404 of the Sarbanes Oxley Act of 2002 (“S404”) requires that we evaluate and report on the effectiveness of Solectron’s internal controls over financial reporting beginning with the annual report filed on Form 10-K for the reporting period ending August 31, 2005. In addition, our independent auditors must report on management’s evaluation of Solectron’s internal controls. We are currently in the process of evaluating, documenting and testing internal controls that will be used as the basis for the S404 management report to be included in the Form 10-K. A material weakness in our internal controls over financial reporting has been identified in connection with our S404 efforts and the control issues surrounding this material weakness have been or are in the process of being remediated. Our ongoing evaluation and testing of internal controls may result in the identification of additional deficiencies, which may require further remediation efforts and enhancements or changes to internal controls in order to satisfy the requirements of S404. Any delay or failure to implement required new or improved controls, or difficulties encountered in the implementation of such new or improved controls, could have implications on our consolidated operating results and could result in a material weakness or weaknesses, each of which would be required to be reported in the Form 10-K.

We are exposed to fluctuations in foreign currency exchange rates.

      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 consolidated financial condition.

      We enter into foreign exchange forward contracts intended to reduce the short-term impact of foreign currency fluctuations on foreign currency cash, receivables, investments, payables and indebtedness. 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 February 28, 2005, we had outstanding foreign exchange forward contracts with a total notional amount of approximately $579.0 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 February 28, 2005, 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 hedge because both operating expenses and a

42

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 26.8% of our net sales from continuing operations in the first quarter of fiscal 2005 were denominated in currencies other than the U.S. dollar, we do not believe our total exposure to be significant because of natural hedges.

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 in a variety of securities, including government and corporate obligations, certificates of deposit and money market funds. As of February 28, 2005, 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 February 28, 2005, we had no cash equivalents that were 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 approximated the carrying value as of February 28, 2005.

      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. On November 15, 2002, we entered into an interest rate swap transaction under which we pay variable rates and we receive fixed rate. The interest swap effectively converted $500 million of our long-term debt with fixed interest rate into debt with variable rates of interest. Our interest rate swap, which expires on February 15, 2009, has a total notional amount of $500 million and relates to our 9.625% $500 million senior notes. Under this swap transaction we pay an interest rate equal to the 3-month LIBOR rate plus a fixed spread. In exchange, we receive fixed interest rates of 9.625%. Our interest rate swap creates interest rate risk for us. A hypothetical 50 basis point change in interest rates would not have a material effect on our consolidated financial position, results of operations and cash flows over the next fiscal year.

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 business.

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. We are also required to comply with laws and regulations relating to occupational safety and health, product disposal and product content and labeling. 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, consolidated financial condition and results of operations. Nevertheless, the process of remediating contamina-

43

tion 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, consolidated financial condition and results of operations in the future.

      In general, we are not directly responsible for compliance with laws like Waste Electrical and Electronic Equipment (WEEE) and Restrictions of Hazardous Substances (RoHS). These WEEE and RoHS laws generally apply to our OEM customers; Solectron may, however, provide compliance-related services to our customers upon request. Failing to have the capability of delivering the products which comply with these present and future environmental laws and regulations could restrict our ability to expand facilities, or could require us to acquire costly equipment or to incur other significant expenses to comply with environmental regulations, and could impair our relations with our customers. Moreover, to the extent we are found non-compliant with any environmental laws and regulations applicable to our activities, we may incur substantial fines and penalties.

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

      Our ability to effectively compete may be affected by our ability to protect our proprietary information. We hold a number of patents, patent applications, and 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, or we might find it necessary to initiate litigation proceedings to protect our intellectual property rights. Any such litigation could be lengthy and costly and could harm our consolidated financial condition.

      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, consolidated financial condition and results of operations.

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. On June 22, 2004, Standard and Poor’s affirmed our senior unsecured rating and revised our outlook to positive from stable.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

      See Management’s Discussion and Analysis of Financial Condition and Results of Operations for factors related to fluctuations in the exchange rates of foreign currency and fluctuations in interest rates under “Risk Factors — We are exposed to fluctuations in foreign currency exchange rates,” and “We are exposed to interest rate fluctuations.”

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

      As discussed in Note 2 to the consolidated financial statements contained herein, we have restated our consolidated financial statements for the years 2002 through 2004 and for the first quarter of 2005. Specifically, there were circumstances in which certain financial statement accounts were not being analyzed

44

on a timely basis, resulting in an accumulation of accounting errors that were not being corrected in the appropriate period. The primary financial statement accounts in which accounting errors were identified included accounts payable and accrued liabilities, income taxes, goodwill and intangible assets, and property and equipment. Management has determined that this failure to comply with such routine account reconciliation procedures was an internal control deficiency in the financial reporting process at November 30, 2004. This discovery and the resulting restatement are described in the Note 2 to the consolidated financial statements contained herein.

      Management also determined that the internal control deficiency that resulted in this Restatement represents a material weakness in our internal control over financial reporting, as defined by the Public Company Accounting Oversight Board’s Auditing Standard No. 2. The Public Company Accounting Oversight Board has defined material weakness as “a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.” Our conclusion that the control issues surrounding financial reporting constituted a material weakness means that, absent remediation of these issues, there would exist a reasonable possibility that a material misstatement in our consolidated financial statements might occur in future periods.

      Furthermore, on April 11, 2005, we received a letter concerning this material weakness from our independent registered public accounting firm, KPMG LLP, regarding these same issues.

      To date, we have taken steps to improve our internal control over financial reporting, including the following:

•  Account Analysis & Reconciliation: Solectron’s financial close checklist (“FCC”) has been expanded to address the various account analysis and reconciliation issues addressed in this Restatement. In particular, the areas of general ledger analyses and intercompany accounts have been added to the FCC beginning with the quarter ended February 28, 2005. In addition, regional and corporate financial management will provide additional levels of review concerning these issues.

