TALLINN - The U.S.-based information technology company Tellabs International announced last week it would outsource its foreign manufacturing operations and transfer ownership of its plant in Espoo, Finland, to Elcoteq Tallinn.
Elcoteq Tallinn, which is part of the Finland's Elcoteq Network Corporation, the largest European electronics manufacturing services company, will acquire the Espoo plant at an undisclosed price in a deal that will also give the Estonian company preferred supplier status of Tellabs' products.
The deal involves mainly the production of Tellabs' digital optical cross-connection products and broadband access systems, Elcoteq officials said Nov. 14.
Company officials also said their net sales next year could increase by 100 million euros thanks to Tellabs' manufacturing projects.
The transfer will be finalized once competition authorities give their approval, which is expected to happen by the end of the year. The current staff at the Espoo plant - nearly 200 people - will become Elcoteq employees without any change in contracts, and manufacturing operations will move from Tellabs premises during autumn 2004.
"We are satisfied about having won this deal in a tough international competition. Getting Tellabs as a new customer in a big way fits perfectly with communications technology strategy," said Lasse Kurkilahti, chief executive officer of Elcoteq.
"As soon as the deal is finalized, we will need to initiate an analysis related to whether to continue the manufacture of these products and how to meet Tellabs' requirements while safeguarding the profitability of this business to Elcoteq," he added.
The Espoo production site is Tellabs International's largest and focuses on digital optical cross-connection products and broadband access systems.
Anders Gustafsson, president of Tellabs International, said the outsourcing decision was essential for Tellabs to continue profitable growth of the company.
"This action enables Tellabs to focus 100 percent of our energies on product development and customer relationships, as Elcoteq focuses on its core business electronics manufacturing services," he said.
According to Gustafsson, Tellabs expects to benefit from lower manufacturing costs and a freeing-up of capital currently tied up in equipment and inventory.
Elcoteq Tallinn runs the largest telecommunication equipment details production site of the Elcoteq Network Corporation, the largest European electronics manufacturer, which has plants and operations in 12 countries and has some 11,000 employees, of which 2,000 are in Estonia.
Elcoteq's consolidated net sales in 2002 reached 1.8 billion euros.