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Lines up Sanmina-SCI as buyer

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Hewlett-Packard wants to outsource its PC manufacturing facility in France, and it has a buyer already lined up. This is Sanmina-SCI, the contract electronics manufacturer which last week, announced its intention to buy IBM's PC manufacturing business in the US and Europe.

The deal has to be squared with the French unions, but there is always the unspoken threat of closure. HP says it is also considering outsourcing other PC ops, but it does not say where.

HP is keen to emphasise that it's been outsourcing aspects of its PC operations since 1993. In other words, it's business as usual, the company would have you believe. This is true, in the respect that PC maker do not need vertically-integrated operations to retain their status as "manufacturers". In the networking equipment world, no-one questions, say, Nortel's position as a manufacturer, even though its enterprise and wireless parts are made by Sanmina-SCI.

But HP's outsourcing plans, like IBM, shows the huge pressure on the major PC brands to contain costs. Slack markets and mighty Dell are to blame for this. HP of course wants to build economies of scale by merging its PC business with that of Compaq. Even if shareholders vote in favoure of its proposed takeover, the deal may be on hold for four months, while it is scrutinised by EU regulators.

Presumably, one of the cost-efficiencies - of combining PC production - will be lost. Unless Compaq flogs its manufacturing facilities to Sanmina-SCI too.

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