•  Foreign Exchange Translation: All locations with significant foreign currency exchange transactions have been identified and are now subject to compliance with the FCC noted above, effective February 28, 2005. Solectron currently anticipates that it will be eliminating a number of its legal entities, thereby reducing related financial and accounting complexity and simplifying the accounting treatment of these types of items.

•  Income Taxes: Previous issues relating to income tax account roll-forwards have been identified and corrected. In addition Solectron’s management has migrated the tax account roll-forwards to an automated system (CorpTax), which will facilitate accurate and timely treatment of these items, effective February 28, 2005. In addition, Solectron’s management has engaged a third party specialist to assist Solectron personnel conducting comprehensive and detailed reviews of Solectron’s tax reporting and accounting.

      In addition, we have been engaged in an ongoing process of identifying, documenting and testing our internal controls over financial reporting in anticipation of our required compliance with Section 404 of the Sarbanes-Oxley Act at the end of fiscal 2005. We anticipate that we will be making further changes in our internal controls as a result of these efforts.

      Although we have taken the remedial actions described above, we have not yet had time to retest the affected controls in order to ascertain whether the material weakness has been remediated. Based on our progress, we do fully expect the material weakness to be remediated on or before May 31, 2005 and to be able to conclude that our internal control over financial reporting and our disclosure controls and procedures are effective as of that date.

      In connection with the preparation and filing of this Form 10-Q, we reevaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of

45

the fiscal year covered by this report. Based on the material weakness described above, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of February 28, 2005.

Changes in internal control over financial reporting.

      We did not make any changes to our internal control over financial reporting during the period ended February 28, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, as discussed above, since February 28, 2005, we have made changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

      Solectron has settled the previously reported shareholder derivative lawsuit entitled Lifshitz v. Cannon et al., Case No. CV815693, filed in the Santa Clara County, California Superior Court, on terms not considered to be material to Solectron. Court approval of the settlement terms was obtained on December 16, 2004.

      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, as amended (the “Exchange Act”), 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 Solectron’s former 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, as amended (the “Securities Act”), 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 former Technology Solutions business unit, the Consolidated Amended Complaint adds allegations of inadequate disclosure and failure to properly account for excess and obsolete inventory at Solectron’s other business units. The complaint seeks an unspecified amount of damages on behalf of the putative class. Solectron believes it has valid defenses to the plaintiffs’ claims. 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, consolidated financial condition and results of operations. In addition, Solectron may be forced to incur substantial litigation expenses in defending this litigation.

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Item 6. Exhibits

      (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	2002 Stock Plan, as amended
	10	.2	Form of Indemnification Agreement for independent, non-employee directors
	10	.3	Form of Employment Agreement for executive officers Craig London, Marty Neese, Kevin O’Connor, Kiran Patel, and Dave Purvis
	10	.4	Amendment Agreement entered into as of January 13, 2005, among the Company, the lending institutions party thereto, and Bank of America, N.A., as Administrative Agent
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

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

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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)

By /s/ Kiran Patel

Kiran Patel

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

By /s/ Warren Ligan

Warren Ligan

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

Date: April 14, 2005

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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	2002 Stock Plan, as amended
	10	.2	Form of Indemnification Agreement for independent, non-employee directors
	10	.3	Form of Employment Agreement for executive officers Craig London, Marty Neese, Kevin O’Connor, Kiran Patel, and Dave Purvis
	10	.4	Amendment Agreement entered into as of January 13, 2005, among the Company, the lending institutions party thereto, and Bank of America, N.A., as Administrative Agent
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

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

EX-10.1

EXHIBIT 10.1

SOLECTRON CORPORATION

2002 STOCK PLAN

Amended as of February 22, 2005

     1. Purposes of the Plan. The purposes of this 2002 Stock Plan are:

•   to attract and retain the best available personnel for positions of substantial responsibility,

•   to provide additional incentive to Employees, Directors and Consultants, and

•   to promote the success of the Company’s business.

     Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant.

     2. Definitions. As used herein, the following definitions shall apply:

       (a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

       (b) “Applicable Laws” means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

       (c) “Board” means the Board of Directors of the Company.

       (d) “Change in Control” means the occurrence of any of the following events:

          (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

          (ii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” will mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

          (iii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

          (iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

       (e) “Code” means the Internal Revenue Code of 1986, as amended.

       (f) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

       (g) “Common Stock” means the common stock of the Company.

       (h) “Company” means Solectron Corporation, a Delaware corporation.

       (i) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

       (j) “Director” means a member of the Board.

       (k) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

       (l) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91^st day of such leave, any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

       (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

       (n) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price

-2-

for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

          (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

          (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

       (o) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

       (p) “Inside Director” means a Director who is an Employee.

       (q) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

       (r) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement.

       (s) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

       (t) “Option” means a stock option granted pursuant to the Plan.

       (u) “Option Agreement” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

       (v) “Optioned Stock” means the Common Stock subject to an Option.

       (w) “Optionee” means the holder of an outstanding Option granted under the Plan.

       (x) “Outside Director” means a Director who is not an Employee.

       (y) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

       (z) “Plan” means this 2002 Stock Plan, as amended and restated.

       (aa) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

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       (bb) “Section 16(b) “ means Section 16(b) of the Exchange Act.

       (cc) “Service Provider” means an Employee, Director or Consultant.

       (dd) “Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

       (ee) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 35,000,000 Shares plus (a) any Shares which have been reserved but not issued under the Company’s 1992 Stock Option Plan (the “1992 Plan”) as of the date of stockholder approval of this Plan and (b) any Shares returned to the 1992 Plan as a result of termination of options or repurchase of Shares issued under the 1992 Plan. The Shares may be authorized, but unissued, or reacquired Common Stock.

     If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of restricted stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

     4. Administration of the Plan.

       (a) Procedure.

          (i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.

          (ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.

