Motorola awards monster contract to Flextronics

In what will be by far the largest outsourcing contract in history,
Motorola announced it has awarded a 5-year, $30 billion supplier contract to
Flextronics, the Singapore-based electronics contract manufacturing firm.

Under the terms of the deal, Flextronics will make many of Motorola’s
cellular phones, pagers and other electronics products such as television
set-top boxes. Eventually, Flextronics will account for about 15 per cent of
Motorola's total manufacturing needs. Motorola will also pay $100 million for a
five per cent stake in the company.

Flextronics will do the manufacturing at plants in North America, Latin
America, Europe and Asia. Motorola's Communications Enterprise unit vice
president Gray Benoist said the deal will bring greater efficiency to Motorola’s
operations. "This certainly will be cost-effective. It redirects resources
that would be invested in expanding our capacity over to design and development
of new products.''

The previous record for an outsourcing contract was in April, when Solectron
agreed to buy Nortel Networks plants for $900 million and to supply more than
$10 billion in parts and services to the company, analysts said.