Solectron buys Smart Modular for $2 billion

America’s largest high-tech contract manufacturing

company, Solectron,

announced it is branching out into the memory module design and

production arena with a $2 billion, all-stock take-over of memory

chipmaker Smart Modular Technologies.

California-based Solectron does about $10 billion a year in contract

manufacturing work, mostly board-level assembly for hundreds of computer

and electronics companies in Silicon Valley and elsewhere. Smart Modular

is located in neighboring Fremont and sold $714 million worth of memory

modules in 1998. Its main products are memory modules, flash smart cards

and embedded high-performance computer modules. Solectron already did most

of Smart Modular’s manufacturing.

"We decided this was a nice strategic fit. We saw the chance to

mix Smart Modular’s excellent design with our manufacturing

capabilities," said Solectron vice president Charles Welch. The

combined company will have fiscal 2000 sales of around $13 billion and

profits of some $400 million. Smart Modular’s 830 workers will become

employees of Solectron, which has nearly 25,000 employees.

Analysts said the move will enable Solectron to broaden its revenue

base and mix the high-profitability of end-user products like memory

modules with the tight-margins the company achieves in its contract

manufacturing operations.