The network gear maker said it will hand over all of its manufacturing, which currently takes place in Dublin, Ireland, to contract manufacturers Flextronics International and Jabil Circuit, resulting in the job losses.
The company expects that the move to outsource manufacturing will reduce its costs and increase its ability to compete in the market for networking gear. Outsourcing has grown in popularity among technology companies over the past few years, as products such as PCs and networking gear have become commodities. IBM, for example, outsourced its Intel server manufacturing to Sanmina SCI last January.
Typically, outsourcing helps companies lower their costs by reducing the overhead of maintaining a manufacturing plant and staffing it with workers. Working with contract manufacturers can also often help companies turn out new products more quickly and share research and development, another measure that helps control costs.
"These actions further enhance 3Com's ability to bring competitive and comprehensive networking solutions to the enterprise market," Bruce Claflin, 3Com's chief executive, said in a statement.
3Com also established a new product design house, the Taiwan Design Centre, to managing the design and manufacturing of its low-price, high-unit-volume products. The centre will be staffed by both 3Com employees and workers from third-party design and manufacturing companies. 3Com plans to shift the focus of its internal engineering to products such as voice over IP (VoIP) and application-specific integrated circuit (ASIC) chips, the company said in a statement.
3Com expects its manufacturing transition, which will also shift management of global product distribution to Singapore-based Flextronics, to last about six months. The Dublin plant is expected to close by the end of February 2004, the company said.
3Com did not announce any of the financial details of its outsourcing deal on Wednesday. Instead, the company will include them in its fiscal first-quarter 2004 earnings report, which will be released on 18 September, a company representative said. Earlier this year, 3Com sold off its CommWorks business unit and relocated its headquarters to Marlborough, Massachusetts, by moving its senior executives there.
Talkback
Will they pay back the "enterprise" grants and tax breaks that enticed them there in the first place? I doubt it !