Arima Computer Corp. has announced  the signing of a binding Letter of Intent to sell the notebook computer and server related business, operation and assets owned by Arima to Flextronics. The move means that Arima, one of the world’s largest contract manufacturers of notebooks, exits computer business and will concentrate on other projects.

The transaction includes operation, facilities (including one plant, four dormitories together with the related land usage right, located at Wu-Jiang ), machineries, products, technology, customer lists, inventories, as well as the entire stockholding or shareholding of Arima’s wholly-owned subsidiaries. The transaction price is $59.5 million (NT$1,963 million) over the book value of the disposed assets at closing. As of June 30, 2007, the book value of the relevant assets were about $132 million (NT$4,356 million).

The move will allow Arima to concentrate on other businesses, whereas Flextronics, who is also in process of taking over contract maker Solectron, will strenghten its operations, client portfolio and engineering pool.

The decision to sell off the computer business of Arima to Flextronics, one of the world’s largest contract makers of electronics and computer equipment, outlines very thin margins on the market of notebooks and servers. The transaction also fits into the trend towards acquisitions of smaller players by larger companies and once again emphasizes that smaller players will inevitably disappear.  

The definitive sale and purchase agreement is expected to be executed within 45 days. Afterwards, Arima will immediately call a shareholders meeting to seek approval of the transaction. Flextronics will apply for the Investment Commission’s approval according to applicable laws. The parties will proceed to close the deal on a date to be further agreed by both parties after Flextronics receives the approval from the Investment Commission.

Arima indicates that the transaction will safeguard all affected Arima employees’ interests. Flextronics intends to offer positions to substantially all of Arima’s employees of the notebook and server business. Flextronics will also offer employee benefit and base compensation that are substantially similar in the aggregate to those provided by Arima. Moreover, the existing relationships between Arima and suppliers, customers and banks will remain unchanged. Prior to the closing of this transaction, Arima will continue to operate its business in the ordinary course.