s

Vol. 11, No. 7: July 2001


Table of Contents

Cover story

Sanmina and SCI To Join Forces

An Alternative

Vertical Integration by Alliance

World Markets

Jabil To Partner with KAW in Japan

Flextronics To Support Telecom Co. in China

Supply Chain

Curtain Opens on Design Collaboration

Market Data

Market Researchers Report In

News

Texas Plant Makes Two Divestitures for Alcatel

SCI Buys Nokia Repair Center

Distributor To Sell EMS Subsidiary

Enclosure Supplier Acquires Nortel Group

More deals done

Flextronics and Motorola Unwind Agreement

New programs

Acer names design and manufacturing company

Chapter 11 filing

People on the move


Sanmina and SCI To Join Forces

Vertical integration is a tie that binds this megamerger

Sanmina (San Jose, CA) and SCI Systems (Huntsville, AL) have agreed to a merger that will go down as a defining event in the annals of the EMS industry. SCI, the 40-year old company usually credited with starting the EMS industry, will give up its independence to join Sanmina in a larger, more vertically integrated enterprise. The deal will form a new company with revenue over $14 billion.

Under a definitive merger agreement, each share of SCI common stock will be converted to 1.36 shares of Sanmina common stock. Based on Sanmina’s closing price of $22.14 on July 13, the deal valued SCI’s stock at $30.11 per share, which represented a premium of 19.6% over its closing price. Including the assumption of debt, the transaction was worth about $6.0 billion at that point.

The new, as yet unnamed company will have about 100 facilities operating in 21 countries with over 50,000 employees. It will utilize Sanmina’s vertically integrated capabilities in PCB fabrication, backplanes, enclosures, and cables and harnesses along with SCI’s enclosure operation as part of an end-to-end solution.

This union will bring Sanmina the advantages that a larger company has in such areas as purchasing leverage. With SCI, Sanmina will also gain a large internal customer for its vertical integration capabilities, such as backplanes and high-end PCBs, to improve operational efficiencies.

What’s more, Sanmina will get access to SCI’s substantial offerings in PCB and final system assembly. “A large portfolio of EMS services will eliminate the market perception that Sanmina is a niche player and will allow us to compete more effectively for larger programs and new product programs,” said Jure Sola, Sanmina’s chairman and CEO, in a conference call. He admitted that in the past Sanmina lost out on some business because customers felt Sanmina didn’t have enough experience in full system build.

Through SCI, Sanmina will also expand its global footprint, particularly in low-cost regions, and broaden its customer base. One of Sanmina’s challenges is “its exposure to the communication market, which for the first time in the company’s history has slowed our growth,” said Sola. The new company’s market mix will consist of communications, almost all infrastructure, at about 47% of sales; high-end computing at about 18%; PCs at about 17%; industrial and medical at about 13%; and multimedia at about 5%. Reportedly, the customer sets of two companies are complementary, allowing cross selling.

“Finally, increased financial flexibility and larger scale will allow us to pursue additional growth opportunities and customer relationships through OEM outsourcing and divestitures,” Sola told analysts.

When pursuing major divestitures, it helps to have a strong balance sheet. “Fortunately for Sanmina, we have a great balance sheet. And as you combine these two companies together, we continue to still have a balance sheet that we believe that we can create a better company [with],” said Sola. As of June 30, Sanmina reported cash and short term investments of $1.4 billion.

By combining the strengths of both companies in a vertical integration model, Sanmina and SCI believe that they are in a better position to satisfy OEMs that are outsourcing from end to end in a big way. “I think what we’re creating here is a company that can go to the Ericssons and the Nokias and others and say, ‘We’re very, very well postured, much better postured today to take on your total requirements than we were in the past.’ And frankly, that was one of the major considerations that led to the merger…,” said Gene Sapp, SCI’s chairman and CEO, during the conference call.

To make itself more of complete supplier, SCI had been looking at ways to enter the backplane business. Backplanes, of course, are essential building blocks for high-end systems. The merger now fulfills that need.

According to Robert Bradshaw, SCI’s president and COO, combining the strengths of the two companies will give SCI “an opportunity to probably propel ourselves ahead 12 to 18 months quicker than we might be able to do by ourselves.”

