TORONTO -- Nortel Networks (NYSE:NT) (TSX:NT) has reached an agreementwith Flextronics (Nasdaq:FLEX) regarding the divestiture of certainNortel Networks manufacturing operations and related activities inCanada and Brazil. It is also anticipated that Flextronics will acquireNortel Networks manufacturing operations in France and Northern Ireland,subject to the completion of the required information and consultationprocess. These operations and activities have been the subject ofdiscussions between the two companies since Nortel Networks announced inJanuary 2004 that it was in discussions with Flextronics.

"With today's announcement, we have completed our five-yearplan to divest substantially all of our manufacturing activities toworld-class electronics manufacturing services companies -- a supplychain strategy that has provided, and is expected to continue toprovide, significant benefits to Nortel Networks," said Chahram Bolouri,president, Global Operations, Nortel Networks. "We have been able tolower our cost of sales, reduce our fixed-cost infrastructure, andsignificantly reduce inventory levels and associated carrying costs."

"Most importantly, this strategy will continue to enable usto respond with increasing effectiveness to significant ups and downs inmarket demand and customer needs," Bolouri said. "That, together withthe other benefits, has been critical in today's highly competitiveglobal telecommunications industry. Today's announcement is consistentwith Nortel Networks commitment to having one of the industry's mostefficient and responsive business operations."

Under the terms of the agreement, Flextronics will acquiresubstantially all of Nortel Networks remaining manufacturing operations,including product integration, testing and repair operations carried outin the Nortel Networks Systems Houses in Calgary and Montreal (Canada)and Campinas (Brazil), and will also acquire certain activities relatedto these locations, including the management of the supply chain,related suppliers and third-party logistics. In Europe, Flextronics hasmade an offer to purchase similar operations at the Nortel NetworksMonkstown (Northern Ireland) and Chateaudun (France) Systems Houses,and, as required by law, this offer will be subject to completion ofappropriate information and consultation processes with the relevantemployee representatives.

Under the terms of the agreement and offer, Flextronics wouldalso acquire Nortel Networks global repair services, as well as certaindesign assets in Ottawa and Monkstown related to hardware and embeddedsoftware design, and related product verification for certainestablished optical products. These design assets are being coupled withthe manufacturing operations that are being divested so as to enablefaster product cost reduction and improved time-to-market for newfeatures that further leverage the lifecycle of these successfulestablished optical products. This, in turn, will enable Nortel Networksto focus on next generation optical architectures, products andsolutions -- areas where Nortel Networks believes it can gain the mostcompetitive advantage.

Nortel Networks Ltd.

Flextronics Corp.