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I didn't listen to the web cast, but the news reports look very bullish to me (see below). If Maguire is correct, Kemet revenues should jump during the next two quarters as inventories drop. Profits and cash should also jump as expenses and expenditures remain flat. This is exciting stuff!


Kemet Chairman Sees Inventory Correction End Around May

CHARLOTTE -(Dow Jones)- Kemet Corp. (KEM) Chairman and Chief Executive David Maguire said Wednesday he expects distributors of the company's capacitors will have worked through excess inventories by around April or May.

In a presentation to the Needham Growth Conference that was broadcast on the Internet, Maguire said he expects a "very rapid increase" in unit shipments of capacitors in the industry as a result of the end to the inventory cycle.

"The unit volumes have clearly bottomed last summer," Maguire said. "The September quarter was the bottom."

Among distributors of Kemet's capacitors, which regulate electricity in computers, hand-held phones and other electronic equipment, are Arrow Electronics Inc. (ARW), Avnet Inc. (AVT) and Jaco Electronics Inc. (JACO).

He estimated distributors are shipping capacitors at about half the rate they are being consumed in end uses. Similarly, contract electronic-manufacturing services companies are ordering fewer capacitors than they are using. That could lead to a supply crunch by the end of the second quarter, when inventories of distributors and their customers are gone, he said.

Maguire said he expects the Greenville, S.C., company's unit shipment volumes to increase in the March quarter amid continued lower prices.

"The net effect is revenue has pretty much flattened out here," he said. "We think this is the bottom."

Kemet has accumulated inventories of about $290 million, "about twice as much as we should have," Maguire said. As a result, the company plans to lower inventories by about $150 million over the next 12 to 14 months.

But he believes Kemet is well positioned to capitalize on the end of the inventory correction, a recovery of electronic manufacturing end markets in 2002 and 2003 and a continued shift in electronic manufacturing to the company's customers, which include Celestica Inc. (CLS), Flextronics International Ltd. ( FLEX), Jabil Circuit Inc. (JBL) and Solectron Corp. (SLR).

A restructuring announced in December, which cut 1,600 jobs and refocused production lines, is expected to save the company about $45 million a year, he said.

The company had $218.2 million in cash and short-term investments as of Sept. 30.

Maguire did not comment on the outlook for the company's fiscal third quarter, which ended in December.

Analysts polled by Thomson Financial/First Call expect break-even results, compared with net income of $1.10 a share a year ago.

-By Mary Ellen Lloyd, Dow Jones Newswires; 704-371-4033; maryellen.lloyd@

(This story was originally published by Dow Jones Newswires)

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