FLEXTRONICS NOT CONCERNED ABOUT WISTRON XBOX COMPETITION
Microsoft’s selection of Wistron as 2nd contract manufacturer for Xbox game consoles (CED Sept 4 p3) won’t affect Flextronics at all, latter’s chief mktg. officer, James Sacherman, told us after our Tues. deadline. Sacherman said: “We've known since the beginning of [our Xbox deal with Microsoft] that there would be a 2nd source and so this has always been a planned event for both us and Microsoft.”
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Noting that Microsoft said it was planning to turn to Wistron for incremental volume only at this time, Sacherman said: “Our volumes [therefore] are unaffected.” Calling manufacturing for Xbox “a big program,” he said “it would be atypical to have something like this single-sourced -- it was just a matter of having the time to [select] the 2nd source.” Sacherman also told us his company’s financial results shouldn’t be affected because it already had been factoring in addition of 2nd source.
As for which contract manufacturer would be supplying game consoles for specific regions, Sacherman told us: “I certainly can’t say anything that Microsoft won’t tell you.” He said only: “We're both going to be manufacturing it in China and the product is pretty flexible where you build it and where it supplies into… I don’t know where they're going to order what products for what regions. But certainly Microsoft has the flexibility there.” Microsoft spokesman told us earlier in day company wasn’t revealing which contract manufacturer would be supplying consoles for specific regions.
Separately, Flextronics said it completed $2 billion outsourcing deal with Casio that would see Singapore-based company manufacturing “a variety of Casio’s electronic consumer products.” Flextronics CEO Michael Marks told financial analysts in conference call last week that his company was “in the process of completing contracts with Casio” that should be concluded by end of quarter (CED Sept 3 p4). Flextronics said deal included purchase of Casio production facility in Shah Alam, Malaysia. In addition, Casio sold its manufacturing operation in Aichi Japan, excluding land and building. Flextronics said latter would serve as site for repair, logistics and distribution services, as well as launch point for Japanese customers’ new product introductions. Flextronics also said it acquired certain equipment from Casio’s factory in Kluang, Johor, Malaysia.
Flextronics said value of Casio deal was estimated at $2 billion over 4-year period, rather than $1.5 billion over 3-year period announced earlier. Company said “strategic relationship allows Casio to leverage [its] global manufacturing infrastructure, world-class procurement and robust supply chain resources so [it] can provide industry-leading consumer electronic products at new competitive price points.” Flextronics added: “Both companies will establish strong collaboration in new product development and design activities.”
After trading at $8.84 at close of day Tues., Flextronics shares opened at $8.96 Wed., moved to low of $8.82 and high of $9.28 before dropping to $8.90 at our deadline.