MILPITAS, CA – JDS Uniphase has signed a definitive agreement to sell certain manufacturing and other assets in Shenzhen to Sanmina-SCI. No financial terms were disclosed.

Under the terms of the agreement, Sanmina-SCI will acquire the plants, inventories and employees.

The transaction is expected to close before April 6, pending customary closing conditions, including regulatory approval.

Sanmina-SCI will provide services back to JDSU for an unspecified period.

“Further OEM outsourcing is typical after a downturn,” said analyst Sherri Scribner of Deutsche Bank Equity Research, pointing to the tech recession in 2001. “While asset purchases are not uncommon in the EMS industry, we view them as non-optimal, as they are often a way for OEMs to offload underperforming facilities. The end result is often lower utilization and ROIC for EMS companies.

“We expect additional outsourcing opportunities to emerge as the current downturn winds down,” she added. “That said, further OEM pull-ins of manufacturing to internal factories are still more likely over the next six to nine months, as evidenced by Nokia's decision to reduce its reliance on EMS suppliers.”

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