Sanmina-SCI will build IBM eServer, IntelliStation

Continuing its metamorphosis from a manufacturing company to a services organization, IBM announced that Sanmina-SCI Corp. will manufacture a portion of IBM's servers and workstations in a deal worth US$3.6 billion over three years. IBM also announced a separate outsourcing agreement with Solectron Tuesday.

IBM's one-way through four-way eServer xSeries servers and its IntelliStation workstations will be manufactured by Sanmina-SCI at existing IBM locations for customers in North America, Europe, the Middle East and Africa, said Nancy Kaplan, an IBM spokeswoman.

Sanmina-SCI, based in San Jose, California, will also handle distribution of options and accessories, such as power cords and monitors, for ThinkPad notebooks, NetVista desktops, and the eServer xSeries servers in those regions.

Separately, Sanmina-SCI will purchase or lease IBM facilities in Guadalajara, Mexico, and Greencock, Scotland, to handle the manufacturing. All affected employees, about 650 employees in Mexico, 400 employees in Scotland, and 10 employees at IBM's manufacturing support center in Research Triangle Park, North Carolina, will be offered positions with Sanmina-SCI. IBM is not disclosing the details of the facility sales.

IBM, based in Armonk, New York, and Sanmina-SCI have long had an outsourcing relationship. Sanmina-SCI manufactures most of IBM's NetVista desktops in Scotland and North Carolina under a deal signed in January 2002.

IBM is always looking at its product lines and evaluating whether it makes sense to manufacture those products internally, Kaplan said. More than 65 percent of IBM's products based on processors from Intel Corp., such as the eServer xSeries machines, are now outsourced by IBM, she said.

Solectron signed a $120 million contract to run IBM's Global Asset Recovery Services division for three years. This division takes equipment from IBM customers whose leases have expired, and refurbishes it for sale. Solectron will step right into IBM's facility in Research Triangle Park to run that operation, and about 250 employees at that facility will have the opportunity to join Solectron, based in Milpitas, California.

The Global Asset Recovery Services division sells the refurbished gear to IBM Global Services customers, as well as to some outside customers, Kaplan said.

The entire announcement is part of IBM's strategy to move toward an on-demand supply chain, Kaplan said. As part of that strategy, Bob Moffat was named senior vice president and group executive for the integrated supply chain group, allowing him to focus specifically on supply issues. Moffat was previously head of IBM's personal computer and printing group, in addition to his duties with the supply chain group, she said.

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