IBM Sheds NetVista PC Manufacturing Ops

Armonk N.Y.’s IBM Corp., which has been shedding certain business units lately, said Tuesday that electronics manufacturer Sanmina-SCI Corp. will take on a “significant portion” of its PC manufacturing needs.

IBM will still design and market the NetVista line in the three-year, $5 billion deal, in which Sanmina-SCI will provide desktop manufacturing services for the NetVista line in U.S. and European markets.

Sanmina-SCI Executive Vice President and Chief Financial Officer Rick Ackel said in a conference call that the incremental increase in revenue for Sanmina as a result of this deal is expected to amount to $5 billion, with total cash outlay for the project pegged at less than $200 million. The deal, expected to close in February, strictly covers Big Blue’s NetVista PCs and does not include the manufacturing operations for IBM ThinkPad notebooks, or any other hardware.

Bob Moffat, general manager of IBM’s Personal & Printing Systems Group, said the deal was the latest stab at cutting costs for IBM.

“PCs are an important part of IBM’s e-business infrastructure offerings. We’ve been executing a strategy to make this business even
more competitive,” Moffat said in a public statement. “This agreement supports that strategy, which is to leverage the skills of the
industry where it makes sense to improve our costs, and focus more of our own investments on areas that deliver the highest value to
our customers.”

IBM makes its NetVista desktop computers in Research Triangle Park (RTP), North Carolina for customers in the U.S. and Canada, and
has this product line manufactured on its behalf in Greenock, Scotland and mainland Europe for customers in Europe, the Middle East
and Africa. Sanmima-SCI will also eventually take on IBM’s NetVista desktop manufacturing requirements for Mexico and Latin America.

Sanmina-SCI said it intends to use the established locations in RTP and Scotland to fulfill IBM’s desktop manufacturing needs; it
will, in fact, acquire IBM buildings and equipment related to desktop manufacturing in RTP, and take over the management of IBM’s
existing outsourced manufacturing contract and acquire IBM manufacturing equipment in Scotland. With this significant shift comes a
lot of employees — 900 employees in RTP and 80 employees in Scotland — all of whom will be offered the same positions with
Sanmina-SCI at the same salary. The terms of the sale were not disclosed.

“Partnering with [Sanmina-SCI] to provide manufacturing services for our desktop products will make our business stronger and give
us greater flexibility to focus our investments more on the technologies and services our customers look to IBM to deliver,” Moffat

There seems to be a cost-cutting trend brewing at IBM. Just last month, the firm tossed off its fiber optic transceiver unit to optical
specialist JDS Uniphase in a $340 million cash/stock combination. And, a couple of weeks before that, RF Micro
Devices Inc. bought Big Blue’s
GPS integrated circuits (ICs) division for an undisclosed sum.

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