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Nortel Sells Plants, Supplies Update

Nortel Networks Ltd. (NYSE/Toronto: NT) hit the street running today, announcing the proposed sale of its remaining manufacturing operations to Flextronics Corp. (Nasdaq: FLEX) and saying that its updated financial refiling should be available in July (see Nortel Sells Plants to Flextronics and Nortel Provides Financial Update).

The agreement with Flextronics, which will net Nortel between $675 million and $725 million in cash, was widely expected since the beginning of the year (see Nortel Talks Outsourcing).

The deal with the contract manufacturer means Nortel won't be making any of its own products any more, a move it expects will save it up to $100 million a year after four years. Nortel's four-year manufacturing deal with Flextronics is worth $2.5 billion a year, and it will also enter a three-year product design services deal. About 2,500 Nortel employees are set to be transferred to the new owner.

The deal will include product integration, testing, and repair operations in Canada and Brazil, while Flextronics has also offered to buy Nortel's plants in France and Northern Ireland. The deal also includes some hardware and embedded software design assets in Canada and Northern Ireland, as well as Nortel's global repair services business.

Nortel will receive cash payments starting in the fourth quarter of 2004, subject to approval of the sale. The Canadian firm expects to incur sale costs of $200 million but to see a positive impact of $75 million to $100 million a year on net earnings after four years.

Meanwhile, Nortel investors are anxious for the company to get through its messy financial refiling, which has depressed its share price and resulted in board-level job losses (see Dunn's Done With Nortel , Nortel Gets Federal Subpoena, and Nortel Rattles Nerves).

Now the company is hinting that it sees the light at the end of the tunnel. While its previous updates have been non-committal (see Nortel Leaves All Doors Open), today's update on the refiling process and its impact on 2004 financial reporting provides a timetable of sorts. The highlights are:

  • Nortel expects to provide "updated assessments of the expected impacts of the restatements" on its financial statements from 2003, 2002, 2001, and the first quarter of 2004, in mid to late July. So, in about three to five weeks' time.
  • Preliminary unaudited results for the first and second quarters of 2004 are due to be released by mid August.
  • During the third quarter of 2004, Nortel expects to file financial statements for 2003 and the first two quarters of 2004, and then file any remaining amendments to any prior periods after that "as soon as practicable." This means Nortel will miss the August 2004 deadline for filing its report on the second quarter of 2004, so it will file a late filing report for that quarter with the Securities and Exchange Commission (SEC).

Nortel's share price today is up 6 cents, just over 1 percent, to $4.80, while Flextronics is up 43 cents, nearly three percent, to $15.80.

— Ray Le Maistre, International Editor, Boardwatch

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Machavelli 12/5/2012 | 1:29:06 AM
re: Nortel Sells Plants, Supplies Update Milano,

I agree with you, I think Jean Monty was one of (if not the) best CEO's Nortel ever had. I met him once and he is one of the few Nortel guys that had a comprehensive vision for the company that extended well beyond 10 years. This differs from your typical CEO whose vision lapses after their stock options are vested.

Dodo,

In regards to PM, I believe his influence on Bill Owens (who has the final decision on plant and regional facility closings)is minimal. I doubt a seasoned military guy is going to take suggestions from a "Doogie Howser" look-alike for major company decisions. I found PM to be in the same class as B McF and GM in terms of lack of intellegence and leadership charisma.

Mach
inauniversefarfaraway 12/5/2012 | 1:28:53 AM
re: Nortel Sells Plants, Supplies Update Dear Mach,

From your post, Nortel seems to have more problems
than simple corruption at the top.

> In regards to BAN vs Ottawa, there has always
>been anomosity between the two regions as well as
>cultural differences in regards to team dynamics.

Long standing animosity that upper management has never addressed? This is freaky!

>The Ottawa guys suffered fewer layoffs because
>their management fought hard to prevent them,
>whereas the BAN management threw their guys to
>the wolves willingly in order to save their own
>jobs.

Either you're saying that management at BAN is incompetent, which can only be the fault of higher-ups, unless you are also saying that decisions don't emanate from the top. The alternative is that Nortel would threaten BAN managers to get them to be more... compliant.

It must be nice to live in the Ottawa bubble where
management is never threatened...

>BAN guys will be out in the street.

You allude to team dynamics, and cultural differences... Do you actually believe that this is anything more than discrimination cloaked in the thin patina of hypocrisy? Your post seems to lay responsibility for the layoffs strictly at the feet of BAN management, when they were described by another poster as working feverish hours to get the job done. Layoffs are usually decided at the top, is this not the case at Nortel? You mean they layoff because they look down their noses at BAN?

Doesn't read like Nortel has much of a future. Rife within the ranks because of "cultural" differences, throwing out divisions because of these cultural differences.

When technology decisions are made within Nortel, do they also look for these "cultural" differences? Is that how the viability of innovations is decided?

Good luck to these folks, they'll need it to figure out which way is up.

Far'y
Machavelli 12/5/2012 | 1:28:51 AM
re: Nortel Sells Plants, Supplies Update > From your post, Nortel seems to have more
> problems than simple corruption at the top.

Probably no different than any other company.

> Long standing animosity that upper management
> has never addressed? This is freaky!

The typical upper managerment attitude is "I can't bothered by these trivial human resources issues, I need to focus on the bottom line". Upper managers expect middle and lower managers to deal with this "trivial stuff"

> Either you're saying that management at BAN is > incompetent, which can only be the fault of
> higher-ups, unless you are also saying that
> decisions don't emanate from the top. The
> alternative is that Nortel would threaten BAN > managers to get them to be more... compliant.

The difference between the Ottawa and BAN is: "Ottawa managers listen to and protect those below them, whereas the BAN guys listen and please those above them". I would rather work for the Ottawa guys myself.

> You allude to team dynamics, and cultural
> differences... Do you actually believe that
> this is anything more than discrimination
> cloaked in the thin patina of hypocrisy?

I don't know if you are elude to racial discrimination. The Ottawa guys tend to be predominately English, whereas the BAN guys tend to be predominately French. I personally don't think there is any disrimination along those lines. But I believe there was discrimination with layoffs with respect to a person's age. Young people are cheaper to have in a company than older people (despite the fact that older people' wisdom is worth the extra price)

" ....when they were described by another poster as working feverish hours to get the job done."

Layoffs at Nortel are usually done along political lines (who you know), not how dedicated or efficent you are (unfortunately)

Mach
inauniversefarfaraway 12/5/2012 | 1:28:50 AM
re: Nortel Sells Plants, Supplies Update > The typical upper managerment attitude is "I
> can't bothered by these trivial human resources
> issues, I need to focus on the bottom line".
> Upper managers expect middle and lower managers
> to deal with this "trivial stuff"

This is double talk, on the one hand you state that this is the fundamental reason between the two site's differences and now you trivialise those differences. This is what is called hypocrisy.

> The difference between the Ottawa and BAN is:
> "Ottawa managers listen to and protect those
> below them, whereas the BAN guys listen and
> please those above them". I would rather work
> for the Ottawa guys myself.

This is B.S. as well. Management allegiance based on geography, or culture? This is moronic. Or are you saying that BAN managers only kiss ass of their superiors, but not the Ottawa guys, they are defenders of the little guy? This would be revolutionary. Why not just say something like: colored people kiss ass, while white people stand up for themselves.

Ottawa sounds like a better place because of favoritism, nothing more, nothing less.

Whatever allows you to sleep at night Mach. I'm sure Hitler also though Germans defended their subordinates, while Jews threw their own at the wolves to save their own skin.

How quickly we forget the lessons of history.

Far'y
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