Flextronics Buys Xerox’s Office Equipment Business
Struggling copier maker Xerox Corp. said Tuesday that it has agreed to sell its office equipment manufacturing business to Flextronics International Ltd. of Singapore for about $220 million as part of an effort to return to profitability.
The sale will cut Xerox’s total production roughly in half and save $1 billion in annual costs. About 4,900 Xerox jobs will be transferred to Flextronics, and 1,100 more will be cut, said Christa Carone, spokeswoman for the Stamford, Conn.-based company.
About 425 employees at Xerox’s printed circuit board factory in El Segundo will lose their jobs in May 2002, when a union contract expires, Carone said. The other layoffs will occur in Utica, N.Y., and Mitcheldean, England.
About 230 Xerox employees in El Segundo will continue to make input-output scanners after the Flextronics sale is complete, Carone said. Xerox has 85,000 employees worldwide.
Analysts said the move will allow Xerox to focus on high-end products that are more profitable. Its high-speed printing and production machines can cost hundreds of thousands of dollars each.
“Manufacturing expertise on the high-end is profitable,” said Jonathan Rosenzweig, an imaging industry analyst at Salomon Smith Barney Inc. “What they’re getting rid of is commodity-like manufacturing.”
Flextronics, a $12-billion global electronics manufacturing services company, will make most of Xerox’s Document Centre line of copiers, as well as small printers and multi-function office machines, as part of a five-year agreement.
Xerox will still design the machines after Flextronics takes over the manufacturing, Xerox said. The company will also continue to make more expensive printers used by the graphic arts industry and copy stores such as those operated by Ventura-based Kinko’s Corp..
Xerox is selling assets and eliminating jobs as part of a plan to return to profitability by the fourth quarter. Last month, the company formed a venture with General Electric Co.’s GE Capital, which agreed to take over most of Xerox’s U.S. equipment-financing business.
The deal brings another marquee customer to Flextronics, the world’s second-biggest contract manufacturer of electronics. The company already manufactures cell phones for Ericsson and Motorola Inc., Internet equipment for Cisco Systems Inc., and printers for Hewlett-Packard Co.
Separately, Flextronics said Tuesday it was maintaining financial guidance for the September quarter despite taking a $380-million restructuring charge amid a continued slump in the market for electronics and components.
Flextronics shares rose 5 cents to $15.95 on Nasdaq and Xerox rose 34 cents to close at $7.78 on the New York Stock Exchange.
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Bloomberg News and the Associated Press were used in compiling this report.
