Nortel, once one of the largest manufacturers of telecommunications equipment in the world, is getting out of the building to focus on research and development.
Fincially troubled Nortel announced formally on Tuesday its decision to sell “essentially all” its remaining manufacturing plants to Singapore-based Flextronics.
Chahram Bolouri, president of global operations for Nortel, said the agreement “most importantly” will “continue to enable us to respond with increasing effectiveness to significant ups and downs in market demand and customer needs.”
Some 2,500 workers in various plants will be affected. The company has already cut its workforce to 32,500 from 95,500 just four years ago. The affected plants include facilities in Canada, Brazil, Northern Ireland and France.
Nortel (NYSE: NT) did not cite any impact on its Research Triangle Park operations, which employ some 3,000 people.
Wall Street reaction was favorable. NT closed up 25 cents to close at $4.99.
“(The deal) liberates Nortel to really focus on system design work and sales and marketing,” said Gabriel Lowy, an analyst at Blalock & Partners, in an interview with Reuters news service.
The deal could produce more than $700 million in revenue for Nortel, including $475 million to $525 million in inventory and equipment plus $200 million in engineering and design assets.
Nortel values the annual manufacturing business at $2.5 billion annually.
Nortel and Flextronics had been in discussions since January.
Nortel and Cisco Systems, one of its biggest rivals, have also had recent discussions about some form of a partnership.
Also Tuesday, Nortel said it plans to disclose the results of its internal financial audit sometime in July.