Nortel to hold on to Northern Ireland plant

20-09-2005

by Ciara O'Brien

Nortel has decided to keep its Northern Ireland plant, in a multimillion dollar change to a planned deal with electronics manufacturer Flextronics.

The telecoms firm had planned to sell its manufacturing operations in Northern Ireland, France, Canada and Brazil to Flextronics. However, the Northern Ireland plant has now been removed from the agreement.

Had the deal gone ahead, 350 of the 720 workers in Nortel's Monkstown plant could have been affected. The Monkstown operation combines an R&D function with an operations centre.

However, Nortel had planned on keeping the operations centre, regardless of whether the deal had gone through. As part of the proposal, Nortel planned to retain customer contact, customer service, order management, quality assurance, product cost-management, new product introduction, and network solutions integration, testing, and fulfilment functions in-house.

Nortel also announced plans to create a regional supply chain centre for the Europe, Middle East and Africa (EMEA) region in Monkstown.

Retaining the Monkstown plant will cost Nortel USD100 million of the deal, which is expected to net the company in the region of USD575 million to USD625 million. Between USD200 million and USD250 million is expected to be received in 2006.

Nortel's manufacturing operations in Chateaudun, France, were transferred to Flextronics in August, while the Montreal operations were transferred in February. The company is planning to transfer similar operations in Alberta and Brazil to Flextronics by early in 2006.

Flextronics said in a statement that it does not expect the change to have a material impact on its revenues, predicting it will generate USD2 billion of annual revenue from the Nortel program once the deal is completed.

Nortel appears to be regaining some ground, with its latest results revealing vastly improved fortunes in the second quarter. The beleaguered company almost tripled its profit, fueled by demand for enterprise and wireless products. Net earnings reached USD45 million, compared with a net loss of USD49 million in the first quarter of 2005, and a 75 percent drop in profit in the company's fourth quarter results for 2004.

The company has suffered a number of setbacks in recent months, with an accounting scandal leading to the sacking of several executives, including its then-chief executive Frank Dunn and former chief financial officer Doug Beatty.