Wall St. Journal: Motorola to Outsource
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May 31 2:48am ET
NEW YORK (Reuters) - Motorola Inc. (MOT.N) is poised to outsource over $30 billion of consumer-electronics production over the next five years with Flextronics International Ltd. (FLEX.O) and take a small stake in the contract manufacturer, according to the Wall Street Journal.
The deal, which the companies are expected to announce this week, would be the largest outsourcing agreement between a name-brand electronics company and a contract manufacturer, the newspaper said.
By 2005, the companies expect Flextronics to make more than $10 billion of cellular phones, two-way pagers, set-top boxes, wireless-communications gear and components for Motorola, according to the Wall Street Journal.
That would be nearly twice Flextronics's total revenue of $5.7 billion in the fiscal year ended March 31, the newspaper said.
Gray Benoist, a Motorola vice president, told the Wall Street Journal the Schaumburg, Ill., electronics concern will continue to do most of its manufacturing itself. The Flextronics work will represent less than 15 percent of Motorola's manufacturing, he said.
As part of the deal, Motorola would pay $100 million for an equity instrument convertible to 11 million shares of Flextronics, which would represent roughly a 5 percent stake in Flextronics, the newspaper said.
At roughly $9 a share, Motorola would be getting the Flextronics stock at more than an 80 percent discount to Tuesday's 4 p.m. price of $50.0625 on the Nasdaq Stock Market, according to the Wall Street Journal.
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