Molex Earnings Call Insights: Strongest and Weakest Segments, Startup Cost Impact

On Tuesday, Molex, Inc. (NASDAQ:MOLX) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Strongest and Weakest Segments

Sherri Scribner – Deutsche Bank: I just wanted to verify, Martin, based on the comments you made about the different segments it sounds like you are really only expecting two of your segments to see sequential growth primarily driven by the new programs in tablets and in smartphones. Is that the right way to think about, any other segments either flat to declining?

Martin P. Slark – Vice Chairman and CEO: Sherri, very close. I would say the segments we feel positive about would be automotive, telecom and infotech and the major segments we feel weaker about is obviously consumer and industrial. We obviously will see growth in medical and the military market, but that’s going to be driven by acquisition. So, if you are trying to get a feel for the underlying market trends that we are seeing, I would say automotive, telecom and infotech looks okay for us, industrial and the consumer clearly weaker.

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Sherri Scribner – Deutsche Bank: And last quarter you gave revenue guidance for the full year of 8% to 10%. In this environment are you still comfortable with that 8% to 10% guidance. I know a lot of that was driven by new programs, but it sounds from your commentary like the environment has worsened?

Martin P. Slark – Vice Chairman and CEO: No, I think we still feel confident about that. But it is going to probably take more leverage from the new product programs. When we look at the strength of those, we think at this point in time that would offset the underlying business weakness that we are seeing. But clearly we are going to have to execute on these new product programs to get that growth. We still think that kind of growth is possible at this stage.

Startup Cost Impact

Amitabh Passi – UBS: Dave, first question for you. Can you help quantify the impact of the startup costs in the current quarter, and then with respect to OpEx from next quarter should we simply assume roughly $10 million to $12 million high, now that the insurance claims are behind you? Then just one quick one for Martin, given the strong tablet mobile device ramps that you are seeing into the December quarter, is there any risk from your perspective that we see sub-seasonal trend as we move into the early part of 2013?

David D. Johnson – EVP, Treasurer and CFO: Sure. Let me start with the question about the startup cost. We roughly – we are impacted by about $5 million in the first two months of the quarter because of the startup costs. And your thought for the SG&A is about right. We have to add back the $9.9 million and remember that in the October timeframe, we have our global (merit) increases, so that would add maybe another $3 million to SG&A in the December quarter.

Martin P. Slark – Vice Chairman and CEO: I think when you think about the strong demand for mobile devices and tablets going to Christmas, which obviously is a positive right now, as it’s frankly in electronic content, in automotive vehicles and what we’re seeing in some of these high speed products in infotech. That’s obviously, I don’t think are as impacted by consumer demand. I think the real issue and honestly we see a very confusing picture and you must see the same thing. You see announcements everyday with people pronouncing weaker results coming in the next quarter, but then you see macroeconomic data, particularly for North America that’s a little encouraging in terms of housing starts and things like that. But everybody is got this concern about the fiscal cliff, potentially taking place in January. So, I think the answer to your question is how strong is the Christmas selling season, do our customers come out of that Christmas selling season with a lot of inventory and are then needed to make with cutback. What I can tell you now is they seem to be struggling to get enough of these new products in the stores based on the projected demand they’re seeing from customers of these items. I think it’s isolated. As you all know, if you look across some of those end markets, there are clearly some customers that are doing very well and there are some that are doing very poorly, and I think if the customers are doing well, continue to execute in those markets, it’d be hard to imagine that they would come out of Christmas with excess inventory.

A Closer Look: Molex Earnings Cheat Sheet>>