This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenues or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words "anticipate," "believe," "plan," "expect," "future," "intend," "may," "will," "should," "estimate," "predict," "potential," "continue" and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Overview

We are a leading independent global provider of customized, integrated electronics manufacturing services, or EMS. Our revenue is generated from sales of our services primarily to original equipment manufacturers, or OEMs, in the communications, enterprise computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical and automotive industries.

Recently, the business environment has become challenging due to adverse worldwide economic conditions. These conditions have slowed global economic growth and have resulted in recessions in many countries, including in the U.S, Europe and certain countries in Asia. As a consequence, many of the industries to which we provide products have recently experienced significant financial difficulty, with some entities filing for bankruptcy. Such significant financial difficulty, if experienced by one or more of our customers, may negatively affect our business due to the decreased demand of these financially distressed customers, the potential inability of these companies to make full payment on amounts owed to us, or both.

We exited our PC and associated logistics services business ("PC Business") in 2008, and have reflected this business as a discontinued operation in the condensed consolidated statements of operations for all prior periods presented.

Unless otherwise noted, all references to our operating results in this Management's Discussion and Analysis of Financial Condition and Results of Operations pertain only to our continuing operations and all references to years refer to our fiscal years ending on the last Saturday of each year closest to September 30. Fiscal 2009 will be a 53 week year.

A relatively small number of customers have historically generated a significant portion of our net sales. Sales to our ten largest customers represented 47.5% and 47.3% of our net sales for the three months ended December 27, 2008 and December 29, 2007, respectively. No customer represented 10% or more of our net sales for either of these periods.

We typically generate a significant portion of our net sales from international operations. During the first quarter of 2009 and 2008, 72.7% and 67.4%, respectively, of our net sales were derived from non-U.S. operations. The concentration of international operations has resulted from a desire on the part of many of our customers to source production in lower cost locations such as Asia, Latin America and Eastern Europe. We expect this trend to continue.

Historically, we have had substantial recurring sales to existing customers. We generally do not obtain firm, long-term commitments from our customers. Orders are placed by our customers using purchase orders, some of which are governed by supply agreements. These agreements generally have terms ranging from three to five years and cover the manufacture of a range of products. Under these agreements, a customer typically agrees to purchase its requirements for particular products in particular geographic areas from us. These agreements generally do not obligate the customer to purchase minimum quantities of products.

Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate the process used to develop estimates for certain reserves and contingent liabilities, including those related to product returns, accounts receivable, inventories, investments, intangible assets, income taxes, warranty obligations, environmental matters, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates.

For a complete description of our key critical accounting policies and estimates, refer to our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 24, 2008.

Results of Operations



Key operating results



                                                           Three Months Ended
                                                  December 27, 2008   December 29, 2007
                                                        (In thousands of dollars)
Net sales                                                 1,419,264           1,778,140
Gross profit                                                 83,798             128,929
Operating income                                              1,936              26,816
Net loss from continuing operations                         (25,273 )            (9,453 )
Income from discontinued operations, net of tax                   -              17,369
Net income (loss)                                           (25,273 )             7,916

Net loss from continuing operations includes restructuring costs of $9.2 million and $6.8 million for the three months ended December 27, 2008 and December 29, 2007, respectively. Additionally, net loss for the three months ended December 27, 2008 includes a $10 million reduction in gross profit associated with Nortel Networks' petition for reorganization under bankruptcy law.

Key performance measures

                                               Three Months Ended
                                   December 27,   September 27,   December 29,
                                       2008           2008            2007
       Days sales outstanding(1)             57              51             53
       Inventory turns(2)                   6.8             7.7            6.7
       Accounts payable days(3)              53              52             57
       Cash cycle days(4)                    57              46             50

(2) Inventory turns (annualized) are calculated as the ratio of four times our cost of sales for the quarter to inventory at period end.

(3) Accounts payable days is calculated as the ratio of 365 days divided by accounts payable turns, in which accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter to accounts payable at period end.

(4) Cash cycle days is calculated as the ratio of 365 days to inventory turns, plus days sales outstanding minus accounts payable days.

