As part of this agreement, Nortel Networks proposes to outsource to SCI the PCBA activities performed in its Systems Houses in St. Laurent, Quebec and Monkstown, Northern Ireland. The transactions also include the sale of associated equipment and inventory.
In addition, Nortel Networks will extend its master supply agreement with SCI, which covers existing PCBA manufacturing services performed for Nortel Networks.
This agreement with SCI continues a successful supply chain transformation strategy that began in 1999, when the Company began evolving from a vertically integrated manufacturing model where everything was manufactured in-house to a virtually integrated model, whereby the Company complements its own internal strengths with the best-in-class expertise and resources of the external manufacturing industry.
This strategy has brought significant benefits to the Company. It has increased manufacturing flexibility (through access to some 200 production plants around the world); decreased investment in plant, equipment, and inventories; lowered the Company’s ratio of fixed to variable costs; and increased agility to ramp up and down quickly to meet changing market needs.
These transactions support the Company’s Work Plan, which has aligned Nortel Networks to the changing industry dynamics. The Work Plan has streamlined costs and focused the Company’s business around core market areas.
The agreement we’re announcing today represents our continuing commitment to take advantage of the best-in-class capabilities of the external marketplace, said Richard Lowe, vice president, Global Customer and Product Operations, Nortel Networks. This, in turn, enables us to better direct our investment and internal resources to those specialized skills that continue to offer us competitive differentiation in the marketplace and that are not easily found outside the Company. Those skills include the rapid introduction, integration and testing of advanced network solutions.
The North American portion of the transaction is expected to close in the third quarter or early in the fourth quarter, and the European portion is expected to close in the fourth quarter.
The Systems Houses in St. Laurent and Monkstown remain cornerstones of the Company’s virtual manufacturing strategy. The St. Laurent Systems House continues as a center of excellence for the integration and test of advanced optical and Intelligent Internet networking solutions. The Monkstown Systems House remains a center of excellence for the integration and testing of Metro Optical and Optical Long Haul networking solutions.
SOURCE: COMPANY PRESS RELEASE
