IBM Outsources Desktop Manufacturing

IBM, seeking to reduce operating costs, has signed a $5 billion agreement to turn over the U.S. and European production of its NetVista desktop PCs to Sanmina-SCI Corp.

As part of the deal, about 900 IBM employees in North Carolina and 80 in Scotland will be transferred to Sanmina-SCI, which will take over operations at Big Blues existing facilities.

Eventually, IBM said it plans to also transfer its desktop operations in Guadalajara, Mexico, to Sanmina-SCI as well. But the company said it will continue to manufacture desktops at other existing plants and said the deal does not include the manufacturing operations for ThinkPad notebooks or any other computer hardware.

"Todays announcement will allow us to further lower our costs, while we continue to develop and deliver a full line of PC products and services for our customers," said Bob Moffat, general manager of IBMs Personal & Printing Systems Group. "PCs are an important part of IBMs e-business infrastructure offerings. Weve been executing a strategy to make this business even more competitive. This agreement supports that strategy."

While IBM, based in Armonk, N.Y., has weathered the recent industry downturn better than most of its rivals, the giant computer maker has been forced to cut expenses in the face of sluggish sales and falling revenue.

In late November, IBM said it will eliminate more than 1,000 jobs at several of its U.S. chip manufacturing, storage and development plants, saying the cuts were in response to a 30 percent drop in microelectronics sales.

Sanmina-SCI was created last month after San Jose, Calif-based Sanmina acquired SCI, of Huntsville, Ala. The newly merged company is one of worlds largest contract manufacturers with facilities in more than 20 countries.