Net Sales

Net sales decreased 20.2%, from $1.8 billion in the first quarter of 2008 to $1.4 billion in the first quarter of 2009. The decrease was primarily the result of the weakening economy which reduced demand across most of our end markets. For example, sales decreased $135 million in our communications end market, $103 million in our high-end computing end market, $81 million in our multi-media end market and $41 million in our automotive defense and aerospace and industrial and semiconductor capital equipment end markets.

Gross Margin

Gross margin decreased from 7.3% in the first quarter of 2008 to 5.9% in the first quarter of 2009. The decrease was primarily a result of significantly lower business volume in the first quarter of 2009, as discussed above, and adjustments recorded in the first quarter of 2009 related to a petition for reorganization under bankruptcy law by one of our customers, Nortel Networks. These adjustments reduced gross profit by $10 million. The adverse items above were partially offset by a change in estimate related to the recovery rate we apply to excess and obsolete inventory, reduced by $1.6 million of new excess and obsolete inventory reserves, which together resulted in a $4.6 million increase in gross profit.

We expect gross margins to continue to fluctuate based on overall production and shipment volumes and changes in the mix of products demanded by our major customers. Fluctuations in our gross margins may also be caused by a number of other factors, including (a) greater competition in EMS and pricing pressures from OEMs due to greater focus on cost reduction; (b) provisions for excess and obsolete inventory that we are not able to charge back to a customer or sales of inventories previously written down; (c) changes in operational efficiencies;
(d) pricing pressure on electronic components resulting from economic conditions in the electronics industry, with EMS companies competing more aggressively on cost to obtain new or maintain existing business; and (e) our ability to transition manufacturing and assembly operations to lower cost regions in an efficient manner.

Operating Expenses

Selling, general and administrative

Selling, general and administrative expenses decreased $26.1 million, from $89.1 million in the first quarter of 2008 to $63.0 million in the first quarter of 2009. As a percentage of net sales, selling, general and administrative expenses decreased to 4.4% in the first quarter of 2009 from 5.0% in the first quarter of 2008. The decrease was primarily attributable to cost reduction initiatives across the Company. We expect to implement additional cost reduction initiatives in future quarters that should enable us to maintain or reduce expenses from the level achieved in the first quarter of 2009.

Research and Development

Research and development expenses decreased $0.4 million, from $4.6 million in the first quarter of 2008 to $4.2 million in the first quarter of 2009. The decrease was primarily a result of cost reduction initiatives. Research and development expense as a percentage of net sales remained consistent at 0.3% for both the first quarter of 2009 and 2008.

Restructuring costs

Costs associated with restructuring activities, other than those activities related to business combinations, are accounted for in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities",or SFAS No. 112, "Employers' Accounting for Postemployment Benefits", as applicable. Pursuant to SFAS No. 112, restructuring costs related to employee severance are recorded when probable and estimable based on our severance policy with respect to severance payments. For all other restructuring costs, a liability is recognized in accordance with SFAS No. 146 only when incurred. Costs associated with restructuring activities related to business combinations are accounted for in accordance with EITF 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination".

2009 Restructuring Plan

During the first quarter of 2009, we initiated a restructuring plan as a result of the slowdown in the global electronics industry and worldwide economy. The plan was designed to reduce excess capacity and affected facilities across all services offered in our global manufacturing organization. We expect actions under this plan to increase our gross and operating margins and be cash positive over a 12 - 24 month period as cash outlays for severance and facility closures will be recovered by cost savings and asset sales resulting from actions under the plan. In connection with actions taken to date under this plan, we recorded restructuring charges of $7.0 million for employee termination benefits, of which $2.2 million was utilized during the period and $4.8 million is expected to be paid during 2009. These benefits were provided for approximately 800 employees. Additionally, we incurred $0.5 million of costs related to closure of facilities under this plan in the first quarter of 2009.

Restructuring Plans - Prior Years



Below is a summary of restructuring costs associated with facility closures and
other consolidation efforts that were implemented in prior fiscal years:



