More Telecom Outsourcing is OK'd

Electronic News, July 9, 2001 by Bernard Levine

Latest deals for contractors

On the telecom outsourcing front, a design deal surfaced between Solectron Corp. and Qualcomm Inc., while previously announced pacts between Flextronics International Ltd. and Alcatel Corp., and Celestica Inc. and Sagem SA have been completed.

Contracting leader Solectron (nyse: SLR), Milpitas, Calif., and Qualcomm (nasdaq: QCOM), San Diego, agreed to work together to make a CDMA2000 1x handset design package available to Qualcomm licensees. The CDMA2000 handset design package, recently developed by Qualcomm, is intended to support CDMA handset manufacturers in mainland China and other emerging CDMA markets. The design package will help bring 3G wireless products faster to market, and help accelerate the adoption of CDMA worldwide, the companies claimed.

Under the agreement, Solectron will build and test prototypes of a CDMA2000 handset in exchange for a handset design support package intended to strengthen Solectron's ability to efficiently support CDMA handset design, manufacturing and test needs of Qualcomm's licensees seeking to outsource manufacturing.

"This is a very positive step for Solectron," said Joe Regan, vice president of Solectron. "The opportunity to work with the leader in CDMA digital wireless technology will further enhance Solectron's CDMA manufacturing and testing capabilities, and strengthen our global capabilities to better serve our customers worldwide."

"Qualcomm is focused on making CDMA technologies readily available to its growing list of licensees," said Mary Blecker, senior vice president of technology transfer for Qualcomm. "This collaboration with Solectron ensures that Qualcomm's customers have the option of outsourcing all or part of their handset manufacturing to one of the world's leading contract manufacturers."

In another telecom outsourcing move, Paris-based Alcatel (nyse: ALA) and Singapore-based Flextronics (nasdaq: FLEX) have completed a strategic partnership agreement in which Alcatel will outsource the European manufacturing of its GSM handsets to Flextronics. In the agreement, which became effective June 30, Flextronics acquires the assets of Alcatel's Laval, France, manufacturing plant and 830 employees are transferred to Flextronics. All Alcatel GSM handset production will be consolidated from Illkirch, France, to the Flextronics facility in Laval.

A memorandum of understanding for the deal had been signed in April. At that time, Olivier Houssin, president of Alcatel's e-business group, said. "The GSM handsets market is maturing, and Alcatel must adapt its processes to remain competitive and regain profitability. This agreement is an extension of our successful relationship with Flextronics and gives us increased flexibility and lower costs while strengthening the future of the operations."

Also in recent days, Celestica, Toronto, (nyse: CLS),completed its strategic agreement with Sagem SA of France, a technology group with a business focus on the communications, automotive and defense industries. As part of this arrangement, Celestica has acquired Sagem CRs.r.o., a subsidiary of Sagem SA, which operates in Kladno, Czech Republic.

As announced in May, the deal includes a three-year supply agreement worth approximately $500 million in total revenue over the course of three years. Further terms of the transaction were not disclosed.