          (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

          (iv) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

       (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

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          (i) to determine the Fair Market Value;

          (ii) to select the Service Providers to whom Options may be granted hereunder;

          (iii) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

          (iv) to approve forms of agreement for use under the Plan;

          (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

          (vi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

          (vii) to establish, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

          (viii) to modify or amend each Option (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

          (ix) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

          (x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator;

          (xi) to correct any defect, supply any omission, or reconcile any inconsistency in the Plan, or in any Option Agreement, in a manner and to the extent it shall deem necessary, all of which determinations and interpretations made by the Administrator shall be conclusive and binding on all Optionees, any other holders of Options and on their legal representatives and beneficiaries; and

          (xii) except to the extent prohibited by, or impermissible in order to obtain treatment desired by the Administrator under, applicable law or rule, to allocate or delegate all or any portion of its powers and responsibilities to any one or more of its members or to any person(s)

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selected by it, subject to revocation or modification by the Administrator of such allocation or delegation.

          (xiii) to make all other determinations deemed necessary or advisable for administering the Plan.

       (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options.

     5. Eligibility. Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

     6. Limitations.

       (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

       (b) Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.

       (c) The following limitation shall apply to grants of Options:

          (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 750,000 Shares.

          (ii) The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 13.

     7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock

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Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

     9. Option Exercise Price and Consideration.

       (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

          (i) In the case of an Incentive Stock Option

             (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

             (B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

          (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

          (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.

       (b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.

       (c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist of (without limitation):

          (i) cash;

          (ii) check;

          (iii) other Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

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          (iv) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

          (v) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

          (vi) any combination of the foregoing methods of payment; or

          (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

     10. Exercise of Option.

       (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse or in the name of a family trust of which the Optionee is a trustee. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised; provided that if the Company shall be advised by counsel that certain requirements under the Federal, state or foreign securities laws must be met before Shares may be issued under this Plan, the Company shall notify all persons who have been issued Options, and the Company shall have no liability for failure to issue Shares under any exercise of Options because of delay while such requirements are being met or the inability of the Company to comply with such requirements. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

       (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the

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term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for sixty (60) days following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

       (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for six (6) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

       (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised following the Optionee’s death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by the Optionee’s designated beneficiary, provided such beneficiary has been designated prior to the Optionee’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for nine (9) months following the Optionee’s death. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

     11. Transferability of Options. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate.

     12. Formula Option Grants to Outside Directors. Outside Directors shall be automatically granted Options each year in accordance with the following provisions:

       (a) All Options granted pursuant to this Section shall be Nonstatutory Stock Options and, except as otherwise provided herein, shall be subject to the other terms and conditions of the Plan.

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       (b) Each person who first becomes an Outside Director on or after January 7, 2004, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy, shall be automatically granted an Option to purchase 20,000 Shares (the “First Option”) on the date he or she first becomes an Outside Director.

       (c) Each Outside Director shall be automatically granted an Option to purchase 20,000 Shares (a “Full Subsequent Option”) on December 1 of each year (beginning in 2004), provided such Outside Director was an Outside Director on or before the last day of the first quarter of the fiscal year of the Company just ended.

       (d) On December 1 of each year, each Outside Director who was not an Outside Director on or before the last day of the first quarter of the fiscal year of the Company just ended shall be automatically granted a pro-rated Full Subsequent Option (a “Partial Subsequent Option”) calculated according to the number of quarters of service provided by such Outside Director in the just ended fiscal year of the Company. For purposes of this calculation, service for only a portion of the quarter shall be deemed service for the whole quarter.

       (e) Notwithstanding the provisions of subsections (b), (c) and (d) hereof, any exercise of an Option granted before the Company has obtained stockholder approval of the Plan in accordance with Section 19 hereof shall be conditioned upon obtaining such stockholder approval of the Plan in accordance with Section 19 hereof.

       (f) The terms of each Option granted pursuant to subsections (b), (c) and (d) shall be as follows:

          (i) the term of each Option shall be seven (7) years.

          (ii) each Option shall only be exercisable while the Outside Director remains a Director; provided, however, that if the Outside Director (i) provides five (5) years of continuous service as a Director or (ii) voluntarily resigns as a Director after attaining the age of seventy (70), then each Option shall remain exercisable until the end of its seven-year term.

          (iii) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of an Option.

          (iv) each Option shall vest as to 1/12 of the Shares subject to such Option on each full month following its date of grant provided that the Optionee continues to serve as a Director on such date.

       (g) The Administrator in its discretion may change and otherwise revise the terms of Options granted under this Section 12, including, without limitation, the number of Shares and exercise prices thereof, for Options granted on or after the date the Administrator determines to make any such change or revision.

     13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Change in Control.

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       (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock that have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, the number of Shares as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

       (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

       (c) Merger or Change in Control. In the event of a merger of the Company with or into another corporation, or a Change in Control, each outstanding Option shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. With respect to Options granted to an Outside Director pursuant to Section 13 that are assumed or substituted for, if following such assumption or substitution the Optionee’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee, then the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable and such Option shall remain exercisable for a period of three (3) months following such termination.

          In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or Change in Control, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for a period of thirty (30) days, or such longer time as the Administrator may provide, from the date of such notice, and the Option shall terminate upon the expiration of such period.

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          For the purposes of this subsection (c), the Option shall be considered assumed if, following the merger or Change in Control, the option or right confers the right to purchase or receive, for each Share subject to the Option immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.

     14. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

     15. Amendment and Termination of the Plan.

       (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

       (b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws and Section 15(c) below.

       (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan or any Option shall (i) impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company or (ii) permit the reduction of the exercise price of an Option after it has been granted (except for adjustments made pursuant to Section 13). Neither may the Administrator, without the approval of the Company’s stockholders, cancel any outstanding Option and replace it with a new Option with a lower exercise price, where the economic effect would be the same as reducing the exercise price of the cancelled Option. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

     16. Conditions Upon Issuance of Shares.

       (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

       (b) Investment Representations. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any

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such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

     17. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

     18. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

     19. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

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EX-10.2

EXHIBIT 10.2

SOLECTRON CORPORATION

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (“Agreement”) is effective as of January 13, 2005 by and between Solectron Corporation, a Delaware corporation (the “Company”), and the indemnitee listed on the signature page hereto (“Indemnitee”).

     WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities;

     WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and the advancement of expenses to, Indemnitee to the maximum extent permitted by law;

     WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for the Company’s directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

     WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and

     WHEREAS, the Company and Indemnitee desire to continue to have in place the additional protection provided by an indemnification agreement and to provide indemnification and advancement of expenses to the Indemnitee to the maximum extent permitted by Delaware law.;

     NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

     1. Certain Definitions.

       (a) “Change in Control” shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for

election by the Company’s stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company’s assets.

       (b) “Claim” shall mean with respect to a Covered Event: any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other.

       (c) References to the “Company” shall include, in addition to Solectron Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Solectron Corporation (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

       (d) “Covered Event” shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary, partially or wholly owned, of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity.

       (e) “Expenses” shall mean any and all expenses (including attorneys’ fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in

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settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), actually and reasonably incurred, of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. If the Company agrees to a settlement without the consent of Indemnitee, Indemnitee shall be entitled to Expenses and Expense Advances. “Expenses” shall include expenses incurred in connection with any appeal of a matter covered hereby, including, without limitation, any premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent as well any taxes payable on any amounts paid under this Agreement.

       (f) “Expense Advance” shall mean a payment to Indemnitee pursuant to Section 3 of Expenses as incurred and in advance of the settlement of or final judgement in any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation which constitutes a Claim.

       (g) “Independent Legal Counsel” shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

       (h) References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

       (i) “Reviewing Party” shall mean, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with Section 145(d) of the Delaware General Corporation Law to review the Company’s obligations hereunder and under applicable law, which may include a member or members of the Company’s Board of Directors, Independent Legal Counsel or any other person or body not a party to the particular Claim for which Indemnitee is seeking indemnification.

       (j) “Section” refers to a section of this Agreement unless otherwise indicated.

       (k) “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

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     2. Indemnification.

       (a) Indemnification of Expenses. Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim (whether by reason of or arising in part out of a Covered Event), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses.

       (b) Review of Indemnification Obligations. Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law, the Company may commence a legal proceeding in a court of competent jurisdiction to determine whether Indemnitee is entitled to be indemnified hereunder under applicable law. The Company shall continue to be obligated to make Expense Advances in accordance with Section 3(a) unless and until a court having jurisdiction shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to such Expense Advances. Upon such final determination, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in indemnifying Indemnitee.

       (c) Indemnitee Rights on Unfavorable Determination. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking a determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding.

       (d) Selection of Reviewing Party; Change in Control. If there has not been a Change in Control, any Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company’s Certificate of Incorporation or Bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the

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Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees.

       (e) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been wholly or partly successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith.

     3. Expense Advances.

       (a) Obligation to Make Expense Advances. Upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined by a court of competent jurisdiction in which all rights of appeal have passed that the Indemnitee is not entitled to be indemnified therefor by the Company, the Company shall make Expense Advances to Indemnitee.

       (b) Form of Undertaking. Any written undertaking by the Indemnitee to repay any Expense Advances hereunder shall be unsecured and no interest shall be charged thereon.

       (c) Determination of Reasonable Expense Advances. The parties agree that for the purposes of any Expense Advance for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such Expense Advance that are certified by the Indemnitee as being reasonable shall be presumed conclusively to be reasonable.

     4. Procedures for Indemnification and Expense Advances.

       (a) Timing of Payments. All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than thirty (30)business days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made as soon as practicable and no later than ten (10) business days after such written demand by Indemnitee is presented to the Company. If payment of such Expenses and Expense Advancements is not made within ten (10) days following the expiration of their respective payment deadlines, the Indemnitee shall be entitled to adjudication in the State of Delaware.

       (b) Notice/Cooperation by Indemnitee. Indemnitee shallgive the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indem-

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nification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). The failure to so notify the Company shall not relieve the Company of any obligation that it may have to Indemnitee under this Agreement, or otherwise, so long as the Company is not prejudiced by the passage of time. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

       (c) No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by the Company or Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement or applicable law, shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

       (d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.

       (e) Selection of Counsel. In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee’s separate counsel in any such Claim at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee

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shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee’s separate counsel shall be Expenses for which Indemnitee shall receive indemnification and Expense Advances hereunder.

     5. Additional Indemnification Rights; Nonexclusivity.

       (a) Scope. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except as set forth in Section 10(a) hereof.

       (b) Nonexclusivity. The indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any other agreement, resolutions duly adopted by the Board of Directors, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.

     6. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company’s Certificate of Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.

     7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

     8. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in

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the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

     9. Liability Insurance. To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.

     10. Exceptions. Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement:

       (a) Excluded Action or Omissions. To indemnify Indemnitee for Expenses resulting from acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable law; provided, however, that notwithstanding any limitation set forth in this Section 10(a) regarding the Company’s obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances hereunder with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has engaged in acts, omissions or transactions for which Indemnitee is prohibited from receiving Expense Advances under this Agreement or applicable law.

       (b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee, except (i) Claims brought way way of defense, including without limitation, by way of counterclaim, cross-claim, interpleader or third party claim, (ii) with respect to actions or proceedings brought to establish or enforce a right to indemnification or Expense Advances under this Agreement or any other agreement or insurance policy or under the Company’s Certificate of Incorporation or Bylaws now or hereafter in effect, (iii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iv) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be.

       (c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material assertions made by the Indemnitee as a basis for such action was not made in good faith or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous.

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       (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute; provided, however, that notwithstanding any limitation set forth in this Section 10(d) regarding the Company’s obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances hereunder with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to receive Expense Advances from the Company.

     11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

     12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company’s request.