                                          Employee         Leases and          Impairment
                                       Termination /       Facilities           of Fixed
                                       Severance and      Shutdown and         Assets or
                                          Related         Consolidation     Redundant Fixed
                                          Benefits            Costs              Assets
                                            Cash              Cash              Non-Cash          Total
                                                                 (In thousands)
Balance at September 30, 2006                   21,349             9,804                    -       31,153
Charges (recovery) to operations                35,169            11,195                 (831 )     45,533
Charges recovered (utilized)                   (47,873 )         (12,132 )                831      (59,174 )
Reversal of accrual                             (2,505 )            (441 )                  -       (2,946 )
Balance at September 29, 2007                    6,140             8,426                    -       14,566
Charges to operations                           64,126            16,519                2,456       83,101
Charges utilized                               (45,248 )         (19,765 )             (2,456 )    (67,469 )
Reversal of accrual                               (833 )            (892 )                  -       (1,725 )
Balance at September 27, 2008                   24,185             4,288                    -       28,473
Discontinued operations                          5,607                 -                    -        5,607
Balance at September 27, 2008,
including discontinued operations               29,792             4,288                    -       34,080
Charges to operations                            3,222             1,989                  644        5,855
Charges utilized                               (11,651 )          (2,587 )               (644 )    (14,882 )
Reversal of accrual                             (4,067 )             (44 )                  -       (4,111 )
Balance at December 27, 2008           $        17,296   $         3,646   $                -   $   20,942

During the first quarter of 2009, we recorded restructuring charges for employee termination benefits for approximately 500 employees. In connection with restructuring actions we have already implemented under these restructuring plans, we expect to pay remaining facilities related restructuring liabilities of $3.6 million through 2010, and the majority of severance costs of $17.3 million through 2009. We have substantially completed our actions under these prior year restructuring plans.

All Restructuring Plans

In connection with all of our restructuring plans, restructuring costs of $25.7 million were accrued as of December 27, 2008, of which $24.8 million was included in accrued liabilities and $0.9 million was included in other long-term liabilities on the condensed consolidated balance sheet.

The recognition of restructuring charges requires us to make judgments and estimates regarding the nature, timing, and amount of costs associated with planned exit activities, including estimating sublease income and the fair values, less selling costs, of property, plant and equipment to be disposed of. Our estimates of future liabilities may change, requiring us to record additional restructuring charges or reduce the amount of liabilities already recorded.

Asset Impairment

During the first quarter of 2009, we recorded an impairment charge of $3.8 million related to a decline in the fair value of certain properties held for sale. No such charges were recorded in the first quarter of 2008.

Interest Income and Expense

Interest income decreased from $6.2 million in the first quarter of 2008 to $3.5 million in the first quarter of 2009. The decrease is primarily attributable to lower interest rates in the first quarter of 2009 as a result of weakening economic conditions and uncertainty and volatility in the financial markets.

Interest expense decreased to $29.2 million in the first quarter of 2009, from $35.4 million in the first quarter of 2008. The decrease is primarily attributable to a significant decrease in LIBOR during the first quarter of 2009 as a result of uncertainty and volatility in the financial markets and a lower average variable rate debt balance in the first quarter of 2009 as a result of the redemption of $120 million of debt near the end of the first quarter of 2008.

Other Income (Expense), net



Other income (expense), net was $0.6 million for the first quarter of 2009 and
$(4.6) million for the first quarter of 2008. The following table presents the
major components of other income (expense), net:



                                                   Three Months Ended
                                             December 27,     December 29,
                                                 2008             2007
                                                     (In thousands)
         Foreign exchange losses             $        (636 )  $      (2,749 )
         Loss on extinguishment of debt                  -           (2,238 )
         Other, net                                  1,189              347
         Total other income (expense), net   $         553    $      (4,640 )

The decrease in foreign exchange losses in the first quarter of 2009 is primarily the result of the U.S. dollar strengthening against the Euro, which caused net favorable gains in our European subsidiaries.

During the first quarter of 2008, we redeemed $120 million of debt that was due in 2010. In connection with this redemption, $2.2 million of deferred financing fees were expensed.

On November 21, 2008, an interest rate swap agreement having a notional principal amount of $100 million was terminated. As a result, we were required to discontinue hedge accounting for the terminated swap and the remaining three interest rate swaps designated under SFAS 133 as hedges of our 6.75% Notes. During the period from November 22, 2008 through December 27, 2008 (period during which hedge accounting was discontinued), a gain of $5.1 million was recorded to reflect the change in the fair value of the interest rate swaps during that period. This gain was partially offset by a decrease of $2.8 million in the fair market value of our deferred compensation plan assets that resulted from volatile conditions in the financial markets. These items are reflected in "Other, net" in the table above.

