Tellabs Outsources Manufacturing

To lower production costs and free up capital, Tellabs will outsource manufacturing of its North America products to Sanmina-SCI . About 325 workers will lose jobs as a result.

The company will shutter its 545,000-square-foot facility in Bolingbrook, Ill., by year’s end and them put the facility on the market. Remaining employees will move to Tellabs’ Naperville, Ill., headquarters.

“Bolingbrook has been a good place for Tellabs to do business,” said Michael J. Birck, chairman and CEO. “And while we deeply regret the need to take such a painful action, it’s essential to advance Tellabs along the path to profitable growth.”

Affected employees will receive outplacement assistance and severance packages based on their years of service and position.

Since it will take at least six months to switch-over to outsourced manufacturing, the benefits will not greatly impact 2003 financial results.

Tellabs, which makes gear that helps carriers in 100 countries manage bandwidth, will record a charge of between $90 million and $110 million in the third quarter related to the outsourcing moves.

Financial terms of the deal with San Jose, Calif.-based Sanmina-SCI were not disclosed. The companies had a previous working relationship.

In recent years, contract manufacturers have suffered along with the high-tech companies that employ them. But small steps toward economic recovery, combined with stepped-up outsourcing have some industry-watchers thinking the worst may be over. Sanmina-SCI competitors include Flextronics International, Celestica and Solectron.

Sanmina-SCI which recently announced widening loss in its third quarter, is still investing in new facilities. For example, it is spending $4 million for a software development site in India and bought Newisys, a privately held developer of enterprise servers based in Austin, Texas.