Xerox to Transfer Office Manufacturing Operations to Flextronics
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Xerox to Transfer Office Manufacturing Operations to Flextronics

Agreement Includes Sale of Assets for Approximately $220 Million

STAMFORD, Conn. and SINGAPORE--(BUSINESS WIRE)--Oct. 2, 2001-- Taking another major step forward in its turnaround plan to reduce costs, improve productivity and increase competitiveness, Xerox Corporation (NYSE: XRX), a $12 billion global electronics manufacturing services (EMS) company.

The agreement includes payment to Xerox of approximately $220 million and assumption of certain liabilities for the sale of inventory, property and equipment and a five-year contract for Flextronics to manufacture certain Xerox office equipment and components, at a modest premium over book value.

Xerox will sell to Flextronics office manufacturing operations including manufacturing assets and inventory in Toronto; Resende, Brazil; Aguascalientes, Mexico; and Penang, Malaysia. The approximately 3,650 current Xerox employees in these operations are expected to transfer to Flextronics.

"Our agreement with Flextronics will redefine our office manufacturing strategy through significantly improved asset utilization, greater supply chain flexibility and cost savings as well as generating cash from the asset sales," said Anne M. Mulcahy, Xerox president and chief executive officer.

The company also said that it will stop production by the end of the second quarter 2002 at its printed circuit board factory in El Segundo, Calif., and its customer replaceable unit plant in Utica, N.Y. The operation in El Segundo currently employs 425; Utica's employment is 265. When these plants close, Flextronics will build the work into its global network of manufacturing plants.

In addition, Xerox will begin consultations with European works councils regarding the sale of its office manufacturing operations in Venray, The Netherlands, and the transfer to Flextronics of some production work currently performed at Xerox's site in Mitcheldean, England.

As a result of these actions, Xerox expects to incur cash restructuring charges that will approximately equal the premium over book value from the asset sales.

Xerox and Flextronics expect that the first in a series of closings on the asset sales will occur in the fourth quarter, beginning a one-year transition period for Flextronics to assume manufacturing of Xerox-designed office products and related components. Flextronics will also begin the manufacturing of Xerox's electronic parts and subsystems during the first half of 2002. Xerox will continue to strengthen its manufacturing competencies in high-end production printing and publishing equipment, toner and imaging supplies through its remaining global manufacturing plants.

In total, the agreement with Flextronics represents in excess of $1 billion in annual manufacturing costs, approximately 50 percent of Xerox's overall manufacturing operations.

"This agreement exemplifies the type of business that we have built Flextronics to handle and is further evidence that the trend towards virtual manufacturing continues," said Michael E. Marks, chairman and chief executive officer of Flextronics. "This is also an opportunity to expand our customer base and product portfolio through the acquisition of these sites in addition to gaining valuable knowledge through the Xerox people."

"Our partnership with Flextronics ensures that all Xerox office products and components will continue to be produced under the high quality standards that customers rely on from Xerox," said Ursula Burns, president, Xerox Worldwide Business Services. "At the same time, Xerox will benefit from Flextronics' commitment to significant annual productivity improvements, maximizing its large-scale purchasing and technological efficiencies."

Today's announcement with Flextronics is the latest in a series of Xerox turnaround-related actions that are restoring Xerox's financial strength and positioning the company for a return of profitability. For example, Xerox announced last month a framework agreement with GE Capital's Vendor Financial Services to become the primary equipment-financing provider for Xerox's U.S. customers. The two companies also agreed to the principal terms of a financing agreement under which Xerox will receive from GE Capital approximately $1 billion secured by Xerox's lease receivables in the United States.

Xerox's agreement with Flextronics is expected to close in stages subject to the completion of global regulatory requirements. Xerox will receive cash proceeds from the agreement in phases as the companies close on the individual worldwide asset sales.

Deutsche Banc Alex. Brown served as Xerox's advisor on this agreement.

Flextronics will discuss this agreement and provide a strategic review and general update of the company's business and outlook during its previously announced analyst meeting today from 1:00 p.m. to 5:00 p.m. EST. This meeting will be broadcast via the Internet and may be accessed at

About Xerox

Headquartered in Stamford, Conn., Xerox Corporation is a USD$18.7 billion global enterprise with 85,000 employees serving customers in 130 countries. Xerox makes the digital world work better with an array of innovative document solutions, services and systems -- including color and black-and-white digital printers, multifunction devices and copiers -- designed for offices and production-printing environments. Xerox Worldwide Business Services, based in Webster, N.Y., is responsible for all manufacturing operations, which currently employs 14,400 people. For further information,

About Flextronics

Headquartered in Singapore, Flextronics is a world-class Electronics Manufacturing Services (EMS) provider focused on delivering operational services to branded technology companies. With fiscal year 2001 revenues of USD$12 billion and approximately 70,000 employees, Flextronics is a major global operating company with design, engineering, manufacturing and logistics operations in 27 countries and four continents. This global presence allows for manufacturing excellence through a network of facilities situated in key markets and geographies that in turn provide its customers with the resources, technology and capacity to optimize their operations. Flextronics' ability to provide end-to-end operational services that includes innovative product design, manufacturing, IT expertise and logistics has established the company as a top-tier EMS provider. For further information, visit

Media Contacts:

Christa Carone, Xerox Corporation, 716-423-5074, Email Contact

Bill McKee, Xerox Corporation, 716-423-4476, Email Contact

Manuella Solomon, Flextronics, 408-576-7867, Email Contact

Cheryl Scritchfield, Flextronics, 43 1 602 4100 26, Email Contact


For more information about Xerox, visit

For more information about Flextronics, visit

XEROX®, The Document Company® and the digital X® are trademarks of XEROX CORPORATION.

This release contains forward-looking statements and information relating to Xerox and Flextronics that are based on the companies' beliefs as well as assumptions made by and information currently available to them. The words "anticipate," "believe," "estimate," "expect," "intend," "will" and similar expressions, as they relate to Xerox and Flextronics, are intended to identify forward-looking statements. Actual results could differ materially from those projected in such forward-looking statements. Information concerning certain factors that could cause actual results to differ materially is included in the companies' Form 10-Qs filed recently with the SEC. The forward-looking statements in this news release are based on current expectations. Neither company assumes any obligation to update these forward-looking statements.

     Media Contacts:
     Xerox Corporation
     Christa Carone, 716/423-5074
Email Contact,
     Bill McKee, 716/423-4476
Email Contact
     Manuella Solomon, 408/576-7867
Email Contact
     Cheryl Scritchfield, 43 1 602 4100 26
Email Contact