Nortel Networks will shift the last of its manufacturing operations to Flextronics when a deal is completed next year.
Nortel, which supplies carrier and Lan equipment and five years ago built all of its own products at 26 locations, has outsourced those operations so it can more quickly shift its manufacturing mix and get products to customers, as well as to cut costs, said Chahram Bolouri, president of global operations.
Nortel's five-year outsourcing process reflects an industrywide trend, according to Frank Dzubeck, president of Communications Network Architects.
Rival Cisco Systems has also offloaded much of its manufacturing over the last several years. Equipment makers want to focus their own resources on developing the next generation of hardware and software, Dzubeck said.
Flextronics will acquire operations and some assets at Nortel Networks Systems Houses in Canada as well as in Brazil. Flextronics also has offered to buy similar operations in Northern Ireland and France.
Singapore-based Flextronics also will acquire Nortel's global repair services, which it will manage with employees of Flextronics and third parties carrying out repairs. The European transactions are subject to information and consultation processes with employee representatives.
Flextronics will also take over some design operations in Ottawa and Monkstown for existing Nortel optical products and Nortel will focus on developing the next generation of gear.
In all, about 2,500 Nortel employees will transfer to Flextronics.
Rather than maintain its own factories and manufacturing workforce, Nortel is turning to specialised companies such as Flextronics and Solectron that can respond to changes in customer demand by shifting resources, Bolouri said.
Steven Lawson writes for IDG News Service