IBM continues to move away from manufacturing and working with actual hardware, including repair, assemble and so on. They have already sold their HDD business and now they plan to focus even more on technology innovation, research and development work and providing solutions under their brand-name. Today the company announced it has reached definitive agreement with Sanmina-SCI and Solectron in regards IBM’s manufacturing, assembling and RMA operations in North America and Europe. Under the terms of the agreement, IBM will sell their facilities that provide the mentioned operations to Sanmina-SCI and Solectron, and the companies will provide these services to IBM on a contract basis.

There is no surprise that assembling, manufacturing and RMA activities are not cheap in well-developed countries, as people want to have a high salary, while the taxes are also not low at all. Moreover, it may be pretty hard to fully utilise manufacturing capacities, hence, it there may be no finaincial benefits from owning a fab.

IBM has signed a $3.6 billion, three-year contract with Sanmina-SCI and a $120 million, three-year contract with Solectron to provide specific manufacturing services. The deals are expected to close in February.

IBM will outsource manufacturing of a significant portion of its low and midrange eServer xSeries systems and IntelliStation workstations for customers in the Americas, mainland Europe, the Middle East and Africa to Sanmina-SCI. Sanmina-SCI also will distribute and fulfil orders for computing options for IBM NetVista desktop systems, ThinkPad notebooks, and eServer xSeries systems, and handle custom configuration for some ThinkPad notebooks for customers in these regions. Sanmina-SCI will acquire the IBM manufacturing operations that support these products in Mexico and Scotland. IBM will continue to manufacture the majority of ThinkPad notebooks worldwide in Shenzhen, China.

Sanmina-SCI intends to use existing IBM locations to fulfil the contract and will acquire or lease related IBM equipment and buildings in Guadalajara, Mexico, and Greenock, Scotland. IBM will transfer inventory and fixed assets, as well as the management of IBM's existing outsourced manufacturing contracts in both locations. The agreement includes the transfer of about 650 IBM employees in Greenock, 400 IBM employees in Guadalajara and 10 IBM employees in RTP. All IBM employees whose work is being outsourced under the agreement will be offered positions with Sanmina-SCI. Terms of the sale were not disclosed.

Solectron will take over a significant portion of the manufacturing operations of Global Asset Recovery Services - an offering of IBM Global Financing that restores end-of-lease PCs and other information technology equipment for resale. Solectron will acquire the IBM refurbishing center that supports this operation in Research Triangle Park, North Carolina, USA.

Solectron will use the existing IBM refurbishing center in RTP and acquire the related buildings and equipment. IBM will transfer inventory and fixed assets, as well as the management of IBM's existing outsourced manufacturing contracts at RTP. All of the about 250 IBM employees who support these operations will be offered positions with Solectron. Terms of the sale were not disclosed.

The agreements do not cover manufacturing services for any of IBM's Intel-based products for customers in Asia Pacific, the majority of which will continue to be manufactured at IBM’s joint venture International Information Products Company manufacturing facility in Shenzhen, China. In addition, eServer xSeries systems manufactured by Solectron Sumare for customers in Brazil, Argentina, Paraguay and Uruguay will not be affected. No other IBM product lines or IBM manufacturing location other than those in Scotland, Mexico and RTP will be affected by the Sanmina-SCI and Solectron agreements.