UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission file number 000-23354

FLEXTRONICS INTERNATIONAL LTD.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code

(65) 6890 7188

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Title of Class:

Ordinary Shares, S$0.01 Par Value

      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 such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     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

      As of September 30, 2004, the last business day of the Registrant’s most recently completed second fiscal quarter, there were 559,407,967 shares of the Registrant’s ordinary shares outstanding, and the aggregate market value of such shares held by non-affiliates of the registrant (based upon the closing sale price of such shares on the NASDAQ National Market on September 30, 2004) was approximately $7.4 billion.

      As of May 31, 2005, there were 569,337,884 shares of the Registrant’s ordinary shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s definitive proxy statement, to be delivered to shareholders in connection with the Registrant’s 2005 Annual General Meeting of Shareholders, are incorporated by reference into Part III of this Report on Form 10-K.

TABLE OF CONTENTS

PART I

FORWARD-LOOKING STATEMENTS

      Unless otherwise specifically stated, references in this report to “Flextronics,” “the Company,” “we,” “us,” “our” and similar terms mean Flextronics International Ltd. and its subsidiaries.

      Except for historical information contained herein, certain matters discussed in this annual report on Form 10-K are, or may be deemed as, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “will,” “may,” “designed to,” “believe,” “should,” “anticipate,” “plan,” “expect,” “intend,” “estimate” and similar expressions identify forward-looking statements, which speak only as of the date of this annual report. These forward-looking statements are contained principally under Item 1, “Business,” and under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because these forward-looking statements are subject to risks and uncertainties, actual results could differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described in Item 1, “Business — Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

OVERVIEW

      We are a leading provider of advanced electronics manufacturing services (EMS) to original equipment manufacturers (OEMs) in the following industries:

      We are one of the world’s largest EMS providers, with revenues of $15.9 billion in fiscal year 2005. As of March 31, 2005, our total manufacturing capacity was approximately 12.8 million square feet in over 30 countries across five continents. We have established an extensive network of manufacturing facilities in the world’s major electronics markets (Asia, Europe and the Americas) in order to serve the growing outsourcing needs of both multinational and regional OEMs. In fiscal year 2005, our net sales in the Americas, Europe, and Asia represented 17%, 35% and 48% of our total net sales, respectively.

      We provide a full range of vertically-integrated global supply chain services through which we design, build, and ship a complete packaged product for our OEM customers. Our OEM customers leverage our services to meet their product requirements throughout their products’ entire product life cycle. The following

is a summary list of our vertically-integrated service offerings, which are described in greater detail in the “Service Offerings” section below:

      We believe that the combination of our extensive design and engineering services, global presence, vertically integrated end-to-end services, advanced supply chain management and operational track record provide us with a competitive advantage in the market for designing and manufacturing electronic products for leading multinational OEMs. Through these services and facilities, we simplify the global product development process and provide meaningful time and cost savings for our OEM customers.

      Our customers include industry leaders such as: Alcatel SA; Casio Computer Co., Ltd.; Dell Computer Corporation; Ericsson Telecom AB; Hewlett-Packard Company; Microsoft Corporation; Motorola, Inc.; Nortel Networks Limited; Siemens AG; Sony-Ericsson; Telia Companies; and Xerox Corporation.

INDUSTRY OVERVIEW

      Due to the intensely competitive nature of the electronics industry, ever increasing complexity and sophistication of electronics products, pressure on OEMs to reduce product costs, and shorter product lifecycles, the demand for advanced manufacturing capabilities and related services has grown rapidly. The result has been an increase in the number of OEMs that utilize EMS providers as part of their business and manufacturing strategies. This allows OEMs to take advantage of the global design, manufacturing and supply chain management expertise of EMS providers, enabling OEMs to concentrate on product research and development, marketing and sales. We believe that OEMs realize the following benefits through their strategic relationships with EMS providers:

      We believe that the EMS industry will continue to grow, driven largely by the need of OEMs to respond to rapidly changing markets and technologies and to reduce product costs. Additionally, we believe that there are significant growth opportunities for EMS providers to win additional business from OEMs in certain markets or industry segments that have yet to substantially utilize EMS providers, such as the Japanese market and the industrial, medical and automotive industry segments.

