Solectron Buying Several Manufacturing Operations From Nortel Networks

The two companies are also discussing the possibility of a similar arrangement in Europe.
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Solectron

(SLR)

said Tuesday that it would buy some of the manufacturing operations of

Nortel Networks

(NT)

for about $900 million.

The deal is aimed at streamlining Nortel's business and expanding Solectron's telecommunications capabilities.

Under the terms of the agreement, Solectron, an electronics manufacturing services company, plans to buy Nortel's new product introduction prototyping (a service that shortens a product's development cycle), printed circuit boards and telephone set assembly assets in North America and Asia. The two companies are also discussing the possibility of a similar arrangement in Europe.

Solectron, based in Milpitas, Calif., will offer jobs to all of the 4,200 employees at the various sites. The transactions are expected to close in North America by the end of the second quarter of calendar 2000, in Europe by the end of the second quarter or beginning of the third quarter and in Asia in the third quarter.

The sites acquired from Nortel, based in the Toronto suburb of Brampton, will comprise a new operating unit that will be part of Solectron's manufacturing and operations business unit.

Solectron and Nortel have also agreed upon a four-year supply agreement for Solectron to provide NPI prototyping, manufacturing and repair services for Nortel's optical, carrier, enterprise and wireless products.

Nortel is the No. 2 manufacturer of telecommunications products in North America, behind

Lucent Technologies

(LU)

.

Nortel's shares were down 14 15/16, or 12%, to 105 around midday Tuesday, pulled down in part by the broad selloff of technology issues. But Solectron's shares were up 2 5/16, or 6%, to 41 9/16. (Nortel closed down 5 5/16, or 4%, at 114 7/16 while Solectron closed up 1 1/16, or 3%, at 40 5/16).