     13. Expenses Incurred in Action Relating to Enforcement or Interpretation. In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys’ fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final

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judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action.

     14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed (with a copy to counsel to such party), on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked (with a copy to counsel to such party). Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

     15. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.

     16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

     17. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.

     18. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

     19. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

     20. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

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     21. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities.

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     IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

SOLECTRON CORPORATION

By:
Name:
Title:
Address:	Solectron Corporation
	777 Gibraltar Drive
	Milpitas, California 95035

AGREED TO AND ACCEPTED

(Signature)

(Print Name)

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EX-10.3

EXHIBIT 10.3

SOLECTRON CORPORATION

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is made by and between Solectron Corporation (the “Company”), and [___] (“Executive”) as of January 14, 2005 (the “Effective Date”).

     1. Duties and Scope of Employment.

          (a) Positions and Duties. Executive will serve as the Company’s Executive Vice President, [___]. Executive will render such business and professional services in the performance of Executive’s duties, consistent with Executive’s position within the Company, as will reasonably be assigned to Executive by the Company’s Chief Executive Officer (the “CEO”) or the CEO’s designate. The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.”

          (b) Obligations. During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board of Directors of the Company (the “Board”) (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the Board, serve in any capacity with any civic, educational or charitable organization, provided such services do not interfere with Executive’s obligations to Company.

     2. Employee Benefits. During the Employment Term, Executive will be eligible to participate in accordance with the terms of all Company employee benefit plans, policies and arrangements that are applicable to other senior executives of the Company, as such plans, policies and arrangements and terms may exist from time to time.

     3. At-Will Employment. Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment. Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive. However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of Executive’s termination of employment.

     4. Compensation.

          (a) Base Salary. During the Employment Term, the Company will pay Executive an annual salary of $[___] as compensation for his services (the “Base Salary”). The Base Salary will be paid through payroll periods that are consistent with the Company’s normal payroll practices, but in all events will not be less frequent than once per month. Executive’s salary

will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

          (b) Bonuses. Executive may participate in any bonus plan or similar arrangement the Company may have in place that are applicable to other senior executives of the Company, on such terms and conditions as the Executive Compensation and Management Resources Committee of the Board (the “Committee”) may determine from time to time in its discretion.

          (c) Stock Options. Executive will be eligible to receive options to purchase the Company’s common stock pursuant to any plans or arrangements it may have in effect from time to time. The Committee will determine in its discretion whether Executive will be granted any such option or options and the terms of any such option or options in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time.

     5. Severance.

          (a) Involuntary Termination other than for Cause, Death or Disability Prior to a Change of Control or After Twelve Months Following a Change of Control. If the Company terminates Executive’s employment with the Company without Executive’s consent and for a reason other than Cause, Executive becoming Disabled or Executive’s death, any of which occur prior to a Change of Control or after twelve (12) months following a Change of Control and Executive signs and delivers to the Company a separation agreement and release of claims in a form satisfactory to the Company, then promptly following such termination of employment, or, if later, the effective date of the separation agreement and release of claims, Executive will receive the following severance from the Company:

               (i) Accrued Compensation. Executive will be entitled to receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with the Company’s then existing employee benefit plans, policies and arrangements.

               (ii) Severance Payment. Executive will be paid continuing payments of severance pay at a rate equal to Executive’s Base Salary rate, as then in effect, and Executive’s target bonus for the year of termination, for a period of twelve (12) months plus one additional month for every full year Executive has been employed with the Company as of the date of such termination, not to exceed twenty-four (24) months (the “Severance Payment Period”), from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; provided, however, that if during the Severance Payment Period Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement, all payments pursuant to this subsection will immediately cease

               (iii) Continued Employee Benefits. Executive will receive Company-paid coverage during the Severance Payment Period for Executive and Executive’s eligible dependents under the Company’s Benefit Plans; provided, however, that if during the Severance Payment Period Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement, all Company-paid coverage pursuant to this subsection will immediately cease.

               (iv) Payments or Benefits Required by Law. Executive will receive such other compensation or benefits from the Company as may be required by law (for example, “COBRA” coverage under Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”)).

          (b) Involuntary Termination other than for Cause, Death or Disability or Resignation for Good Reason within Twelve Months of a Change of Control. If within twelve (12) months following a Change of Control (i) Executive resigns from his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause Executive becoming Disabled or Executive’s death, and Executive signs and delivers to the Company a separation agreement and release of claims in a form satisfactory to the Company, then promptly following such termination of employment, or, if later, the effective date of the separation agreement and release of claims, Executive will receive the following severance from the Company:

               (i) Severance Payment. For a period of twenty-four (24) months following Executive’s termination of employment (the “Change of Control Severance Payment Period”), Executive will be paid continuing payments of severance pay equal to Executive’s average Base Salary rate for the two years prior to such termination, and Executive’s average annual target bonus for the two years prior to such termination, to be paid in equal installments periodically in accordance with the Company’s normal payroll practices; provided, however, that if Executive has been employed for less than two years prior to such termination, for a period of twenty-four (24) months following such termination, Executive will be paid continuing payments of severance pay equal to Executive’s average Base Salary rate for the period Executive was actually employed with the Company, and Executive’s average annual target bonus for the period Executive was actually employed with the Company, to be paid in equal installments periodically in accordance with the Company’s normal payroll practices; provided, further, that in the event Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement during the Change of Control Severance Payment Period, all payments pursuant to this subsection will immediately cease.

               (ii) Equity Awards. Executive’s then outstanding options to purchase shares of the Company’s Common Stock (whether granted on, before or after the date of this Agreement) (the “Options”) will immediately vest and become exercisable as to 100% of the shares subject to such Options. Additionally, shares of the Company’s Common Stock then held by Executive subject to a Company repurchase or reacquisition right (whether issued on, before or after the date of this Agreement) (the “Restricted Stock”) will immediately vest and have such Company right of repurchase or reacquisition lapse as to 100% of such shares. Additionally, Executive will have a period of three (3) months following such termination of employment to exercise Executive’s Options, but in no event beyond the original maximum term of the Option. In all other respects the Options and Restricted Stock will continue to be bound by and subject to the terms of their respective agreements.