SCI and Sanmina will combine their EMS operations, resulting in an EMS business with 39,000 employees, about 9 million ft2 and 70 facilities in 17 countries. Bradshaw, will head this business, which will have a run rate of about $10 billion and existing capacity of about $15 billion. The merged company’s PCB fabrication unit, listed with 15 facilities and 7000 employees, will be run by Stephen Bruton, Sanmina’s senior VP of PCB operations.

Michael Clarke, senior VP and GM of Sanmina Enclosure Systems, will oversee the combined enclosure operations, which will comprise 21 facilities in eight countries with about 5500 employees. Daniel Vick, senior VP of Sanmina Cable Systems, will run the new company’s cable business, which has about 1000 employees.

Note that on Sanmina’s latest earnings call, the company disclosed it is reducing its PCB fabrication capacity by up to $400 million from a current level of roughly $2.1 billion. Sanmina also expects to cut its North American assembly capacity by about 10% and its cable and enclosure operations by 10% to 15%.

Both providers bring extensive engineering and design capabilities to the merger. SCI’s capabilities go back to its days as a government contractor, while Sanmina has focused on this area in recent years through acquisition. Over 2000 people will support 30 design centers in the new company.

Sanmina’s Sola and SCI’s Sapp will serve as cochairmen of the new enterprise. Sapp’s goal is to retire in about a year. That will leave Sola on top of the organization chart. But other details of the new management structure have not been released. For example, how will SCI shareholders be represented on the new board of directors? What will be the role of Randy Furr, Sanmina’s president and COO? Nonetheless, with Sola ending up as chairman and Sanmina shareholders controlling the majority of the new company’s stock, one can speculate that the new company will in the end be a greater reflection of Sanmina’s top management than of SCI’s.

How is Sanmina able to absorb all the stock of SCI, a larger company by sales? Sanmina has the greater market capitalization, and the company’s stock has benefited from its ability to deliver growth and high margins. In the past, Wall Street did not reward SCI as a low-cost producer dependent on the PC industry. While SCI has been working hard for almost two years to diversify its customer portfolio by building up communications and other non-PC business, its stock remains vulnerable to such a deal.

The merger is expected to yield synergies of $100 to $150 million from cost savings and from leveraging vertical integration capabilities. Subject to shareholder and regulatory approvals, the transaction is expected to close either late in the September quarter or early in the December quarter. The deal is expected to be accretive to Sanmina’s fiscal 2002 earnings.

Sanmina says the new company will continue to supply high-end PCBs, enclosures, backplanes and specialty cables to outside customers.


Vertical Integration by Alliance

In the EMS industry, the path to vertical integration has led providers to make acquisitions or, in this month’s case of SCI, a merger. But there is another, less travelled route to vertical integration – through an alliance. CTS Interconnect Systems, a unit of publicly held CTS Corp. (Elkhart, IN) has formed an alliance with seven partners to provide a complete outsourced solution, from PCBs through logistics and management software.

Two of these partners have been revealed. One is Pentair Enclosures, a provider of custom enclosures under the corporate umbrella of publicly held Pentair (St. Paul, MN). The second is PPC, a PCB fabricator. According to CTS, its partners will remain independent; this is not a precursor to acquisition.

CTS believes its alliance provides the answer for flexible and agile contract manufacturing on a global scale. The company reports it already has one program win from the alliance model, and several key OEMs are looking at the model’s possibilities.

For 2000, CTS’ business in EMS was ranked number 28 or 29 in the MMI Top 50.

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World Markets


Jabil To Partner with KAW in Japan

Alliances can also be used to find business in a new geography such as Japan. Take Jabil Circuit (St. Petersburg, FL). Its wholly-owned Japanese subsidiary, Jabil Circuit Japan, intends to enter into a design alliance with Keihin Artwork Co., Ltd., or KAW, a board design house based in Tokyo, Japan. Jabil follows Flextronics as the second provider to recently announce an alliance in Japan (see June, p. 3).

“The collective capabilities of KAW and Jabil Technology Services will provide enhanced turnkey product design and NPI capability in Japan for the benefit of Jabil’s global customers,” states Rick Evans, Jabil’s VP of Asian business development.

The alliance also provides KAW’s customers with access to Jabil’s global manufacturing network.

KAW operates design subsidiaries in California and New Hampshire.

Flextronics To Support Telecom Co. in China

Flextronics (Singapore) has signed a business development agreement with China PTIC Information Industry Corp., China’s largest state-owned communications company.

