Circuits Assembly Online Magazine - Nortel Networks to Transfer Supply Chain Operations to Flextronics

Electronics manufacturing services (EMS) provider Flextronics (Singapore) has signed an agreement with Nortel Networks (Brampton, Ontario, Canada) whereby Nortel will divest certain optical, wireless and enterprise manufacturing operations and optical design operations to Flextronics.

Subject to closing the four-year manufacturing agreement, Flextronics will assume most of Nortel Networks' systems integration activities, final assembly, testing and repair operations, along with the management of the related supply chain and suppliers. Over time, Flextronics expects to consolidate and internally source its vertically integrated supply chain solutions, which include the fabrication and assembly of printed circuit boards and enclosures, as well as logistics and repair services.

Through an optical design services agreement, Flextronics will acquire a group of engineers with expertise in end-to-end, carrier grade optical network products. The design and engineering skills to be transferred to Flextronics include hardware development, software development and project management.

"Flextronics will be acquiring a design group with broad experience in telecommunications and optical networks, with extensive knowledge of optical products and processes," said Michael Marks, chief executive officer of Flextronics. "There are no independent design companies in the world that have this degree of design expertise, so we are thrilled to have expanded the scope of our engagement with Nortel Networks to include these services...We believe hardware design, software design and manufacturing are converging, which makes the addition of the Nortel Networks design group an excellent fit with our long-term strategy."

Mike McNamara, chief operating officer of Flextronics, said, "The significant increase in complex, multi-technology telecom and network solutions, including carrier grade products, further diversifies our product mix and reduces seasonality. The expertise acquired from the Nortel Networks' operations will enhance the capabilities in our Industrial Parks in China, Poland, Mexico and Brazil."

As part of the transaction, approximately 2,500 employees would transfer to Flextronics. The business transfer to Flextronics is expected to begin in November 2004 and will take approximately six months to complete. During this time, Flextronics' revenues from Nortel will increase each quarter and should reach an annual revenue rate of approximately $2.5 billion.

www.flextronics.com

www.nortelnetworks.com