               (iii) Continued Employee Benefits. Executive will receive Company-paid coverage for a period of thirty-six (36) months for Executive and Executive’s eligible dependents under the Company’s Benefit Plans; provided, however, that in the event Executive engages in

Competition or breaches the covenants in Section 12 or in the separation agreement during the thirty-six month period following such termination, all Company-paid coverage pursuant to this subsection will immediately cease.

               (iv) Payments or Benefits Required by Law. Executive will receive such other compensation or benefits from the Company as may be required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (c) Other Terminations. If Executive voluntarily terminates Executive’s employment with the Company (other than for Good Reason within twelve (12) months of a Change of Control) or if the Company terminates Executive employment with the Company for Cause, then Executive will (i) receive the Base Salary through the date of termination of employment, (ii) receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with established Company plans, policies and arrangements, and (iii) not be entitled to any other compensation or benefits (including, without limitation, accelerated vesting of stock options) from the Company except to the extent provided under the applicable stock option agreement(s) or as may be required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (d) Termination due to Death or Disability. If Executive’s employment with the Company is terminated due to Executive’s death or Executive’s becoming Disabled, then Executive or Executive’s estate (as the case may be) will (i) receive the Base Salary through the date of termination of employment, (ii) receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with Company-provided or paid plans, policies and arrangements, and (iii) not be entitled to any other compensation or benefits from the Company except to the extent required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (e) Section 409A. Any cash severance to be paid pursuant to Sections 5(a)(ii) and 6(b)(i) will not be paid during the six-month period following Executive’s termination of employment, unless the Company reasonably determines that paying such amounts immediately following Executive’s termination of employment would not result the imposition of additional tax under Section 409A of the Code (“Section 409A”), in which case such amounts shall be paid in accordance with normal payroll practices. If no cash severance is paid to Executive as a result of the previous sentence, on the first day following such six-month period, the Company will pay Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been paid to Executive pursuant to Sections 5(a)(ii) and 6(b)(i). Thereafter, Executive will receive his cash severance payments pursuant to Sections 5(a)(ii) and 6(b)(i) in accordance with the Company’s normal payroll practices.

     6. Golden Parachute Excise Tax.

          (a) In the event it will be determined that any payment or distribution by the Company or other amount with respect to the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 6 (a

“Payment”), is (or will be) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are (or will be) incurred by Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), Executive will be entitled to receive an additional cash payment (a “Gross-Up Payment”) from the Company in an amount equal to the sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed with respect to such taxes) relating to the Gross-Up Payment so that the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to the terms of this Agreement (excluding the Gross-Up Payment) or otherwise less income taxes (but not reduced by the Excise Tax or by income taxes attributable to the Gross-Up Payment).

          (b) Subject to the provisions of Section 6(c), all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at the determination, will be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, which should not unreasonably be withheld (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within 30 days after the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 6, will pay any Gross-Up Payment to Executive within five days after the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will so indicate to Executive in writing. Any determination by the Accounting Firm will be binding upon the Company and Executive. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.

          (c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day period that it desires to contest the claim, Executive will:

               (i) give the Company any information reasonably requested by the Company relating to the claim;

               (ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;

               (iii) cooperate with the Company in good faith in order effectively to contest the claim; and

               (iv) permit the Company to participate in any proceedings relating to the claim.

          (d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 6, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and sue for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 6(d), promptly pay to the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 6(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of 30 days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

     7. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

          (a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 7, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

          (b) Cause. “Cause” means (i) a willful failure by Executive to substantially perform Executive’s duties as an employee, other than a failure resulting from the Executive’s complete or partial incapacity due to physical or mental illness or impairment, (ii) a willful act by Executive that constitutes gross misconduct and that is injurious to the Company, (iii) circumstances where Executive willfully imparts material confidential information relating to the Company or its business to competitors or to other third parties other than in the course of carrying out Executive’s duties, (iv) a material and willful violation by Executive of a federal or state law or regulation applicable to the business of the Company or (v) Executive’s conviction or plea of guilty or no contest to a felony. No act or failure to act by Executive will be considered “willful” unless committed without good faith and without a reasonable belief that the act or omission was in the Company’s best interest.

          (c) Change of Control. “Change of Control” means the occurrence of any of the following:

               (i) the sale, lease, conveyance or other disposition of all or substantially all of the Company’s assets to any “person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended), entity or group of persons acting in concert;

               (ii) any person or group of persons becoming the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company’s then outstanding voting securities;

               (iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its controlling entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity (or its controlling entity) outstanding immediately after such merger or consolidation; or

               (iv) a contest for the election or removal of members of the Board that results in the removal from the Board of at least 33% of the incumbent members of the Board.

          (d) Competition. “Competition” will mean Executive’s direct or indirect engagement in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), or ownership interest in or participation in the financing, operation, management or control of, any person, firm, corporation or business that competes with Company or is a customer of the Company.

          (e) Disability. “Disability” will mean that Executive has been unable to perform the principal functions of Executive’s duties due to a physical or mental impairment, but only if such inability has lasted or is reasonably expected to last for at least six months. Whether Executive has a Disability will be determined by the Board based on evidence provided by one or more physicians selected by the Board.

          (f) Good Reason. “Good Reason” means (without Executive’s consent) (i) a material reduction in Executive’s title, authority, status, or responsibilities, (ii) a material breach by the Company of its obligations as an employee, or (iii) a relocation of Executive’s principal place of employment by more than twenty five (25) miles. With respect to a termination of employment that occurs during the six (6) month period immediately following a Change of Control, clause (i) of the preceding sentence will be applied by replacing the word “reduction” with the word “change.”