PTIC maintains relationships and partnerships with most OEM manufacturers of communications equipment in China. In collaboration with PTIC, Flextronics will be able to influence the manufacturing and distribution of these products in China.

The agreement outlines a cooperative sales, manufacturing and R&D plan for the Chinese communication market. Through government and industry initiatives, this collaboration will focus on three areas:

· Development of strategic partnerships with both private and state-owned telecom customers in China.

· Development of design, industrialization, manufacturing and supply-chain solutions for PTIC, its partners and customers.

· Management, construction and installation of mobile network services for PTIC and its subsidiaries.

Flextronics says it will continue to expand the breadth of its services in China, especially in research, design and industrialization. (See also May, p. 1.)

The company expects this agreement will set the stage for future relations between Flextronics and the Chinese government.

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Supply Chain


Curtain Opens on Design Collaboration

Products cannot be designed in a vacuum. OEMs learned long ago that throwing designs over the wall from engineering to manufacturing was a bad idea. That’s because a board design then had to be revised, perhaps more than once, to make it suitable for fabricating the PCB, assembly and test. So DFM (design for manufacturability), DFT (design for testability) and the more general DFX were born. In the outsourced world of today, DFX issues are still with us, but they have grown in complexity. The people who need to review an OEM’s design may be not in the same building or company. Some of them may even be in a different country. Nor is design collaboration limited to OEM engineers and EMS manufacturing staff. For example, commodity managers on the EMS side want to control the cost of components that are designed in. Suppliers downstream may be involved as well. Yet all must collaborate somehow to avoid unnecessary design spins. And they must do so as quickly as possible.

But standard design collaboration is not built for speed. Design files are often sent by FTP to those who participate in a design review. Besides FTP, the review process may involve at least one of the following: email, faxes or conference calls. Communicating back and forth takes time, even when people are available. Not only that, what happens when a nonengineer wants to see a design file? That could be problem if the person does not have or is unfamiliar with the application that created the file.

Enter design collaboration software. This new class of software speeds up design review by allowing collaborators to view design files over the Internet. And EMS providers have started to adopt it (see table below). The same goes for OEMs. For instance EMC, intends to use design collaboration software with its contract manufacturing partners.

Collaborating via the Internet certainly makes sense, but it poses some problems, not the least of which is security outside the firewall. In fact, security may be the number-one issue for companies thinking about design collaboration. For example, if an EMS provider has set up a separate collaboration “room” for each of two competitive customers, one customer cannot be allowed to access the other’s design files. Otherwise, the provider would face the EMS equivalent of Armageddon. By the same token, an OEM using this software with several EMS providers does not necessarily want one provider to know what it’s telling another one.

Besides providing the requisite degree of security outside the firewall, design collaboration tools should offer ease of use and operate on a neutral platform, independent of any application. One way to achieve ease of use is to equip the tool with a browser interface. That concept turns the user’s PC into a thin client, without any need to load special software. These tools should also give the development team a system for managing the design review process. In addition, design collaboration tools should be built to integrate with a company’s existing PDM (product data management) system.

Three tools for design collaboration are presented here. There may be others. While these tools share some attributes, they are not necessarily equivalent. For example, one tool might be stronger for mechanical designs (MCAD), while another might offer more functionality on the board layout (ECAD) side.

# Alventive’s offering consists of four software elements: Alventive Quick Collaboration, Alventive Design Process Collaboration, Alventive PreSourcing Collaboration and the newest tool, Alventive Project Navigator. For real-time collaboration, team members use Alventive Quick Conferencing, which is integrated into Quick Collaboration. Powered by WebEx, Quick Conferencing allows members to conduct real-time meetings via the Web, share applications and work together on product-related documents.

Design Process Collaboration, a tool for setting up a review process, includes an improved work-flow engine that provides a graphical representation of work flows as well as editing capabilities. Event-triggered notification allows users to place time constraints on any phase of a process and receive alerts when schedules are not met.

During development, designers can request information from component suppliers and obtain their feedback through PreSourcing Collaboration. Finally, with Project Navigator, project managers can track schedules and product costs. This module collects information from other Alventive tools.

According to Alventive, its solution makes a drawing viewable and allows participants to query, mark up, and in some cases if appropriate, even modify it. For queries, users can click on a component to pull out its attributes. The software also allows users to view associated files.