SERVICE OFFERINGS

      We offer a broad range of vertically integrated services to provide our customers with a total design, manufacturing and logistics solution that takes a product from its initial design through volume production, test, distribution and into post-sales service and support. Our integrated services allow us to design, build and ship a complete packaged product for our OEM customers. These services include:

      Design Services. We offer a comprehensive range of value-added design services for our customers that range from contract design services (CDS), where the customer purchases services on a time and materials

basis, to original product design and manufacturing services, where the customer purchases a product that we design, develop and manufacture and that we customize to provide our OEM customer with a unique “look and feel” (commonly referred to as original design manufacturing, or “ODM”). ODM products are then sold by our OEM customers under the OEM’s brand name.

      Our design services are provided by our global team of over 6,000 design engineers and include:

      Printed Circuit Board and Flexible Circuit Fabrication. Printed circuit boards are platforms composed of laminated materials that provide the interconnection for integrated circuits and other electronic components. Semiconductor designs are currently so complex that they often require printed circuit boards with multiple layers of narrow, densely spaced wiring or flexible circuits. The manufacture of these complex multilayer interconnect and flexible circuit products often requires the use of sophisticated circuit interconnections between layers, referred to as vias, and adherence to strict electrical characteristics to maintain consistent circuit transmission speeds. We are an industry leader in high-density, multilayer and flexible printed circuit board manufacturing. We manufacture printed circuit boards on a low-volume, quick-turn basis, as well as on a high-volume, production basis. Our quick-turn prototype service allows us to provide small test quantities to customers’ product development groups in as little as 24 hours. Our range of services enables us to respond to our customers’ demands for an accelerated transition from prototype to volume production. We have printed circuit board and flexible circuit fabrication service capabilities on four continents, including North America, South America, Europe and Asia.

      Systems Assembly and Manufacturing. Our assembly and manufacturing operations, which generate the majority of our revenues, include printed circuit board assembly and assembly of systems and subsystems that incorporate printed circuit boards and complex electromechanical components. We often assemble electronics products with our proprietary printed circuit boards and custom electronic enclosures. In these operations, we employ just-in-time, ship-to-stock and ship-to-line programs, continuous flow manufacturing, demand flow processes, and statistical process controls. As OEMs seek to provide greater functionality in smaller products, they increasingly require more sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing equipment and our experience and expertise in innovative miniaturization, packaging and interconnect technologies, enables us to offer a variety of advanced manufacturing solutions. By way of example, we have extensive experience in the manufacture of highly-complex, wireless communications products employing radio frequency technology.

      We offer a comprehensive set of custom electronic enclosures and related products and services worldwide. Our services include designing, manufacturing and integrating electronics packaging systems, including custom enclosure systems, power and thermal subsystems, interconnect subsystems, cabling and cases. In addition to standard sheet metal and plastic fabrication services, we assist in the design of electronic packaging systems that protect sensitive electronics and enhance functionality. Our enclosure design services focus on functionality, manufacturability and testing. These services are integrated with our other assembly and manufacturing services to provide our customers with overall improved supply chain management.

      We also offer computer-aided testing services for assembled printed circuit boards, systems and subsystems. These services significantly improve our ability to deliver high-quality products on a consistent basis. Our test services include management defect analysis, in-circuit testing and functional testing. In addition, we also provide environmental stress tests of board and system assemblies.

      Our manufacturing and assembly operations capitalize on our materials inventory management expertise and volume procurement capabilities. As a result, we believe that we are able to achieve highly competitive cost reductions and reduce total manufacturing cycle time for our OEM customers. Materials procurement and management consist of the planning, purchasing, expediting and warehousing of components and materials used in the manufacturing process. In addition, our strategy includes having third-party suppliers of custom components located in our industrial parks to reduce material and transportation costs, simplify logistics and facilitate inventory management. We also use a sophisticated automated manufacturing resources planning system and enhanced electronic data interchange capabilities to ensure inventory control and optimization. Through our manufacturing resources planning system, we have real-time visibility of material availability and tracking of work in process. We utilize electronic data interchange with our customers and suppliers to implement a variety of supply chain management programs. Electronic data interchange allows customers to share demand and product forecasts and deliver purchase orders and assists suppliers with satisfying just-in-time delivery and supplier-managed inventory requirements.

      We offer customers flexible, just-in-time delivery programs allowing product shipments to be closely coordinated with our customers’ inventory requirements. Increasingly, we ship products directly into customers’ distribution channels or directly to the end-user. We believe that this service provides our customers with a comprehensive solution that allows them to be more responsive to market demands.

