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Electronics Production | December 20, 2004

Elcoteq, Thomson enter agreement

Elcoteq Network Corporation has reached an agreement for its largest outsourcing and acquisition to date with Thomson, provider of technology, systems and services to integrated media and entertainment companies. The deal includes the acquisition of Thomson's manufacturing operation in Juarez, Mexico, and manufacturing co-operation in the set-top box business.
The transaction is scheduled for closing on December 31, 2004. The total consideration to be paid by Elcoteq will amount to approximately MUSD 33. The acquisition includes certain fixed assets and inventories of Thomson's Juarez manufacturing operation. Thomson's personnel in Juarez, Mexico will continue in Elcoteq's organization. Currently the plant employs approximately 2,000 employees. Elcoteq will lease the required manufacturing space of approximately 17,000 square meters and will take over the Juarez facility on January 1, 2005.

Under the long-term manufacturing agreement Elcoteq will become a preferred manufacturing partner to Thomson for the manufacture of set-top box products and produce Thomson's set-top boxes in Juarez, Mexico. In addition to manufacturing services Elcoteq will also offer other value add services such as component sourcing services to Thomson.

Elcoteq expects the deal to boost the company's sales by approximately MUSD 300 during 2005 and by MUSD 800 - 1,000 during 2005-2007. The deal is expected to have positive impact on the company's financial results in 2005.

The acquisition of the Juarez plant will double Elcoteq's manufacturing capacity in Mexico. The Juarez plant is ideally located in the border region between Mexico and the USA, and will provide a needed strategic location to develop business with Elcoteq's current and prospective US customers.

The co-operation with Thomson - a market leader in satellite and terrestrial set-top box products with over 30% global market share - is a significant step toward executing Elcoteq's communications technology strategy and accelerates its development of services for the home communications business. The agreement will make Thomson one of Elcoteq's top ten customers and further diversifies its customer and product base inside the communications technology segment.

"Thomson, one of the leading set-top box manufacturer in the world, is a very welcome addition to our customer portfolio. This deal also marks our entrance into a new product segment that fits into our communications strategy and our manufacturing network extremely well. We see great business opportunities in this co-operation, and I am sure that our competence in manufacturing demanding communications technology products will be beneficial to Thomson as well," said Mr Jouni Hartikainen, President and CEO of Elcoteq.

"Thomson has been at the forefront of developing new set-top box features and technologies for many years," commented Mr Ghislain Lescuyer, Executive Vice President for Thomson. "Teaming up with Elcoteq for our American clients' set-top box manufacturing and supply chain needs will provide the best possible products, service, and price. Through Elcoteq we benefit from the experience of a leading EMS company in the communications technology field."

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