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Telecommunications equipment industry

Nortel Networks Announces Strategic Divestitures and Partnerships

Strategic Insights

— 1 min read

Nortel Networks has made a significant milestone in its three-year global operations strategy, announcing agreements with five manufacturing services companies to divest and/or outsource certain manufacturing and repair operations. This move is aimed at focusing on the company's highest value-added activities and creating a more agile, flexible, and responsive provider of Unified Networks solutions.

Key Takeaways:

  • Nortel Networks will establish strategic supplier relationships with five manufacturing services companies: SCI Systems Inc., C-MAC Industries Inc., Sanmina Corporation, Communications Test Design Inc., and United Tri-Tech Corporation.
  • The agreements will result in the employment of approximately 2,300 employees by the manufacturing services companies, with about 200 employees remaining with Nortel Networks and about 500 employees having their positions eliminated.
  • The manufacturing services companies will provide critical capabilities such as printed circuit board assembly, electromechanical subsystems design and manufacturing, and repair and logistics services to Nortel Networks.
  • The divestitures are expected to generate aggregate gross proceeds of approximately US$400 million and aggregate value of supply agreements in excess of US$1 billion in the first year.
  • Nortel Networks expects to achieve savings in the range of US$250-300 million per year when the operations strategy is completed within 18 to 36 months.

Statistics:

  • Approximately 2,300 employees will be employed by the manufacturing services companies.
  • Around 200 employees will remain with Nortel Networks.
  • About 500 employees will have their positions eliminated.
  • The aggregate gross proceeds from the divestitures are expected to be approximately US$400 million.
  • The aggregate value of the supply agreements to be entered into with the five manufacturing services companies is expected to be in excess of US$1 billion in the first year.
  • Nortel Networks has approximately 76,000 employees worldwide as of 1998.

Sources:

  • Nortel Networks press release, May (referring to the operations identified for divestiture)
  • Nortel Networks press release, January (referring to the three-year global operations strategy)
  • Nortel Networks press release, May (referring to Chahram Bolouri's quote)
  • Nortel Networks press release, May (referring to the agreements with manufacturing services companies)

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