      Logistics. We provide global logistics services and turnkey supply chain solutions to our customers. Our worldwide logistics services include freight forwarding, warehousing/inventory management and outbound/e-commerce solutions through our global supply chain network. We leverage new technologies such as XML links to factories, extranet-based management, vendor managed inventory and build-to-order programs, to simultaneously connect suppliers, manufacturing operations and OEM customers. In addition, our SimFlex simulation software tool allows our customers to simulate, analyze and evaluate complex supply chain scenarios, critical operating characteristics and performance metrics, and supply chain trade-offs to ensure supply chain excellence. By joining these logistics solutions with worldwide manufacturing operations and total supply chain management capabilities in a tightly integrated process, we believe we enable our OEM customers to significantly reduce their product costs and react quickly to constantly changing market demand on a worldwide basis.

      After-Market Services. We provide a range of after-market services, including product repair, re-manufacturing and maintenance at repair depots, logistics and parts management, returns processing, warehousing, and engineering change management. These services are provided through a global network of operations, hubs and centers. We support our customers by providing software updates and design modifications that may be necessary to reduce costs or design-in alternative components due to component obsolescence or unavailability. Manufacturing support involves test engineering support and manufacturability enhancements. We also assist with failure product analysis, warranty and repair, and field service engineering activities.

      Additionally, through Flextronics Network Services, we offer network and communications installation and maintenance services to OEMs in the data and telecommunications industries. Our services include project planning, documentation, engineering, production, installation and commissioning of equipment. We have expertise in the installation of fixed and mobile telecommunications systems, exchanges, corporate networks and peripheral equipment.

COMPETITIVE STRENGTHS

      Over the past several years, we have enhanced our business through the development and broadening of our various product and service offerings. We believe that the following capabilities differentiate us from our competitors and enable us to better serve our customers:

      Extensive Design and Engineering Capabilities. We have an industry leading global design service offering with more than 6,000 product design engineers providing global design services, products and solutions to satisfy a wide array of customer requirements. Our capabilities enable us to provide complete design solutions to our customers, including components and software development, and test and engineering services. We combine our design and manufacturing services to design, develop and manufacture components (such as camera modules) and complete products (such as cellular phones), which are then sold by our OEM customers under the OEMs’ brand names. This full product design service offering is referred to as original design manufacturing (ODM).

      Global Presence. We have established an extensive network of design, manufacturing and logistics facilities in the world’s major electronics markets (Asia, Europe and the Americas) to serve the growing outsourcing needs of both multinational and regional OEMs. Our extensive global network of manufacturing facilities in over 30 countries gives us the flexibility to transition customer projects to any of our locations based on customer requirements.

      Vertically Integrated End-to-End Solutions. We offer a comprehensive range of worldwide supply chain services that simplify the global product development process and provide meaningful time and cost savings to our OEM customers. Our vertically integrated end-to-end services enable us to design, build and ship a complete packaged product. We also provide after-market services such as repair and warranty services. We believe that our capabilities also help our customers improve product quality, manufacturability, performance, and reduce costs. As part of our service offerings, we provide complete supply chain analyses on existing manufacturing strategies and recommend an optimal supply chain solution to our customers utilizing our global service footprint.

      Low-Cost Manufacturing Services. In order to provide customers with the lowest manufacturing costs, we have invested in manufacturing facilities in low-cost regions of the world. As of March 31, 2005, more than 70% of our manufacturing capacity was located in low-cost locations, such as Mexico, Brazil, Poland, Hungary, China, Malaysia and other parts of Asia. We believe we are the global industry leader in low-cost production capabilities. A number of our OEM customers have relocated their production to these locations, where our role in the local supply chain helps to reduce their total product costs.

      As part of our low-cost manufacturing strategy, we have also established fully integrated, high-volume industrial parks in Brazil, China, Hungary, Mexico and Poland. These campuses provide total supply chain management by co-locating our manufacturing and logistics operations with our suppliers at a single low-cost

location. We believe that this strategy increases our customers’ flexibility and reduces distribution barriers, turnaround times, and overall transportation and product costs.

      Advanced Supply Chain Management. We believe that we are a leader in global procurement, purchasing more than $14.0 billion of components in our fiscal year ended March 31, 2005. As a result, we are able to leverage our worldwide supplier relationships to achieve advantageous pricing and supply chain flexibility for our OEM customers.

