Busy Week For Nortel

Between a major reorganization of its manufacturing operation, the release of a new set of converged networking offerings and the announcement of new optical networking deployments, it was a busy week for Nortel.

The company has decided to transfer a significant amount of its optical, wireless and enterprise equipment manufacturing and distribution business to Singapore-based Flextronics. The action completes a near-total retreat from manufacturing for Nortel.

The Flextronics agreement and other divestiture transactions will generate about $700 million in cash payments in the fourth quarter of this year and in 2005. (Related transaction costs will cut this amount by about $200 million.)

Through the divestiture, Flextronics will gain about 2,500 employees, along with some of Nortel's optical design operations, according to the terms of the four-year agreement announced by both companies. The deal also calls for Flextronics to take over most of Nortel's systems integration activities, final assembly, testing and repair operations, along with the management of the related supply chain and suppliers. On the product development side, Flextronics will absorb Nortel hardware and software engineering staffs who have backgrounds in end-to-end, carrier grade optical network products (including edge and core switching as well as transport line products).

In other business news, Nortel said it continues work on the restatement of financial results for each quarter of 2003 and for earlier periods including 2002 and 2001. The company is preparing financial statements for the full year 2003 and the first quarter of 2004. Nortel expects to be able to announce limited preliminary un-audited results for the first and second quarters of 2004 by mid-August 2004.While pulling back from manufacturing, Nortel continues to introduce new networking products and solutions for converged networks. According to Nortel executives, its new offerings are "building blocks" to ready networks for video, IP telephony and SIP multimedia applications. The first building blocks are additions to Nortel's data switching product line. The switches are targeted at the small- and medium-sized enterprise market.To address requirements for network recovery, Nortel is adding new functionality to existing products to ensure the viability of network infrastructures in latency-sensitive applications, such as telephony and streaming media.

Continuing to gain customers for is network solutions, Nortel separately reported deployments at two universities, a healthcare center, and a telecom carrier.

* At the University of Pennsylvania, Nortel is installing its Optical Metro 5200 to link the university with the regional carrier "hotel" that houses an Internet 2 GigaPoP MAGPI routing core. The school already uses Nortel DWDM equipment to deliver multiple services, including Internet2.

* On the West Coast, Santa Clara, Calif.-based Rose-Hulman Institute of Technology is the site of a deployment of a Nortel converged network solution using advanced IP telephony and Ethernet routing solutions.

* Care New England's new optical Ethernet service links voice and data across its Providence, R.I. campus using a Nortel optical Ethernet solution along with services from Cox Business Services.* In telecom, a new deployment of Nortel's optical Ethernet technology has allowed North Dakota Telephone Co. to offer voice and data services on a converged network.