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Nortel, Flextronics Discuss Divestiture

Photonics.com
Jan 2004
TORONTO, Jan. 22 -- Nortel Networks announced today it will divest its remaining manufacturing activities, including product integration, testing and repair operations carried out in Calgary and Montreal, Canada; Campinas, Brazil; Monkstown, Ireland; and Chateaudun France; as well as related activities, including the management of the supply chain and related suppliers.

Nortel said it is in discussions with Flextronics about the divestiture that could result in Flextronics undertaking and managing more than $2 billion of Nortel Networks' annual cost of sales and involve the transfer of more than $500 million of manufacturing and inventory assets to the Singapore-based electronic manufacturing services (EMS) provider. In return, Nortel said, it would receive proceeds of about $500 million in cash over a nine-month period, primarily for inventory and certain manufacturing assets, plus an additional amount for certain intangible assets.

Over the last five years, Nortel has divested most of its manufacturing activities to EMS suppliers.

The discussions with Flextronics could affect up to approximately 2500 Nortel Networks employees, the company said.

"At this stage of the discussions, it is premature to discuss any details of the discussions or the potential effects of this initiative on employees. However, it has been Nortel Networks' experience in similar past divestitures to EMS suppliers that a significant number of Nortel Networks employees have become employees of the EMS supplier," said Chahram Bolouri, president, global operations, Nortel Networks.

"This proposed operating model is an evolution of one that has already been implemented successfully by Nortel Networks in Raleigh, North Carolina and in Billerica, Mass.," said Bolouri. "For example, three years ago in Raleigh, we divested the majority of our manufacturing activities related to the product integration, configuration, and testing of our DMS* circuit-switching products, as well as the management functions related to that supply chain. By implementing this model, we have been able to drive reduced inventory and improved customer service and responsiveness, and to focus on those areas of the supply chain of most importance to our customers."

Nortel said it intends to retain in-house all strategic management and overall control responsibilities associated with its various supply chains, including all customer interfaces, customer service, order management, quality assurance, product cost-management, new product introduction and network solutions integration, testing and fulfillment.

For more information, visit: www.nortelnetworks.com



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