For data handling, Alventive uses an XML-based approach. The company says XML provides flexibility during the design phase when things are unsettled, as opposed to the more rigid structure of a relational database. When uploaded to Alventive’s system, a CAD file is automatically converted to a “lightweight,” viewable version. Security features include role-based access, which at an EMS provider would prevent one customer team from gaining access to another team’s design documents.

Alventive says its solution comes into play when physical properties of a product design become important – that is, when one starts blending the electronic package and the mechanical design. Among file formats supported are the major board layout and MCAD types, the company notes.

Alventive’s investors include Celestica, which is also a customer.

# CoCreate Software, another supplier with a design collaboration solution, offers a virtual conference room called OneSpace. In a browser-based environment, users bring their CAD models into this conference room by dragging and dropping. Through the use of shared views, pointers and annotations, development partners can concurrently engineer through co-viewing, co-inspecting and co-modeling. For example, with co-inspecting users can perform precise measurements on a geometric model.

A Session Manager schedules the conference room, notifies participants by email and requests their design files, handles design file conversions before the collaborative session, launches the session in real time, and tracks usage. Before participants leave the meeting, a OneSpace Collaboration log is automatically created to keep track of decisions, action items and owners.

CoCreate supports ECAD, but its primary focus is on MCAD. This is not surprising since the company also supplies 2D and 3D CAD tools. Still, for ECAD the company has adapters that convert IDF files into OneSpace.

Access to OneSpace sessions is controlled by user ID and password. According to CoCreate, its proprietary protocol for communication and model visualization satisfies most customers’ need for confidentiality. For higher security, customers can opt for the Internet’s secure socket layer (SSL) protection. The company offers SSL 3.0 based encryption and server authentication. In addition, OneSpace uses HTTP tunneling to avoid opening up additional ports on a company’s firewall. Also helping to maintain security through firewalls, the OneSpace Web Access Server facilitates a secure bi-directional communication based on outgoing HTTP requests. This server typically resides in a company’s so-called DMZ (demilitarized zone).

CoCreate lists Hewlett-Packard, Agilent, Philips, Teleflex, ABB and Intermec as OEM customers for design collaboration. Originally a division of HP, CoCreate today operates as an independent, privately owned company.

# A third supplier of design collaboration software is e4eNet. By using the company’s Open Data Manager, participants can share BOM, AVL and CAD data, all in the same view accessed through a browser. A user can select for individual component attributes and zoom in on a component in PopView. Another e4eNet tool, DFM Data Manager, provides a central repository for DFX issues, where discussions and history are tracked. Detailed information about issues, including associated graphics, are presented.

To get started, a company must buy a package of Foundation, or basic, services. These services provide for project, product knowledge and file sharing management. For example, the system maintains a project calendar that can be sent out to team members who use Lotus Notes or Microsoft Outlook. Members are alerted when project changes occur, and the system keeps a history of changes and updates. The team can also use the system to assign tasks, which are sortable, and to monitor milestones. Product knowledge management, another feature, allows users to organize and keep track of discussion threads.

For real-time collaboration, e4eNet offers a service called eCollaborate Live!. Among the features of this service are Voice Over IP, streaming video, instant messaging, white board capability, screen sharing, and application sharing.

Other services consist of Panelization Strategy Manager for working out panel configuration, Mechanical Data Manager for viewing and marking up 2D and 3D CAD, and Process Flow Manager for defining work-flow stages and sign-off.

Security is achieved in several ways. All communications between collaboration partners take place via the Internet’s secure socket layer. Also, e4eNet utilizes VeriSign digital certificates. What’s more, browser-to-server encryption is set at 128 bits, while server-to-server communication uses 630-bit key encryption. According to e4eNet, it employs the same technology that the US Navy uses for communications from submarines through satellite uplinks to the Pentagon.

For open data viewing of board design files, e4eNet requires that board designs be converted into ODB++(x), the XML version of ODB++. The company reports that free converters are available for a number of suppliers of PCB CAD software.

Some 13 major companies have committed to e4eNet’s solution, and roughly 75% of them are OEMs. Customers with OEM businesses include Teradyne, Maxtor and EMC. The latter served as one of e4eNet’s development partners.

e4eNet is 90% owned by Valor Computerized Systems (Yavne, Israel), a supplier of DFM and CAM software.

