Rediff Logo News Check out our special Offers!! Find/Feedback/Site Index
HOME | US EDITION | BUSINESS
September 18, 1999

ELECTION 99
COLUMNISTS
DIARY
SPECIALS
INTERVIEWS
CAPITAL BUZZ
REDIFF POLL
DEAR REDIFF
THE STATES
YEH HAI INDIA!
ELECTIONS
ARCHIVES

Search Rediff

Smart Shareholders to Vote On $ 2 Billion Sale To Solectron

E-Mail this report to a friend

Sonia Chopra

Solectron Corp, which manufactures computers, printers, cellular phones and other technology products for many big companies, announced this week, that it will acquire Smart Modular Technologies Inc for about $ 2 billion in stock.

As part of the purchase, Ajay Shah, chairman and chief executive of Smart Modular, will become president and chief executive of a new Solectron technology design group. Shah owns about 35 per cent of Smart Modular along with his wife Lata Krishnan and Mukesh Patel.

The deal, which has been approved by the board, will be voted on by shareholders in a few days.

The deal -- the largest transaction in the electronics industry -- is the latest triumph in the saga of Shah and Krishnan, a husband and wife partnership who co-founded Smart Modular with their friend Patel. Shah and Krishnan both came from families who left East Africa before it was swept by a wave of anti-Asian violence in the 1970s.

The deal will help Milpitas-based Solectron Corp, one of Silicon Valley's largest companies, to extend its lead as the world's leading electronic manufacturing services company. Solectron builds components and finished products for companies like Cisco, Hewlett-Packard, IBM, Qualcomm, and the Swedish multinational, Ericsson.

Smart Modular Technologies, based in Fremont with 830 employees, makes memory modulars and memory cards, and has had a strong relationship with Solectron. The success of that relationship must have been a factor in convincing Solectron to pay a premium of 55 per cent above Smart Modular's trading price on Monday the day the deal was announced, Silicon Valley pundits believe.

Solectron also topped earnings expectations with another quarter of explosive growth fueled by outsourcing among name-brand companies.

"It is a great thing. We are now a part of a bigger network of providing services to a bunch of different customers," said Charles Welch, Smart Modular's vice-president of business development.

"We saw the chance to mix excellent design and manufacturing capabilities. I know I speak of everyone when I say this is a very good partnership," said Welch, assuming the role of the main spokesperson as Krishnan and her husband are on vacation on the East Coast and Patel is in Japan on business.

For customers, Solectron can design a product, manufacture it, distribute it and provide additional customer service. They are among a group of US contract manufacturers helping to hollow out America's corporations, a business growing twice as fast as the companies. Analysts have been amazed at the company's ability to manage such rapid growth.

Now by adding Smart Modular to its operations, Solectron hopes to expand its ability to help customers design new products.

"They just keep improving, adding to their capability all the time," Alexander Blanton, an analyst at Ingalls & Synder, told Bloomberg News. "They just anticipate, perform and execute consistently better than anyone else."

Solectron will pay for Smart Modular by exchanging 0.51 of its shares for each share of Smart Modular stock. Based on the trading prices on Monday, that would value Smart Modular at $ 37.61 per share or 55 per cent above its final prices, according to news sources. Solectron fell $ 3.75 to $ 73.75 in trading while Smart Modular gained 81 cents at $ 24.31.

Bloomberg News said Solectron's fiscal 2000 revenue is expected to be between $ 13 billion to $ 13.5 billion. That would be up from $ 8.39 billion in 1999. Smart Modular had a net income of $ 51.5 million on revenues of $ 714.7 million in 1998.

Krishnan and Shah met in London in 1986 and moved to Fremont after they were married. They have two small children. All three are now among the highest compensated executives in the area. Krishnan's total compensation in 1998 was $ 3.9 million after she cashed in some stock options, making her the highest-compensated woman executive among the largest publicly traded companies in the valley.

EARLIER REPORT:

The Rise of a Silicon Valley Role Model

Previous: Good Samaritans Open Up Their Hotels To Victims of Hurricane Floyd

Next: Teenagers Find Hindu Camp "Cool"

Tell us what you think of this report

HOME | NEWS | ELECTION 99 | BUSINESS | SPORTS | MOVIES | CHAT | INFOTECH | TRAVEL
SINGLES | BOOK SHOP | MUSIC SHOP | HOTEL RESERVATIONS | WORLD CUP 99
EDUCATION | PERSONAL HOMEPAGES | FREE EMAIL | FEEDBACK