      Long-Standing Customer Relationships. We believe that a cornerstone to our success, and a fundamental requirement for our sustained growth and profitability, is our long-standing customer relationships. We believe that our ability to maintain and grow long-standing customer relationships is due to our development of a broad range of vertically-integrated service offerings, and our commitment to delivering consistent high-quality services. To achieve our quality goals, we monitor our performance using a number of quality improvement and measurement techniques.

STRATEGY

      Our strategy is to further enhance our vertically-integrated end-to-end services through the following:

      Expand Our Design and Engineering Capabilities. We have expanded our design and engineering resources as part of our strategy to offer services that help our OEM customers achieve time and cost savings for their products. We intend to continue to expand our design and engineering capabilities by increasing our research and development capabilities, expanding our established internal design and engineering resources, and by developing, licensing and acquiring technologies.

      Capitalize on Our Industrial Park Concept. Our industrial parks are self-contained campuses where we co-locate our manufacturing and logistics operations with certain of our strategic suppliers in low-cost regions around the world. These industrial parks allow us to minimize logistics costs throughout the supply chain and reduce manufacturing cycle time by reducing distribution barriers and costs, improving communications, increasing flexibility, lowering transportation costs and reducing turnaround times. Each park incorporates the manufacture of printed circuit boards, components, cables, plastics and metal parts needed for product assembly. We have strategically established large industrial parks in Brazil, China, Hungary, Mexico and Poland. We intend to continue to capitalize on these industrial parks as part of our strategy to offer our customers highly-competitive cost reductions and flexible, just-in-time delivery programs.

      Streamline Business Processes Through Information Technologies. We use a sophisticated automated manufacturing resources planning system and enhanced electronic data interchange capabilities to ensure inventory control and optimization. We streamline business processes by using these information technology tools to improve order placement, tracking and fulfillment. We are also able to provide our customers with online access to product design and manufacturing process information. We intend to continue to drive our strategy of streamlining business processes through the use of information technologies so that we can continue to offer our customers a comprehensive solution to improve their communications and relationships across their supply chain and be more responsive to market demands.

      Pursue Strategic Opportunities. We have actively pursued acquisitions of manufacturing facilities, design and engineering resources and technologies in order to expand our worldwide operations, broaden our service offerings, diversify and strengthen our customer relationships, and enhance our competitive position as a leading provider of comprehensive outsourcing solutions. We will continue to selectively pursue strategic opportunities that we believe will further our business objectives and enhance shareholder value.

      Focus on Core Activities. As part of our strategy, we continuously evaluate the strategic and financial contributions of each of our operations and focus our primary growth objectives on our core EMS vertically-integrated business activities. We also assess opportunities to maximize shareholder value with respect to our non-core activities through divestitures, initial public offerings, spin-offs and other strategic transactions. Consistent with this strategy, we entered into an agreement in principle to merge our Flextronics Network Services business with Telavie AS, a company wholly-owned by Altor, a private equity firm focusing on investments in the Nordic region. Under the terms of the proposed merger, we would receive an

undisclosed cash payment plus additional contingent payments along with ownership of 30% of the merged company.

CUSTOMERS

      Our customers include many of the world’s leading technology companies. We have focused on establishing long-term relationships with our customers and have been successful in expanding our relationships to incorporate additional product lines and services. In fiscal year 2005, our ten largest customers accounted for approximately 62% of net sales. Our largest customers during fiscal year 2005 were Sony-Ericsson and Hewlett-Packard, accounting for approximately 14% and 10% of net sales, respectively. No other customer accounted for more than 10% of net sales in fiscal year 2005.

      The following table lists in alphabetical order a representative sample of our largest customers in fiscal year 2005 and the products of those customers for which we provide EMS services:

SALES AND MARKETING

      We achieve worldwide sales coverage through a direct sales force, which focuses on generating new accounts, and through program managers, who are responsible for managing relationships with existing customers and making follow-on sales.

BACKLOG

      Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm orders for delivery of products more than 30 to 90 days in advance. In addition, OEM customers may reschedule or cancel firm orders. Therefore, we do not believe that the backlog of expected product sales covered by firm purchase orders is a meaningful measure of future sales.

COMPETITION

      The EMS industry is extremely competitive and includes many companies, several of which have achieved substantial market share. We compete against numerous domestic and foreign EMS providers, as well as our current and prospective customers, who evaluate our capabilities in light of their own. We also face competition from Taiwanese ODM suppliers, which have a substantial share of the global market for information technology hardware production, primarily related to notebook and desktop computers and

personal computer motherboards, and which manufacture consumer products and provide other technology manufacturing services.