Collaborative design software offers great promise because it organizes and streamlines the design review process. Although this software has not been around long, it already has enough adopters to be taken seriously.

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Market Data


Market Researchers Report In

Four market research firms have recently issued reports that offer different glimpses of the EMS market.

# Relatively new to the market, IDC (Framingham, MA) has weighed in with its estimates of EMS market size and growth. The firm forecasts that the world market for contract manufacturing services will more than double from $103 billion in 2000 to $231 billion in 2005. IDC’s 2000 figure is somewhat below MMI’s estimate of $112 to $115 billion for last year.

According to IDC, the computer and telecom sectors together accounted for 46% of industry revenue in 2000. Through 2005, North and South America will account for more 55% of the market’s revenue, but Europe and Asia will grow faster, says IDC. A new IDC report, Worldwide Contract Manufacturing Services Industry Forecast and Analysis, 2000-2005, forecasts market sales by seven IT segments and four geographic regions.

See www.idc.com.

# Frost & Sullivan (San Jose, CA) estimates that the North American EMS market rose from $30 billion in 1999 to $44 billion in 2000. That’s a 47% growth rate. The firm believes that the North American market is consolidating quickly through mergers and acquisitions.

Go to www.frost.com.

# A recent survey from Technology Forecasters, Inc. (Alameda, CA) shows that in the EMS industry bigger is not always better. For 2000, TFI found that companies with more than $1 billion in sales averaged 4.4% return on assets and 10.4% gross profit margin, compared with ROI of 8.8% and gross margin of 19.4% for providers with revenues between $500 million and $1 billion. So the second group had twice the ROI and nearly twice the gross margin. Not only that, their net profit margin averaged 7.3%, compared with a measly 1.5% for the group of the largest providers.

TFI’s survey benchmarked 77 public and private EMS providers representing more than 70% of the total EMS market for 2000. Last year, these companies grew by 49% in the aggregate. The slowest growth rate – 17% – was observed for companies between $100 million and $200 million. In contrast, companies above $1 billion in sales put up growth of 99%, and those between $500 million and $1 billion boosted revenues by 82%. Survey results were presented at TFI’s latest Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain.

Go to www.techforecasters.com.

# Another study recently benchmarked cost of conversion of a printed circuit assembly. Cost of conversion is the difference between the selling price and the purchase order cost of material. This data can be used both for assessing factory performance and for estimating PCA costs.

Prepared by CEERIS International (Old Lyme, CT), the study showed that in early 2001 the average conversion cost for mixed-technology PCAs, for example, ranged from $0.014 per component for very high-volume boards to $0.443 for low-volume boards. In between those extremes, high-volume PCAs averaged $0.085 per device, while medium-volume PCAs required $0.160 for conversion. According to CEERIS, the effects of volume on cost are even more pronounced when expressed per lead or solder joint, CEERIS’ preferred reference, since it factors in the impact of high lead count packages. Besides volume, lot size and geography also influence conversion cost.

The firm obtained detailed PCA profiles and cost data from 26 well-known contract manufacturers and OEMs, who each selected a minimum of four PCAs most representative of their board mix. In the updated report entitled Cost Conversion Benchmarks for Printed Circuit Assemblies, CEERIS analyzed conversion cost by type of board technology, assembly volume and lot size, business sector and geographic region.

See www.ceeris.com.

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News


Texas Plant Makes Two Divestitures for Alcatel

Alcatel has completed the sale of one manufacturing operation and announced the sale of another. Based on a letter of intent, Sanmina (San Jose, CA) plans to acquire Alcatel’s operation in Richardson, TX, with 450 employees and about 320,000 ft2. In a previously reported deal, Flextronics (Singapore) has completed the purchase of the assets of Alcatel’s Laval, France plant for GSM handset production (May, p. 7).

The Texas acquisition is expected to close in Sanmina’s September 2001 quarter, following the completion of a definitive agreement and government requirements. Financial terms of the agreement, which includes a multiyear supply contract, were not disclosed. Alcatel is a longtime customer of Sanmina, which also bought an Alcatel enclosure plant in Clinton, NC, last year.

In the French deal, Alcatel will outsource the European manufacturing of its GSM handsets to Flextronics. All GSM production will be consolidated from Illkirch, France, to the Flextronics facility in Laval. As part of this agreement, Flextronics is taking on 830 employees from Alcatel.