Provision for Income Taxes

We estimate our annual effective tax rate at the end of each quarterly period. Our estimate takes into account our expected annual pre-tax income (loss), the geographic mix of our pre-tax income/(loss), implementation of tax planning strategies and possible outcomes of audits. To the extent there are fluctuations in any of these variables during a period, our provision for income taxes may vary. Our provision for income tax expense was $2.0 million for the three months ended December 27, 2008, compared to $2.5 million for the three months ended December 29, 2007.

Liquidity and Capital Resources



                                                         Three Months Ended
                                                    December 27,     December 29,
                                                        2008             2007
                                                             (Unaudited)
                                                           (In thousands)
Net cash provided by (used in):
Operating activities                               $      (10,891 ) $      133,943
Investing activities                                      (27,970 )        (11,039 )
Financing activities                                      (35,864 )       (120,000 )
Effect of exchange rate changes                             1,698            4,869
Increase (decrease) in cash and cash equivalents   $      (73,027 ) $        7,773

Cash and cash equivalents were $796.8 million at December 27, 2008 and $869.8 million at September 27, 2008. Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, the extent of sales of accounts receivable, borrowings under credit facilities and other factors.

Net cash provided by (used in) operating activities was $(10.9) million and $133.9 million in the first quarter of 2009 and 2008, respectively. During the first quarter of 2009, accounts payable decreased $112.1 million due to lower business volume and accrued and other long-term liabilities decreased $14.1 million due primarily to bonus payouts and vacation usage. Those cash usages were offset by decreases of $87.6 million and $21.6 million in accounts receivable and inventory, respectively, resulting primarily from lower business volume. Working capital was $1.5 billion and $1.6 billion at December 27, 2008 and September 27, 2008, respectively.

Net cash used in investing activities was $28.0 million and $11.0 million for the first quarter ended 2009 and 2008, respectively. During the first quarter of 2009, we paid $28.0 million for property, plant and equipment.

Net cash used in financing activities was $35.9 million and $120.0 million for the first quarter ended 2009 and 2008, respectively. During the first quarter of 2009, we repurchased 21.0 million shares of our common stock for a total of $11.6 million, including commissions. Additionally, we posted collateral of $24.3 million in the form of cash against certain of our collateralized obligations.

Other Liquidity Matters.

Current weak economic conditions and tightening of credit markets have increased the risk of delinquent or uncollectible accounts receivable. Additionally, such factors have negatively affected our sales, net income and operating cash flows. We expect this trend to continue in the near term.

On January 14, 2009, one of our customers, Nortel Networks, filed a petition for reorganization under bankruptcy law. As a result, we performed an analysis to quantify our potential exposure, considering factors such as which legal entities of the customer are included in the bankruptcy reorganization, future demand from Nortel Networks, and administrative and reclamation claim priority. Based on our analysis, we estimated a maximum exposure of approximately $20 million related to outstanding accounts receivable and on-hand inventory. We considered collectibility of accounts receivable and determined that certain amounts may not be collectible. Therefore, we deferred recognition of revenue in the amount of $5.0 million for shipments made in the first quarter of 2009. Additionally, we determined that certain inventory balances may not be recoverable and provided a reserve for such inventories in the amount of $5.0 million in the first quarter of 2009. Our estimates are subject to change as additional information becomes available.

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental matters and examinations and investigations by government agencies. As of December 27, 2008, we had reserves of $28.6 million related to such matters. We may not be able to accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters. For further information regarding legal proceedings, see Part II, Item 1. Legal Proceedings.

We have entered into, and continue to enter into, various transactions that periodically require collateral. These obligations have historically arisen from customs, import/export, VAT, utility services, debt financing, foreign exchange contracts and interest rate swaps. We have collateralized, and may from time to time collateralize, such obligations as a result of counterparty requirements or for economic reasons.

Our liquidity needs are largely dependent on changes in our working capital, including the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, and repayments of obligations under outstanding indebtedness. Our primary sources of liquidity include cash of $796.8 million, our $135 million credit facility, under which we were eligible to borrow $86.3 million as of December 27, 2008, our accounts receivable sales program, pursuant to which the maximum face amount of accounts receivable that may be outstanding at any time under this program is $250 million, and cash generated from operations. There were no amounts outstanding under our accounts receivable sales program as of December 27, 2008.

Our debt agreements currently contain a number of restrictive covenants, . . .