      We compete with different companies depending on the type of service we are providing or the geographic area in which an activity is taking place. We believe that the principal competitive factors in the segments of the EMS industry in which we operate are: quality and range of services; design and technological capabilities; cost; location of facilities; and responsiveness and flexibility.

SOCIAL RESPONSIBILITY

      Our corporate social responsibility practices are broad in scope, and include a focus on disaster relief, medical aid, education, environmental protection, health and safety and the support of communities around the world. We intend to continue to invest in global communities through grant-making, financial contributions, volunteer work, support programs and donating resources.

      Our commitment to social responsibility also includes our mission to positively contribute to global communities and the environment by adhering to the highest ethical standards of practice with our customers, suppliers, partners, employees, communities and investors as well as with respect to our corporate governance policies and procedures, and by providing a safe and quality work environment for our employees.

EMPLOYEES

      As of March 31, 2005, our global workforce totaled approximately 92,000 employees. We have never experienced a significant work stoppage or strike, and we believe that our employee relations are good.

      Our success depends to a large extent upon the continued services of key managerial and technical employees. The loss of such personnel could seriously harm our business, results of operations and business prospects. To date, we have not experienced significant difficulties in attracting or retaining such personnel. Although we are not aware that any of our key personnel currently intend to terminate their employment, we cannot guarantee their future services.

ENVIRONMENTAL REGULATION

      Our operations are subject to a number of regulatory requirements relating to the use, storage, discharge, and disposal of hazardous chemicals used during the manufacturing processes. We believe that our operations are currently in compliance in all material respects with applicable regulations and we do not believe that costs of compliance with these laws and regulations will have a material adverse effect on our capital expenditures, operating results, or competitive position. In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third party sites. In the past, we have engaged an environmental consulting firm to assist us in the evaluation of environmental liabilities of our ongoing operations, historical disposal activities and closed sites in order to establish appropriate accruals in our financial statements. We determined the amount of our accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by us at our operating facilities, or a determination that we are potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated to be required for such matters. While no material exposures have been identified to date that we are aware of, there can be no assurance that additional environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.

      We are also required to comply with certain hazardous substance content regulations (such as the European Union’s Directive 2002/95/ EC about RoHS). Some of our customers require that we take responsibility for the risk of non-compliance for both the components that we procure and our own products that we supply for those customers’ products. To address this risk, we require that component suppliers comply with relevant hazardous substance product content regulations and we engage in other standard mitigating

activities. If we or our suppliers do not comply with these regulations, we could incur significant costs and/or penalties relating to noncompliance.

INTELLECTUAL PROPERTY

      We own or have licensed various United States and foreign patents related to a variety of technologies. For certain of our proprietary processes, we rely on trade secret protection. We also have registered our corporate name and several other trademarks and service marks that we use in our business in the United States and other countries throughout the world.

      Although we believe that our intellectual property assets and licenses are sufficient for the operation of our business as we currently conduct it, we cannot assure you that third parties will not make infringement claims against us in the future. In addition, we are increasingly providing design and engineering to our customers and designing and making our own products. As a consequence of these activities, we are required to address and allocate the ownership and responsibility for intellectual property in our customer relationships to a greater extent than in our manufacturing and assembly businesses. If a third party were to make an assertion regarding the ownership or right to use intellectual property, we could be required to either enter into licensing arrangements or to resolve the issue through litigation. Such license rights may not be available to us on commercially acceptable terms, if at all, or any such litigation may not be resolved in our favor. Additionally, litigation could be lengthy and costly and could materially harm our financial condition regardless of the outcome. We may also be required to incur substantial costs to redesign a product or re-perform design services.

ADDITIONAL INFORMATION

      Our Internet address is http://www.flextronics.com. We make available through our Internet website the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

      We were incorporated in the Republic of Singapore in May 1990. Our principal corporate office is located at One Marina Boulevard, #28-00, Singapore 018989. Our U.S. corporate headquarters is located at 2090 Fortune Drive, San Jose, California, 95131.

