Nortel

( NT) is in talks to outsource the remainder of its manufacturing capacity, a move that could cause the transfer or loss of 2,500 jobs.

The Toronto technology company said it intends to sell its remaining factories and facilities in Calgary, Montreal, Brazil, Northern Ireland and France. It's discussing a deal in which contractor

Flextronics

(FLEX) - Get Report

would take over the lion's share of the manufacturing capacity, operations that make up roughly $2 billion of Nortel's cost of sales.

The operations primarily manufacture optical fiber, wireless gear and equipment for networked business computers. About 2,500 employees would be affected if the deal went through, but Nortel said in past arrangements the vast majority were transferred to the outsourcer.

Nortel would move more than $500 million of manufacturing and inventory assets to Flextronics in return for $500 million in cash to be paid over nine months. Nortel would then be freed up to "focus on the core capabilities required to deliver converged networks to our customers."

Flextronics said such a transaction would add to its earnings in its first year. Flextronics also said it has "adequate liquidity through its existing cash reserves and available revolving credit facility to meet the cash requirement, which would be spread over a nine-month period."

Nortel is already a big customer of the main electronics manufacturing services firms, making up roughly 15% of

Solectron's

( SLR) revenue in 2002.

Nortel rose 4 cents, or 0.6%, to $6.87 in early trading. Flextronics was up 80 cents, or 4.6%, to $18.12.