HP to Outsource More PC Manufacturing

By eweek  |  Posted 2002-01-18

Hewlett-Packard Co. is planning to turn over more of its PC manufacturing to an outside company in a bid to reduce operating expenses and improve profitability.

HP began outsourcing its PC manufacturing in 1993. Currently, HP outsources all of its consumer PCs and slightly less than 50 percent of the companys commercial PCs, according to HP spokeswoman Andrea Bass. This latest iniative, she said, will result in more than 90 percent of commerical systems being outsourced.

HP denied that the move was related to its proposed $25 billion takeover of Compaq Computer Corp.

"The outsourcing of HPs volume computing manufacturing has been planned and executed since 1993 and is independent of the proposed HP-Compaq merger," the company said in a statement released from its headquarters in Palo Alto, Calif.

HPs announcement comes slightly more than a week after rival IBM disclosed a similar deal to turn over the U.S. and European manufacturing of its desktop PCs to Sanmina-SCI Inc., based in San Jose, Calif.

Outsourcing should allow HP and IBM to better compete with Dell Computer Corp., the Round Rock, Texas, company that last year became the worlds largest PC vendor, thanks in large part to its efficient made-to-order manufacturing model that has long enabled it to undercut the prices of its rivals.

By handing over PC manufacturing to third parties, computer companies relieve themselves of the cost of maintaining and upgrading multimillion-dollar facilities, as well as employing the workers needed to run them.

Among the manufacturing facilities currently under consideration is the site in Isle dAbeau, France. HP is in the process of consulting with the French workers council and intends to proceed with Sanmina-SCI as the potential buyer.

HP also operates six PC manufacturing plants in Latin America and the Asia-Pacific region.

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