RISK FACTORS

      We derive our revenues from the following industries:

      Factors affecting any of these industries in general, or our customers in particular, could seriously harm us. These factors include:

      As a provider of electronics manufacturing services, we must provide increasingly rapid product turnaround time for our customers. We generally do not obtain firm, long-term purchase commitments from our customers, and we often experience reduced lead-times in customer orders. Customers cancel their orders, change production quantities and delay production for a number of reasons. Uncertain economic and geopolitical conditions have resulted, and may continue to result, in some of our customers delaying the delivery of 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 have harmed, and may continue to harm, our results of operations by reducing the volumes of products we manufacture and deliver for these customers, by causing a delay in the repayment of our expenditures for inventory in preparation for customer orders and by lowering our asset utilization resulting in lower gross margins. In addition, customers often require that manufacturing of their products be transitioned from one facility to another to achieve cost and other objectives. Such transfers result in inefficiencies and costs due to resulting excess capacity and overhead at one facility and capacity constraints and related stresses at the other.

      In addition, we make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel and other resource requirements, based on our estimates of customer requirements. The short-term nature of our customers’ commitments and the rapid changes in demand for their products reduces our ability to accurately estimate the future requirements of those customers. This makes it difficult to schedule production and maximize utilization of our manufacturing capacity.

      On occasion, customers require rapid increases in production, which stress our resources and reduce our margins. Although we have increased our manufacturing capacity, and plan further increases, we may not have sufficient capacity at any given time to meet our customers’ demands. In addition, because many of our costs and operating expenses are relatively fixed, a reduction in customer demand harms our gross profit and operating income.

      We experience significant fluctuations in our results of operations. Some of the principal factors that contribute to the fluctuations in our annual and quarterly operating results are:

      Two of our significant end-markets are the handheld electronics devices market and the consumer devices market. These markets exhibit particular strength toward the end of the calendar year in connection with the holiday season. As a result, we have historically experienced stronger revenues in our third fiscal quarter as compared to our other fiscal quarters.

      We have completed numerous acquisitions of businesses and we expect to continue to acquire additional businesses in the future. We are currently in preliminary discussions with respect to potential acquisitions and strategic customer transactions, and we are in the process of completing the acquisition of Nortel’s optical, and wireless and enterprise manufacturing operations and related supply chain activities, as described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.” We do not have any other definitive agreements to make any material acquisitions or strategic customer transactions. Any future acquisitions may require additional debt or equity financing. This could increase our leverage or be dilutive to our existing shareholders. We may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as in the past, or at all.

      To integrate acquired businesses, we must implement our management information systems and operating systems and assimilate and manage the personnel of the acquired operations. The difficulties of this integration may be further complicated by geographic distances. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business.

      In addition, acquisitions involve numerous risks and challenges, including:

      These and other factors have harmed, and in the future could harm, our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business and operating results.

      The transaction with Nortel described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” is subject to a number of closing conditions, including regulatory approvals, conversion of information technology systems, and the completion of the required information and consultation process with employee representatives in Europe. Some of the processes involved in converting information technology systems (including the integration of related systems and internal controls) are complex and time consuming, and may present unanticipated difficulties. As a result, we currently expect that this transaction will not be completed before the March 2006 quarter. Further delays may arise if the conversion of information technology systems requires more time than presently anticipated. In addition, completion of the required information and consultation process with employee representatives in Europe may result in additional delays and in difficulties in retaining employees.

      After closing, the success of this transaction will depend on our ability to successfully integrate the acquired operations with our existing operations. This will involve integrating Nortel’s operations into our existing procurement activities, and assimilating and managing existing personnel. In addition, this transaction will increase our expenses and working capital requirements, and place burdens on our management resources. In the event we are unsuccessful in integrating the acquired operations, we would not achieve the anticipated benefits of this transaction, and our results of operations would be adversely affected.

      As a result of the new strategic relationship, we expect that Nortel will become our largest single customer, and will represent over 10% of our net sales. The manufacturing relationship with Nortel is not exclusive, and they are entitled to use other suppliers for a portion of their requirements of these products. Although Nortel has agreed to use us to manufacture a majority of its requirements for these existing products, for so long as our services are competitive, our services may not remain competitive, and there can be no assurance that we will continue to manufacture a majority of Nortel’s requirements for these products. In addition, sales of these products depend on a number of factors, including global economic conditions, competition, new technologies that could render these products obsolete, the level of sales and marketing resources devoted by Nortel with respect to these products, and the success of these sales and marketing activities. If demand for these products should decline, we would experience reduced sales and gross margins from these products.

