Jabil Circuit Inc. has agreed to purchase Silicon Graphics International Corp.’s main manufacturing facility in the United States in addition to certain other assets as the two companies seal their previously announced outsourced production deal.
Under the terms of the engagement, contract manufacturer Jabil will become the primary provider of outsourced manufacturing and supply chain services to SGI, a medium-sized vendor of high-performance computing equipment used for data analytics, cloud computing and storage. Jabil and SGI first announced the transaction in July. (See: SGI Names Jabil Key Supply Chain Partner).
The deal announced today calls for Jabil to pay $6 million in cash for SGI’s facility in Chippewa Falls, Wis and “certain other manufacturing assets.” SGI said it will transfer 130 employees at the facility to Jabil and noted it does not expect any “other workforce transfers or reductions” as a result of the transaction. The company will, however, take a charge of about $2 million in its fiscal 2014 second quarter ending Dec. 27, 2013 for the asset sale and personnel transfer.
“We expect significant benefits to SGI and our customers as a result of this relationship, including a more variable cost structure, greater flexibility to respond to changes in volumes or customer requirements, shorter cycle times for certain products, and enhanced quality management,” Jorge Titinger, president and CEO of SGI said in a statement. “As a world-class supply chain partner, Jabil has extensive experience in system-level assembly and testing of compute and storage products and is able to meet the unique sourcing and technical requirements of both our government and commercial customers.”
SGI reported sales of $767 million for the fiscal year ended June 6, 2013, up 2 percent from $753 million in the previous fiscal year. Analysts on average are expecting revenue for fiscal 2014 to decline about 15 percent, to $655.2 million.