     8. Term of Agreement. This Agreement will have an initial term of two (2) years commencing on the Effective Date. On the second anniversary of the Effective Date and on each annual anniversary of the Effective Date thereafter, this Agreement automatically will renew for an additional term of one year unless at least three (3) months prior to such anniversary, Executive or the Company gives the other party written notice that the Agreement will not be renewed. Notwithstanding the foregoing provisions of this paragraph, in the event of a Change of Control, the term of this Agreement will extend through the one-year anniversary of such Change of Control. Additionally, on the anniversary of such Change of Control and each annual anniversary of the Change of Control thereafter, this Agreement automatically will renew for an additional term of one year unless at least three (3) months prior to such anniversary, Executive or the Company gives the other party written notice that the Agreement will not be renewed.

     If Executive incurs a termination of employment that entitles Executive to receive the payments and benefits described in Section 5, this Agreement will not terminate until all of Executive’s and the Company’s obligations under the Agreement have been satisfied. For avoidance of doubt, the expiration of this Agreement upon the provision of notice as provided in this Section 8 by either party will not by itself entitle Executive to any payments or benefits described in Section 5(a) or (b).

     9. Successors.

          (a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this

Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

          (b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

     10. Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Company:

Solectron Corporation
847 Gibraltar Drive
Milpitas, CA 95035

Attn: Chairman, Executive Compensation and Management Resources Committee of the Board of Directors

If to Executive:

Kiran Patel

at the last residential address known by the Company.

     11. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

     12. Non-Solicitation. For a period beginning on the Effective Date and ending one year after the Executive ceases to be employed by the Company or, if longer, upon the completion of the Severance Payment Period if Executive is entitled to severance under Section 5(a) or the Change of Control Severance Payment Period if Executive is entitled to receive severance under Section 5(b), Executive, directly or indirectly, whether as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer or otherwise, will: (i) not solicit, induce or influence any person to leave employment with the Company; or (ii) not directly or indirectly solicit business from any of the Company’s customers and users on behalf of any business that directly competes with the principal business of the Company.

     13. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mention this Section 13.

     14. Arbitration.

          (a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

          (b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

          (c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not

have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.

          (d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys’ fees.

          (e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

          (f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

     15. No Oral Modification, Cancellation or Discharge. This Agreement may be changed or terminated only in writing (signed by Executive and the Company).

     16. Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

     17. Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

     18. Withholding. The Company is authorized to withhold, or cause to be withheld, from any payment or benefit under this Agreement the full amount of any applicable withholding taxes.

     19. Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

     20. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from Executive’s private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

     21. Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

[Signature Page to Follow]

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on the respective dates set forth below:

EXECUTIVE
	Date:
SOLECTRON CORPORATION	Date:

EX-10.4

EXHIBIT 10.4

AMENDMENT AGREEMENT

          This AMENDMENT AGREEMENT (this “Amendment”) is entered into as of January 13, 2005, among SOLECTRON CORPORATION, a Delaware corporation (the “Company”), the lending institutions party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent.

          The Company, the L/C Issuers, the Lenders, and the Administrative Agent have entered into a Credit Agreement dated as of August 20, 2004 (as in effect as of the date of this Amendment, the “Credit Agreement”).

          The Company has requested that the Lenders agree to certain amendments to the Credit Agreement, and the Lenders party hereto have agreed to such request, subject to the terms and conditions of this Amendment.

          In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

1. Definitions; References; Interpretation.

     (a) Unless otherwise specifically defined herein, each term used herein (including in the Recitals hereof) which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement.

     (b) As used herein, “Amendment Documents” means this Amendment, the Consent and Agreement of Subsidiaries related hereto and the Credit Agreement (as amended by this Amendment).

     (c) Each reference to “this Agreement,” “hereof,” “hereunder,” “herein” and “hereby” and each other similar reference contained in the Credit Agreement, and each reference to “the Credit Agreement” and each other similar reference in the other Loan Documents, shall from and after the Effective Date refer to the Credit Agreement as amended hereby.

     (d) The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall be applicable to this Amendment.

2. Amendments to Credit Agreement. Subject to the terms and conditions hereof, the Credit Agreement is amended as follows, effective as of January 13, 2005 (the “Effective Date”):

     (a) The defined term “Consolidated EBITDA” in Section 1.01 of the Credit Agreement shall be amended by inserting in clause (g) “or premiums or transaction costs paid in connection with” after “losses arising from”.

     (b) The second proviso in the defined term “Restricted Junior Payment” in Section 1.01 of the Credit Agreement shall be amended and restated to read as follows:

provided further, that (for the avoidance of doubt) no Restricted Junior Payment

shall be deemed to occur with respect to (A) the delivery of Capital Stock upon conversion of or in exchange for any Convertible Note, (B) the ACES converting from Subordinated Indebtedness into senior Indebtedness in accordance with their terms, (C) any repurchase, prepayments, redemption or acquisition of the LYONs that does not violate the terms of this Agreement, (D) any Convertible Note Cash Conversion Settlement in respect of any Senior Convertible Notes, or any other payment, prepayment, redemption, retirement, sinking fund or similar payment, purchase or other acquisition of any Senior Convertible Notes, including any payment of interest or premium thereon, other than any portion of any Convertible Note Cash Conversion Settlement resulting from an optional election by the Company to effect settlement of conversion in cash, or (E) any premium paid to existing holders of Senior Convertible Notes in connection with any Exchange Offer in respect thereof

     (c) The following definitions in Section 1.01 of the Credit Agreement shall be amended and restated in their entirety as follows:

               “Convertible Notes” means notes or other Indebtedness that are convertible into Capital Stock of the Company or any of its Subsidiaries at the option of the holders thereof (including any such convertible notes or other Indebtedness providing for cash settlement in lieu of delivery of shares of Capital Stock upon any surrender of such notes or other Indebtedness for conversion).

