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Intergraph farms out production

In taking over production of workstations and graphics subsystems, SCI will purchase certain Intergraph manufacturing assets.

Huntsville, Alabama-based Intergraph will farm out the production of its workstations and graphics subsystems to manufacturing giant SCI, which in turn will purchasing certain Intergraph manufacturing assets, the companies announced yesterday.

Computer and electronics manufacturer SCI, also based in Huntsville, said that the 300 Intergraph employees affected will be retained at their current salary and tenure levels. Intergraph said it expects to benefit from the newly reduced headcount, as well as SCI's manufacturing efficiencies and economies of scale.

"This agreement lets Intergraph focus on its core competencies of graphics, workstations, and systems integration," said Intergraph executive vice president Wade Patterson in a statement, "further securing our industry leadership in these areas."

Analysts expressed support for the move. "I think this makes a lot of sense for Intergraph. This allows them to focus on their core strengths while not having to replicate something that another organization can do for them, and do more cost effectively," said Peter ffoulkes, a Dataquest analyst. "This is both good for SCI in strengthening their position as one of the major players and a very positive move for Intergraph."

The deal with SCI follows the sale of Intergraph's circuit board manufacturing facility in a separate transaction earlier this year.

"I think it's the right thing for Intergraph to be doing," said ffoulkes. "Most of the traditional workstation vendors are looking to pare their costs down by outsourcing."

The sale may have been precipitated by Intergraph's ongoing legal tussles with processor giant Intel in a pending patent infringement lawsuit that has lasted for almost a year. Intergraph cited the suit as having "significantly adversely impacted" its last quarterly earnings statement, when it posted a loss of 43 cents per share.

The financial terms of the deal were not disclosed. Neither company responded to requests for comment.