      We have agreed to cost reduction targets and price limitations and to certain manufacturing quality requirements. We may not be able to reduce costs over time as required, and Nortel would be entitled to certain reductions in their product prices, which would adversely affect our margins from this program. In addition, we may encounter difficulties in meeting Nortel’s expectations as to product quality and timeliness. If Nortel’s requirements exceed the volume we anticipate, we may be unable to meet these requirements on a timely basis. Our inability to meet Nortel’s volume, quality, timeliness and cost requirements could have a material adverse effect on our results of operations. Additionally, Nortel may not purchase a sufficient quantity of products from us to meet our expectations and we may not utilize a sufficient portion of the acquired capacity to achieve profitable operations, which could have a material adverse effect on our results of operations.

      We completed the closing of the acquisition of Nortel’s optical design operations in November 2004, and as a result we employ approximately 150 of Nortel’s former optical design employees. In addition, in February 2005, we also completed the closing of the manufacturing operations and related assets (including product integration, testing, repair and logistics operations) in Montreal, Quebec, Canada. We may fail to retain and motivate these employees or to successfully integrate them into our operations.

      Although we expect that our gross margin and operating margin on sales to Nortel will initially be less than that generally realized by the Company in fiscal 2005, we also expect that we will be able to increase these gross margins over time through cost reductions and by internally sourcing our vertically integrated supply chain solutions, which include the fabrication and assembly of printed circuit boards and enclosures, as well as logistics and repair services. Additionally, the impact of lower gross margins may be partially offset by

the effect of anticipated lower selling, general and administrative expenses, as a percentage of net sales. There can be no assurance that we will realize lower expenses or increased operating efficiencies as anticipated.

      Over the past several years, we have completed numerous strategic transactions with OEM customers, including, among others, Alcatel, Casio, Ericsson and Xerox, and we are currently in the process of completing a strategic transaction with Nortel. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease or acquire their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. We intend to continue to pursue these OEM divestiture transactions in the future. There is strong competition among EMS companies for these transactions, and this competition may increase. These transactions have contributed to a significant portion of our revenue growth, and if we fail to complete similar transactions in the future, our revenue growth could be harmed. The arrangements entered into with divesting OEMs typically involve many risks, including the following:

      As a result of these and other risks, we have been, and in the future may be, unable to achieve anticipated levels of profitability under these arrangements. In addition, these strategic arrangements have not, and in the future may not, result in any material revenues or contribute positively to our earnings per share.

      We have experienced growth in our business through a combination of internal growth and acquisitions, and we expect to make additional acquisitions in the future, including our pending completion of the acquisition of assets from Nortel described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.” Our global workforce has more than doubled in size since the beginning of fiscal year 2001. During that time, we have also reduced our workforce at some locations and closed certain facilities in connection with our restructuring activities. These changes have placed considerable strain on our management control systems and resources, including decision support, accounting management, information systems and facilities. If we do not continue to improve our financial and management controls, reporting systems and procedures to manage our employees effectively and to expand our facilities, our business could be harmed.

      We plan to continue to transition manufacturing to lower cost locations and we may be required to take additional restructuring charges in the future as a result of these activities. We also intend to increase our

manufacturing capacity in our low-cost regions by expanding our facilities and adding new equipment. Acquisitions and expansions involve significant risks, including, but not limited to, the following:

      In addition, we expect to incur new fixed operating expenses associated with our expansion efforts that will increase our cost of sales, including increases in depreciation expense and rental expense. If our revenues do not increase sufficiently to offset these expenses, our operating results could be seriously harmed. Our transition to low-cost manufacturing regions has contributed to significant restructuring and other charges that have resulted from reducing our workforce and capacity at higher-cost locations. We recognized restructuring charges of approximately $95.4 million, $540.3 million and $297.0 million in fiscal years 2005, 2004 and 2003, respectively, associated with the consolidation and closure of several manufacturing facilities, and related impairment of certain long-lived assets. We expect to recognize approximately $100 million of restructuring charges in fiscal 2006 and we may be required to take additional charges in the future as a result of these activities. We cannot assure you as to the timing or amount of any future restructuring charges. If we are required to take additional restructuring charges in the future, it could have a material adverse impact on operating results, financial position and cash flows.

      As part of our strategy to enhance our vertically-integrated end-to-end service offerings, we are actively pursuing the expansion of our design and engineering capabilities, which requires that we make investments in research and development, technology licensing, test and tooling equipment, patent applications, facility expansion, and recruitment.

