Microsoft To Sell Bothell Diskette Plant -- Agreement With Kao Infosystems Includes Continued Employment For About 400 Workers

Microsoft Corp. announced it has signed a letter of intent to sell its Bothell computer-diskette plant, its only production facility in the United States.

The deal with Kao Infosystems Co. of Plymouth, Mass., includes the sale, continued employment for the workers and a three-year contract to manufacture software for the Redmond-based company, Microsoft spokesman Dean Katz said yesterday.

Kao will purchase and operate the eight-year-old Canyon Park facility in Bothell, which produces the majority of Microsoft's packaged products for North America.

The exact price of the sale has not been worked out yet, Katz said.

The transaction, which is subject to government approval, is expected to close in early August.

Canyon Park will become the third West Coast software-production facility for Kao, a diskette manufacturer that is a subsidiary of the Japanese conglomerate Kao Corp.

"Our agreement with Kao will have many benefits," Rick Devenuti, Microsoft's vice president of operations, said in a statement. "It allows us to join with a quality manufacturer to offer the lowest product cost to our customers. It reduces our fixed production costs, thus providing flexibility to respond to the changing software market. It offers continued employment to our Canyon Park employees, and it allows Microsoft to focus on our core competency - developing great software."

Devenuti said employee considerations ranked high in the decision to work with Kao. "Microsoft's manufacturing employees are among the most highly skilled and productive in the software industry. We looked for an outsource partner that could utilize our people fully, offer similar wages and benefits, and had a reputation as a great employer."

Canyon Park, which opened in 1988, employs about 400 people, Katz said.It produces a variety of Microsoft software on diskettes, as well as software manuals and other packaged goods.

Microsoft had laid off about 120 of the workers at the Bothell plant in January, saying that demand was declining for software on 3.5-inch floppy disks as software is increasingly sold on CD-ROMs and being loaded on new computers.

Microsoft still operates some production facilities overseas, including Ireland, the Far East and Puerto Rico, Katz said.

Kao Infosystems is a subsidiary of Kao Corp. of America, which in turn is a subsidiary of Kao Corp. Other Kao subsidiaries include High Point Chemical Corp. in High Point, N.C., and Andrew Jergens Co. in Cincinnati, Ohio.