Solectron, Nortel Recast Multi-Billion Dollar Deal
By Colin C. Haley
October 1, 2003
Solectron (Quote, Chart) has signed a renegotiated contract to make telecom equipment for Nortel (Quote, Chart) that's longer but less lucrative than the dot-com era deal it replaces.
The new agreement targets $7.5 billion in revenue from 2000 through 2009, rather than the approximately $10.4 billion in originally anticipated under the 2000 contract.
It includes new product design, testing, manufacturing integration, testing and repair for the Brampton, Ontario, giant. Additional product-specific contracts are expected.
The dollar value "relects the realities of today's marketplace," Solectron said. Nortel accounts for 11.9 percent of its business, while other IT heavy hitters, Hewlett-Packard (Quote, Chart) and Cisco (Quote, Chart) represent 14 percent and 12.3 percent, respectively.
A spokesperson for the Milpitas, Calif., company was not immediately available for comment.
Christina Warren, a Nortel spokeswoman, said the anticipated savings from the rejiggered deal won't affect the company's financial targets.
Analysts in SG Cowen's telecommunications group recently expressed optimism about a rebound in the contract manufacturing sector.
They noted that executives from Solectron, as well as its rival Flextronics (Quote, Chart), have been upbeat about work flowing from companies supplying routers, switches and other equipment to direct the flow of voice and data traffic.
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