Solectron Buys Cisco's DWDM Plant
Solectron Corp., the world's largest contract manufacturer, announced yesterday that it will acquire Cisco Systems Inc.'s (Nasdaq: CSCO) DWDM (dense wavelength-division multiplexing) and optical add/drop module manufacturing facility in West Columbia, S.C. (see Solectron Acquires Cisco DWDM Facility). The facility produces optical subassemblies for Cisco's ONS 15800 product line, the core DWDM box that was acquired from Pirelli SpA.
No financial specifics were disclosed, but Solectron said it expects to move the operation to its Charlotte, N.C., facility. Cisco says about 90 employees will be laid off as part of the transaction, but that those were already accounted for in the firm's latest job cut announcements. Solectron will offer jobs to certain Cisco managers familiar with the company’s DWDM product line.
So what's this all about? Virtual manufacturing, as contract outsourcing is sometimes called, is nothing new for Cisco. Indeed, the South Carolina location appears to have been a bit of an anomaly in a company that outsources so much of its product manufacturing.
Cisco alone accounts for about 12 percent of both Solectron's annual sales and 12 percent of Solectron rival Flextronics International's (Nasdaq: FLEX) annual sales.
Nortel, too, has reorganized itself to be more “virtual” in the past few years. It has sold certain manufacturing facilities to Solectron and others, all the while eliminating some of the costs involved with making its gear. Nortel alone makes up 11 percent of SCI Systems’ sales.
Of course, no matter how efficient the model for making gear, when companies and service providers stop spending, all bets are off. This year when Cisco (and many, many others) had difficulty navigating the economic slowdown, Solectron felt the sting as it fired more than 9,000 workers and closed a plant in Georgia.
- Phil Harvey, Senior Editor, Light Reading