Last month, Alcatel’s chairman and CEO, Serge Tchuruk, told the Alcatel European Workers Council that the company has adopted outsourcing “not so much to reduce our costs, which in this case is marginal since our sites are well managed, but because it gives us more flexibility to adapt to market changes.” He cited the current downturn as an example of such changes.

Tchuruk said Alcatel’s outsourcing strategy applies to standard technologies and products, but not to technologies such as optics, space or sectors over which the company wants to retain complete control. In the case of standard products, Alcatel will retain about a dozen integration sites in Europe and the US with a focus on new product introduction.

Alcatel is down to about 100 plants, of which about 41 are component sites with 8000 employees. The company plans to turn these component activities into subsidiaries as a possible prelude to selling them. But Tchuruk said Alcatel will only sell an activity if social and employment conditions are met. Last year, Alcatel found a buyer for its Saft battery activities with 5500 employees and nine sites. But the deal fell through because Alcatel had doubts about these conditions.

Tchuruk said the company might divest other industrial sites besides component and battery activities. “But I would like to underline that the number of these [other] sites, as we can estimate today, would be very limited. We are far from having reached a decision. I don’t see any transfer before year end…,” he told the workers council.

SCI Buys Nokia Repair Center

SCI Systems (Huntsville, AL) has purchased Nokia’s repair and test operations in Camberley, UK.

In this deal, SCI will provide hardware repair and other services on a variety of telecom products manufactured by SCI or Nokia Networks, including 2G and 3G base station plug-in units. The addition of these services allows SCI to provide Nokia with a total service solution for transceiver/receiver units within Nokia’s Talk family base stations, which SCI already manufactures in a Camberley plant acquired from Nokia.

SCI’s latest acquisition, one of three Nokia Networks centers for repair and test, serves Europe, the Middle East and Africa. The UK operation will add wireless telecom capabilities in diagnostics, testing and repair.

Distributor To Sell EMS Subsidiary

Nu Horizons Electronics Corp. (Melville, NY) will become the latest distributor to withdraw from contract manufacturing. (See also Oct. ’00, p. 6-7). The components distributor has agreed to sell its majority-owned EMS subsidiary, Nu Visions Manufacturing (Springfield, MA), to members of Nu Visions’ management and an affiliate of Golden Gate Capital (San Francisco, CA), a private equity firm.

Nu Visions accounts for about 12% of Nu Horizon’s total sales. For the quarter ended May 31, total sales amounted to $101.7 million.

A Nu Horizons spokesman told the Boston Globe that the subsidiary could end up competing with some of the distributor’s customers.

The transaction is expected to close by Aug. 26.

Enclosure Supplier Acquires Nortel Group

EMS providers are not the only ones acquiring OEM activities. Knürr (Munich, Germany), a privately held supplier of enclosure-related items and technical furnishings, has acquired a design group from Nortel and turned it into a new business unit called Design Integration. Adding this group, which was part of Nortel’s local Internet solutions, enhances Knürr’s NPI capability for end-to-end integration of remote telecom solutions.

Located in Montreal, Canada, the new Design Integration group offers engineer-to-order services such as design, development, integration and deployment of outdoor base stations and enclosure solutions worldwide. The group has expertise in mechanical, systems/network and electrical engineering; system design; EMC; thermal analysis; and regulatory compliance.

This is the third acquisition that Knürr has made this year. In January, the company acquired Quante Telecom’s UK facility, which manufactures racks and outdoor enclosure systems and provides integration services. Then in April, Knürr added Ellan Electromecanica Ltda, a Brazilian enclosure manufacturer.

Knürr was founded in 1931 and remained under family control until May 2000, when 3i Group plc purchased a majority interest with the balance owned by incoming senior management.

More deals done…Celestica (Toronto, Canada) has completed its agreement with SAGEM SA of France and acquired a SAGEM subsidiary in Kladno, Czech Republic (June, p. 4)….Solectron (Milpitas, CA) has closed on its acquisition of Singapore Shinei Sangyo Pte Ltd. (Singapore), an enclosure supplier (June, p. 5).

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Flextronics and Motorola Unwind Agreement

The current downturn and wireless industry forecasts have led Flextronics and Motorola to undo their supply contract signed in May 2000. The agreement called for more than $30 billion in outsourcing from Motorola over five years (June ’00, p. 1). Motorola said it would have difficulty reaching the volume commitments in the agreement.