      Although we enter into contracts with our design services customers, we may design and develop products for these customers prior to receiving a purchase order or other firm commitment from them. We are required to make substantial investments in the resources necessary to design and develop these products, and no revenue may be generated from these efforts if our customers do not approve the designs in a timely manner or at all, or if they do not then purchase anticipated levels of products. Certain of the products we design and develop must satisfy safety and regulatory standards and some must receive government certifications. If we fail to obtain these approvals or certifications on a timely basis, we would be unable to sell these products, which would harm our sales, profitability and reputation. In addition, design activities often require that we purchase inventory for initial production runs before we have a purchase commitment from a customer. Even after we have a contract with a customer with respect to a product, these contracts may allow the customer to delay or cancel deliveries and may not obligate the customer to any volume of purchases. These contracts can generally be terminated by either party on short notice. Due to the increased risks associated with our design services offerings, we may not be able to achieve a high enough level of sales for this business to be profitable. Due to the initial costs of investing in the resources necessary to expand our design and engineering capabilities, and in particular to support our ODM services offerings, our profitability during fiscal years 2005 and 2004 was adversely affected. We continue to make investments in these capabilities, which could adversely affect our profitability during fiscal year 2006 and beyond.

      Our design services involve the creation and use of intellectual property rights, which subject us to the risk of claims of intellectual property infringement from third parties, as well as claims arising from the allocation of intellectual property rights among us and our design services customers. In addition, customers for our ODM and components design services typically require that we indemnify them against the risk of intellectual property infringement. If any claims are brought against us or our customers for such infringement, whether or not these have merit, we could be required to expend significant resources in defense of such claims. In the event of such an infringement claim, we may be required to spend a significant amount of money to develop non-infringing alternatives or obtain licenses. We may not be successful in developing such alternatives or obtaining such a license on reasonable terms or at all.

      We retain certain intellectual property rights to certain technologies that we develop as part of our engineering and design activities. As the level of our engineering and design activities is increasing, the extent to which we rely on rights to intellectual property incorporated into products is increasing. Despite our efforts, we cannot be certain that the measures we have taken to prevent unauthorized use of our technology will be successful. If we are unable to protect our intellectual property rights, this could reduce or eliminate the competitive advantages of our proprietary technology, which would harm our business.

      A defect in a design could result in product or component failures or a product liability claim. In our contracts with our ODM products or components customers we generally provide a warranty against defects in our designs. Since we provide this warranty to these customers we are exposed to an increased risk of warranty claims. If we design a product or component that is found to have a design defect, we could spend a significant amount of money to resolve these design warranty claims. We may also incur considerable costs in connection with product liability claims that may arise as a result of our design and engineering activities. We have limited product liability insurance coverage, however it is expensive and may not be available with respect to all of our design services offerings on acceptable terms, in sufficient amounts, or at all. A successful product liability claim in excess of our insurance coverage or any material claim for which insurance coverage is denied or limited or is not available could have a material adverse effect on our business, results of operations and financial condition.

      We have a substantial amount of intangible assets. These intangible assets are attributable to acquisitions and represent the difference between the purchase price paid for the acquired businesses and the fair value of the net tangible assets of the acquired businesses. We are required to evaluate goodwill and other intangibles for impairment on at least an annual basis, and whenever changes in circumstances indicate that the carrying amount may not be recoverable from estimated future cash flows. As a result of our annual and other periodic evaluations, we may determine that the intangible asset values need to be written down to their fair values, which could result in material charges that could be adverse to our operating results and financial position.

      Future growth in our revenues depends on new outsourcing opportunities in which we assume additional manufacturing and supply chain management responsibilities from OEMs. To the extent that these opportunities are not available, either because OEMs decide to perform these functions internally or because they use other providers of these services, our future growth would be limited.

      Sales to our ten largest customers represent a significant percentage of our net sales. Our ten largest customers accounted for approximately 62% and 64% of net sales in fiscal years 2005 and 2004, respectively. Our largest customers during fiscal year 2005 were Sony-Ericsson and Hewlett-Packard, which accounted for approximately 14% and 10% of net sales, respectively. Hewlett-Packard and Sony-Ericsson each accounted for approximately 12% of net sales in fiscal 2004. No other customer accounted for more than 10% of net sales in fiscal year 2005 or fiscal year 2004.

      Our principal customers have varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of these customers, or the loss of major customers, would seriously harm our business. If we are not able to timely replace expired, canceled or reduced contracts with new business, our revenues could be harmed.