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Compaq to sell Scotland plant

The company is selling its last remaining circuit-board manufacturing plant, the latest example of the trend toward outsourcing among large PC makers.

Compaq Computer is selling its last remaining circuit-board manufacturing plant, the latest example of the trend toward outsourcing among large PC makers.

The company announced Wednesday a deal to sell its Ayr, Scotland, plant to Jabil Circuit, a large circuit-board and systems manufacturer based in St. Petersburg, Fla. The Ayr plant has served most of Europe.

Pending approval, Jabil will assume ownership of the plant and its equipment, and will ultimately hire as many as 240 Compaq employees. The remaining Compaq employees, about 430 people, will have the option of moving to the company's Erskine, Scotland, plant--a sister site to the Ayr facility that makes servers. Compaq also agreed to buy the circuit boards it needs from the Ayr facility from Jabil for three years. Financial terms of the deal were not disclosed.

At one time, Houston, Texas-based Compaq made most of its own motherboards for PCs and servers, a source of pride for the company. But Compaq has outsourced most of that manufacturing in the past few years. The Ayr plant is the last motherboard facility operated by Compaq.

Outsourcing of manufacturing has become popular among large PC makers, especially as the PC market faltered in 2001. Companies such as Compaq use it as a tool to reduce costs and become more competitive.

Last year, Compaq outsourced its European desktop PC production from its Erskine plant. Compaq chose FoxCom to make its commercial PCs and FIC to handle its consumer PCs, a company representative said.

More recently, IBM and Hewlett-Packard, in separate announcements, said they would contract with Sanmina-SCI to manufacture desktop PCs.

Last January, IBM announced plans to sell its NetVista desktop manufacturing operations in the United States and Scotland to Sanmina-SCI for an undisclosed sum. Under the deal, IBM plans to transfer 980 employees to the manufacturer, which will then produce NetVista PCs.

Just over a week later, HP announced it was negotiating to sell its Isle d'Abeau, France, manufacturing site to Sanmina-SCI. Under the deal, Sanmina-SCI would acquire HP factories and about 500 employees.

Compaq said the Jabil deal will reduce manufacturing costs and streamline Compaq's server manufacturing operations in Europe, which will let the company focus on more complex elements, such as configuring high-end machines. Compaq will cut costs in part by consolidating its European server manufacturing at its Erskine facility.

Compaq notified employees of the agreement this week. The next step will begin shortly, a Compaq representative said--a 90-day consultation period during which employees will have the opportunity to suggest alternatives to the deal before it is approved.