Flextronics-Solectron Deal Seen As Positive

By Marina Emmanuel

THE acquisition by Singapore-based electronic manufacturing services (EMS) provider Flextronics International of its smaller competitor Solectron Corp is likely to see more investments flowing into Malaysia.

Industry observers say although the effects of the US$3.6 billion (RM12.53 billion) deal are still unclear as far as headcount reduction and operations integration in Malaysia are concerned, where both companies have operations, the move may be a positive one for the country.

“As the majority of Solectron’s clients like Cisco and Alcatel- Lucent are located in Asia, it looks like more business may come this way and employees here may get to keep their jobs,” an industrialist told the Business Times.

The combined company, which will operate under the name of Flextronics, will have operations in 35 countries, with approximately 200,000 employees worldwide and annual revenues in excess of US$30 billion (RM104.4 billion).

Both Flextronics and Solectron design and make computers, networking gear, cellular phones and other parts sold by technology firms.

Solectron, which is one of the world’s largest providers of complete product lifecycle services, has an investment presence in Penang where around 8,000 people are employed.

Besides Alcatel-Lucent, its other customer is IBM.

Flextronics, which boasts a global presence in 32 countries on five continents, is one of the world’s largest manufacturers of mobile phones, printers, high-end 3G phones and other high technology wireless devices.

The company employs 33,900 workers at its plants in Selangor, Penang, Malacca and Johor, where it services leading multinational firms involved in communications, printing and digital imaging, computing and automotive industries.

In an internal memo sent to all Solectron employees last Monday, its executive vice-president and interim chief executive officer Paul Tufano said the decision to bring the two companies together was reached because both parties were convinced that together, they will emerge a “stronger, more profitable and ultimately more successful player in the highly-competitive global EMS market.”

“In terms of a timeline,” Tufano said, “we expect this transaction to close before the end of the calendar year.

“During this time we will continue to compete in the market as separate companies.

“However, we will shortly be establishing joint integration and planning teams (as permitted by law) and will communicate our plans as they solidify in the months ahead.”

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