Still, Motorola will continue to maintain a strategic relationship with Flextronics as an outsourcing provider. Motorola recently awarded new infrastructure, cell phone and set-top box contracts to Flextronics, which projects Motorola as a top-five customer this year.

Flextronics will repurchase an equity instrument sold at a discount to Motorola. The discount was tied to Motorola meeting its targets.

New programs…Meanwhile, 3Com (Santa Clara, CA) has entered into a contract manufacturing relationship with Flextronics for 3Com’s high-volume server, desktop and mobile connectivity products. Under another new contract, Flextronics will serve as the high-volume manufacturer for a line of wireless connectivity products from TROY Group (Santa Ana, CA). Flextronics has also won three optical programs. Its Flextronics Photonics unit will manufacture DWDM laser diode modules for K2 Optronics (Sunnyvale, CA) and multichannel optical transmitter and receiver modules for W. L. Gore & Associates (Newark, DE). In addition, Flextronics will produce, assemble and test products for PacketLight Networks (Kfar Saba, Israel), which has been developing an optical service transport system for the metro side….Caspian Networks (San Jose, CA), which is developing an IP superswitch, has selected Celestica as system manufacturing provider for the switch. Also, SAN Valley Systems (Campbell, CA) has chosen Celestica as its primary EMS provider. Celestica will perform full turnkey manufacturing of SAN Valley’s product lines. SAN Valley develops networking solutions that connect storage resources across IP and optical networks….Manufacturers’ Services Ltd. (Concord, MA) has landed a contract from Avidyne Corp. (Lincoln, MA) to provide EMS for Avidyne’s aircraft cockpit technology.

Acer names design and manufacturing company…As part of an effort to separate Acer’s design, manufacturing and services business from its Acer-brand activities, the Taiwanese company is now calling this business Wistron (June, p. 3). Acer plans to spin off Wistron as an independent company and expects the separation process will be complete by year end. The new company will focus on OEM and related electronic product manufacturing business ventures. The new Acer Inc. will become a marketing and service company.

Chapter 11 filing… ASD Group (Poughkeepsie, NY), an EMS provider specializing in complex industrial products, has filed for Chapter 11 under US bankruptcy law.

People on the move…James Mills will step down as CEO of Viasystems Group (St Louis, MO), but will remain chairman of the board. David Sindelar, senior VP and CFO of the company, will take over as CEO….Group Technologies (Tampa, FL), the EMS subsidiary of Sypris Solutions, has hired Edmund Stuczynski as VP of operations. He comes from ITT, where he spent 16 years. GroupTech also has named Ray Minter as VP of programs, a new position. Minter, who has served as VP of business development, will retain his current responsibilities for advanced programs and marketing….PEM-STAR (Rochester, MN) has appointed James Cogan VP and GM responsible for its San Jose, CA facilities. Cogan joins the company from Saturn Electronics and Engineering, where he held a variety of senior executive positions. Also, PEMSTAR has hired Linda Feuss, a former Pillsbury executive, as VP and general counsel….Randall Lainhart has joined IEC Electronics (Newark, NY) as VP of new business development. He had held the position of VP of sales and marketing at MATCO Electronics and before that worked at SCI….XeTel (Austin, TX) has named David Osowski as VP and CFO. Prior to joining XeTel, he served as CFO for Hand-tech, an application service and software provider, and Tanknology-NDE International, an oil services firm. In addition, Randy Aldridge has joined XeTel as director of sales for the South region. He most recently served as GM for Flextronics Design in Austin and Dallas. XeTel has also named Chris English director of sales for the North regions. He had been regional sales manager for C-MAC of America. Finally, Richard Phillips, XeTel’s VP of corporate development, will assume the role of VP of business development, an expansion of his current duties….MCMS (San Jose, CA) has promoted Karen Meyer to VP of sales, Western Region, and Jeffrey Schlarbaum to VP of sales, Eastern Region….EFTC (Phoenix, AZ) has elected Fred Breidenbach to its board, which will oversee both EFTC and K*TEC Electronics when the two merge (May, p. 5). Currently in the consulting business, Breidenbach served as president and COO of Gulfstream Aerospace from 1993 to 1997.

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Copyright 2001 JBT Communications

MMI June 2001

MMI August 2001

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