Flextronics says that it is in discussions with Nortel Networks relating to a proposed relationship, whereby Nortel Networks would divest nearly all of its remaining optical, wireless and enterprise manufacturing operations and related supply chain activities to Flextronics.
While subject to on-going discussions, it is currently anticipated that Nortel Networks' Systems Houses activities in Montreal and Calgary (Canada); Campinas (Brazil); Monkstown (Northern Ireland); and Chateaudun (France) would be transferred to Flextronics. Flextronics would assume all the systems integration activities, including the final assembly, testing, and repair operations carried out in these locations along with related activities, including the management of the supply chain and related suppliers for these locations.
Flextronics is expected, if discussions are successful, to also be consolidating and providing full-service supply chain offerings including printed circuit board assembly, fabrication of printed circuit boards and enclosures, along with logistics and repair services supported from Flextronics industrial parks on at least four different continents.
"This proposed transaction would solidify Flextronics as the leader in the infrastructure market," said Michael E. Marks, chief executive officer of Flextronics. He added, "The significant increase of complex, multi-technology network solutions including carrier grade products, would accomplish a long- standing company initiative to better balance our product mix and reduce seasonality."
"We are pleased that Nortel Networks has recognized that Flextronics has the supply-chain capabilities to meet their time-to-market, quality and cost reduction objectives," stated Mike McNamara, chief operations officer of Flextronics.
The successful completion of these arrangements would result in Flextronics undertaking and managing in excess of US$2 billion of Nortel Networks annual cost of sales on a going-forward basis. Flextronics anticipates that it would pay Nortel Networks in excess of US$500 million in cash over a nine-month period, primarily for inventory and certain manufacturing assets, as well as an additional amount, for certain intangible assets.
"The resulting financial impact would be accretive to Flextronics in the first year of an agreement," said Robert Dykes, president, systems group and chief financial officer of Flextronics. He added, "The Company has adequate liquidity through its existing cash reserves and available revolving credit facility to meet the cash requirement, which would be spread over a nine-month period. Further quantification of the transaction will be provided upon consummation of the proposed transaction."
Posted to the site on 23rd January 2004
Posted to: www.cellular-news.com/story/10474.php