Nortel In Talks To Outsource Manufacturing

The networking and telecommunications vendor said in a statement that it is in talks to transition its remaining manufacturing activities, including product integration, testing and repair operations, to Singapore-based Flextronics.

Currently Nortel conducts manufacturing across several facilities in Canada, Brazil, Northern Ireland and France.

If the deal goes through, Flextronics would undertake and manage over $2 billion of Nortel's annual cost of sales. The deal would also involve the transfer of more than $500 million of Nortel's manufacturing and inventory assets to Flextronics.

In return, Brampton, Ontario-based Nortel expects to receive proceeds of over $500 million in cash over a nine-month period for inventory and certain manufacturing assets, as well as an additional undisclosed amount for certain intangible assets.

Nortel's outsourcing plan could impact 2,500 of its employees, the company said.

The vendor said it has been divesting its manufacturing activities to electronic manufacturing services suppliers over the past five years.

Shares of Nortel traded down 42 cents at $6.41 Thursday morning.