TORONTO—Nortel Networks Ltd. completed the company’s transfer of its manufacturing operations and related assets to Flextronics International Ltd., a Singapore-based manufacturing services firm.
The transfer includes product integration, testing, repair and logistics operations, all based out of Nortel’s Systems House in Calgary, Alberta. Nortel said approximately 650 of its employees in Calgary will transfer to Flextronics as part of the final phase of the agreement.
“Today marks a significant event in our business relationship with Nortel, as we have now completed the transfer of Nortel’s remaining major optical, wireless and enterprise manufacturing operations and related supply chain activities, which should generate in excess of $2 billion of revenue annually for Flextronics,” stated Mike McNamara, chief executive officer at Flextronics.
Nortel had previously announced that it planned to hand over its Calgary-based manufacturing operations to Flextronics by the end of the first quarter, but the deal was delayed because of the company’s financial troubles stemming from accounting problems.
In August 2005, Nortel transferred manufacturing operations in Chateaudun, France, to Flextronics. The company has also established a regional supply chain center in Monkstown, Northern Ireland, that will lead its supply chain in Europe, the Middle East and Africa.
“Our goal from the beginning was to create an industry-leading supply chain,” said Joel Hackney, senior vice president of Global Operations and Quality at Nortel. “This initiative was unprecedented in our industry in terms of size and scope. We have transferred essentially all of our remaining major manufacturing activities to a world-class electronics manufacturing services provider, leaving Nortel to focus on making business simple for its customers through development and integration of world-class communications and networking solutions.”
Flextronics is an electronics manufacturing service provider for automotive, industrial, medical and technology companies with fiscal 2005 revenues of $15.9 billion.
In other Nortel news, the company said its $1.3 billion one-year credit facility lenders agreed to waive any default events that may occur due to financial restatements. Under terms of the lender waiver, Nortel has until June 15 to file its first-quarter report. Regulators usually require companies to post their quarterly results no later than 45 days after the quarter ends. Nortel said it plans to file its first-quarter results during the week of June 5.
Last week, Nortel restated its earnings for 2003, 2004 and the first nine months of 2005, revealing $1.5 billion less in revenue than it previously reported. Earlier in April, the company had forecast a $1.2 billion lowering of its revenue for the period.
Nortel also posted 2005 fourth-quarter net losses of $2.3 billion from revenue of $3 billion, up from the same period in 2004 when the company reported net income of $102 million from $2.5 billion in revenue. The 2005 fourth-quarter results include a $2.5 billion litigation expense from settling shareholder class-action lawsuits.
The company reported 2005 net losses of $2.6 billion from revenue of $10.5 billion.
Wall Street didn’t seem fazed as Nortel’s stock traded down just 4 cents at $2.68 per share during morning trading.