               “Exchange Offers” means one or more exchange offers by the Company to the holders, or purchases from the holders, of (i) the ACES in substantially the form described to the Administrative Agent and the Lenders in the Company’s letter dated March 29, 2004, and (ii) the Company’s 0.5% Convertible Senior Notes due 2034 in substantially the form described to the Administrative Agent and the Lenders in the Company’s letter dated January 6, 2005.

     (d) The following new definitions shall be inserted in Section 1.01 of the Credit Agreement:

               “Convertible Note Cash Conversion Settlement” means any settlement in cash received by any holder of Convertible Notes upon any surrender of its Convertible Notes for conversion.

               “Senior Convertible Notes” means any Convertible Notes other than Convertible Notes which constitute Subordinated Indebtedness.

     (e) The text “and” immediately preceding subsection (g) in Section 7.06 of the Credit Agreement shall be deleted, the text “and” shall be inserted at the end of subsection (g), and a new subsection (h) shall be added as follows:

               (h) the Company may effect any Convertible Note Cash Conversion Settlement in respect of any Convertible Notes, if at the time of such Convertible Note Cash Conversion Settlement and after giving effect thereto, no Default or

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Event of Default shall exist or shall result from such Convertible Note Cash Conversion Settlement

3. Representations and Warranties. The Company hereby represents and warrants to the Administrative Agent and the Lenders as follows:

     (a) No Default or Event of Default has occurred and is continuing (or would result from the amendment of the Credit Agreement contemplated hereby).

     (b) The execution, delivery and performance by the Company of the Amendment Documents have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable.

     (c) The Amendment Documents constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditor’s rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law).

     (d) All representations and warranties of the Company contained in the Credit Agreement are true and correct in all material respects (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date and except that this subsection (d) shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered in respect of the representation and warranty made in Section 5.05 of the Credit Agreement and to take into account any amendments to the Schedules to the Credit Agreement and other disclosures made in writing by the Company to the Administrative Agent and the Lenders after the Closing Date and approved by the Administrative Agent and the Required Lenders).

     (e) There has occurred since August 20, 2004, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect.

     (f) The Company is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Administrative Agent and the Lenders or any other Person.

     (g) The Company’s obligations under the Credit Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim.

4. Conditions of Effectiveness.

     (a) The effectiveness of Section 2 of this Amendment shall be subject to the satisfaction of each of the following conditions precedent:

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          (1) The Administrative Agent shall have received from the Company and the Required Lenders a duly executed original (or, if elected by the Administrative Agent, an executed facsimile copy) of this Amendment.

          (2) The Administrative Agent shall have received the consent of the Subsidiaries of the Company party to the Pledge Agreement, the Interco Subordination Agreement, the Security Agreement and the Subsidiary Guaranty, in form and substance satisfactory to the Administrative Agent, in their capacities as such, to the execution and delivery hereof by the Company.

          (3) The Administrative Agent shall have received evidence of payment by the Company of all fees, costs and expenses due and payable as of the date hereof hereunder and under the Credit Agreement, including any costs and expenses payable under Section 5(g) of this Amendment (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, to the extent invoiced on or prior to the date hereof).

          (4) The Administrative Agent shall have received from the Company, in form and substance satisfactory to the Administrative Agent, copies of the resolutions passed by the board of directors of the Company, certified as of the date hereof by the Secretary or an Assistant Secretary of the Company, authorizing the execution, delivery and performance of this Amendment, together with such incumbency certificates and/or other certificates of Responsible Officers of the Company, as the Administrative Agent may require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as such in connection with this Amendment and each other Loan Document to which the Company is a party.

          (5) The Administrative Agent shall have received all other documents it or the Required Lenders may reasonably request relating to any matters relevant hereto, all in form and substance satisfactory to the Administrative Agent.

     (b) For purposes of determining compliance with the conditions specified in Section 4(a), each Lender that has executed this Amendment shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent, or made available for inspection, by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender.

     (c) From and after the Effective Date, the Credit Agreement is amended as set forth herein. Except as expressly amended pursuant hereto, the Credit Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects.

     (d) The Administrative Agent will notify the Company and the Lenders of the satisfaction of the conditions precedent in this Section 4.

5. Miscellaneous.

4

     (a) The Company acknowledges and agrees that the execution and delivery by the Administrative Agent and the Lenders of this Amendment shall not be deemed to create a course of dealing or an obligation to execute similar waivers or amendments under the same or similar circumstances in the future.

     (b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Credit Agreement.

     (c) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     (d) This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Amendment and the other Amendment Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4, this Amendment shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment.

     (e) This Amendment may not be amended except in accordance with the provisions of Section 10.01 of the Credit Agreement.

     (f) If any provision of this Amendment or the other Amendment Documents is held to be illegal, invalid or unenforceable, (i) the legality, validity and enforceability of the remaining provisions of this Amendment and the other Amendment Documents and Loan Documents shall not be affected or impaired thereby and (ii) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     (g) The Company agrees to pay or reimburse all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and the other Amendment Documents Agreement or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated).

     (h) This Amendment shall constitute a Loan Document.

[Signature pages follow]

5

[Intentionally Omitted]

S-1

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(A) OF

THE SARBANES-OXLEY ACT OF 2002

I, Michael Cannon, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Solectron Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 14, 2005

/S/     Michael Cannon

Michael Cannon

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(A) OF

THE SARBANES-OXLEY ACT OF 2002

I, Kiran Patel, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Solectron Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 14, 2005

/S/     Kiran Patel

Kiran Patel

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 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

I, Michael Cannon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Solectron Corporation on Form 10-Q for the three-month period ended February 25, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Solectron Corporation.

Date: April 14, 2005

/S/     Michael Cannon

Michael Cannon

President and Chief Executive Officer

EX-32.2

EXHIBIT 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

I, Kiran Patel, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Solectron Corporation on Form 10-Q for the three-month period ended February 25, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Solectron Corporation.

Date: April 14, 2005

/S/     Kiran Patel

Kiran Patel

Executive Vice President and Chief

Financial Officer