To lower production costs and free up capital, Tellabs will outsource manufacturing of its North America products to Sanmina-SCI. About 325 workers will lose jobs as a result.
The company will shutter its 545,000-square-foot facility in Bolingbrook, Ill., by year's end and them put the facility on the market. Remaining employees will move to Tellabs' Naperville, Ill., headquarters.
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Inventory held at outsourcing partners moved off Tellabs books. Over 2,100 requests submitted manufacturing, aerospace and defense, and high-tech.
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"Bolingbrook has been a good place for Tellabs to do business," said Michael J. Birck, chairman and CEO. "And while we deeply regret the need to take such a painful action, it's essential to advance Tellabs along the path to profitable growth."
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Affected employees will receive outplacement assistance and severance packages based on their years of service and position.
Since it will take at least six months to switch-over to outsourced manufacturing, the benefits will not greatly impact 2003 financial results.
Tellabs, which makes gear that helps carriers in 100 countries manage bandwidth, will record a charge of between $90 million and $110 million in the third quarter related to the outsourcing moves.
Financial terms of the deal with San Jose, Calif.-based Sanmina-SCI were not disclosed. The companies had a previous working relationship.
In recent years, contract manufacturers have suffered along with the high-tech companies that employ them. But small steps toward economic recovery, combined with stepped-up outsourcing have some industry-watchers thinking the worst may be over. Sanmina-SCI competitors include Flextronics International, Celestica and Solectron.
Sanmina-SCI which recently announced widening loss in its third quarter, is still investing in new facilities. For example, it is spending $4 million for a software development site in India and bought Newisys, a privately held developer of enterprise servers based in Austin, Texas.
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