Contract manufacturer returns to hardware roots

Contract manufacturer Flextronics has agreed to sell its software business in a transaction valued at about $900m.

Flextronics is one of the world's largest contract manufacturers and makes devices such as Microsoft's Xbox 360.

The transaction illustrates the increasing competition in the contract manufacturing market. Flextronics sold off its semiconductor and network services operations last year to allow it to better focus on core business.

"This transaction is the continuation of our previously announced strategy of focusing our efforts and resources on the reacceleration of significant growth opportunities in our core electronics manufacturing services business," Flextronics chief executive Michael McNamara said in a statement.

The Singapore-based company will receive about $600m in cash from Kohlberg Kravis Roberts and Co, while retaining a 15 per cent stake in the company. An additional $250m is to be paid with interest in eight years' time.