Elcoteq drives its communications technology strategy and doubles presence in China by acquiring IBM's share of GKI

12/18/2002 - In pursuit of its communications technology strategy, the Finnish electronics manufacturing company Elcoteq announced it will acquire IBM's 70% ownership in the Chinese joint-venture electronics manufacturing services companies Shenzhen GKI Electronics Company Limited and Beijing GKI Electronics Co, Ltd. Closure of the agreement is pending final approvals from relevant Chinese agencies, which are expected later this month.

The transaction price for the acquisitions and certain licensing arrangements, which will take effect on December 31, 2002, is $37.3 million U.S. (about MEUR 36.5). The price will be paid in cash. China Great Wall Computer Shenzhen Company Limited will remain as the joint venture partner in both companies. No impact to the joint ventures' operations, employees or customers is anticipated.

The combined revenue of the two GKI companies in 2003 is estimated by Elcoteq to exceed 600 million euros. The two plants have a total of approximately 1,600 employees and some 15,000 square meters of space. The transaction will further strengthen Elcoteq's relationship with Nokia in China due to GKI's substantial supply relationship with Nokia.

As a result of the agreement, Elcoteq will also establish a presence in Beijing's Xingwang industrial park, where GKI's new Beijing plant is located. GKI's current Beijing operations will move to this 20,000 square meter plant in early 2003. In addition to Nokia, GKI brings Elcoteq several Japanese and Western customers with technically demanding products.

These acquisitions will significantly add to Elcoteq's current business volume in China, which the company entered in 1999. Elcoteq's presently-owned plants in Dongguan and Beijing, employing 1,700 people and occupying 25,000 square meters of space, manufacture mobile terminal and mobile network products for several European and Asian customers.

Following the transaction Elcoteq's total annual sales volume in China will exceed 1.1 billion euros. The total number of personnel in China will be 3,300.

Co-operation between Elcoteq and IBM in communication products
Elcoteq and IBM have also agreed to explore opportunities for extensive cooperation in communications technology products and other applications. IBM's systems design skills, matched with Elcoteq's extensive electronics manufacturing capabilities, offer the potential for providing complementary services for new and existing customers.

"This acquisition practically doubles Elcoteq's presence in China and enables us to competitively handle more projects from existing and new customers. It marks a major step in Elcoteq's strategy to become the leading electronics manufacturing services company for communications technology customers and products. It takes us back to the growth path, and balances our European and Asian businesses to nearly equal in size. We look forward to increased business with IBM in communications technology products and fruitful cooperation with the prestigious Great Wall Company as our joint-venture partner," said Elcoteq's president and CEO, Mr. Lasse Kurkilahti.

"Great Wall and IBM enjoy a close, pleasant and productive co-operation relationship on not only GKI companies project, but also many other fields all along these years. We believe that the co-operation with Elcoteq this time will greatly promote the development of GKI companies. Meanwhile, it will enrich Great Wall's experiences in the communication product sector, and benefit the optimization and upgrade of Great Wall's industrial structure. We are fully confident on the success of this co-operation," said Mr. Wang Zhi, Chairman of China Great Wall Computer Group.

"We believe Elcoteq's participation in the GKI companies can contribute to their continued success in supporting key customers in China and worldwide," said Dr. Thomas Caulfield, vice president, Worldwide Interconnect Products, IBM Microeletronics. "IBM has refocused its Microelectronics business on high-end foundry, ASICs and PowerPC-based standard products, all areas which make best use of our core competencies. Similarly, the GKI companies are a natural complement to Elcoteq's leadership in electronic manufacturing services."

About Elcoteq
Elcoteq Network Corporation is the largest European electronics manufacturing services (EMS) company and one of the global leaders in its field. Elcoteq focuses on communications technology products and customers, and provides globally end-to-end solutions consisting of design, NPI, manufacturing, supply chain management and after-sales services for the whole lifecycle of its customers' products especially in the communications technology sector. The company operates on three continents in 11 countries and it has over 8,500 employees. Elcoteq's consolidated net sales in 2001 totaled MEUR 1,862. Elcoteq Network Corporation in listed on the Helsinki Exchanges. More information on the company at www.elcoteq.com.

About Great Wall
China Great Wall Computer Shenzhen Co.,Ltd. is one of the largest computer system developers, manufacturers and OEM products suppliers in China. Great Wall was listed on the Shenzhen Stock Exchange in 1997 and has about 2,000 employees. Great Wall focuses on the design and manufacture of computer systems, computer parts and components, network equipment, and other information technology applications and services, including broadband access and e-business solutions. In 1999, the brand of "Great Wall" won the honor of "Chinese Famous Brand." In 2001 and 2002, "Great Wall" branded PC and server won the award of "Chinese Famous Brand Product" sequentially.

About IBM
IBM strives to lead in the creation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. IBM translates these advanced technologies into value for customers through professional solutions and services business worldwide.

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