To: Bosco who wrote (6397 ) 8/2/2000 3:01:13 PM From: SJS Read Replies (1) | Respond to Nortel Networks (NT) 72 13/16 +13/16: Nortel's announcement that they will outsource certain information services is doing more to help Computer Sciences (CSC 70 3/4 +2 15/16) shares today, but Nortel's continuing trend of divesting non-core operations bodes well for long-term holders of NT shares. Today's deal will transfer approximately 2000 Nortel employees to CSC's professional services team. We like the decision by Nortel as it allows the company to focus a greater percentage of their human resources toward their core competency, building optical data networking systems. The move follows a series of deals by Nortel to outsource and/or divest non-core operations. In April, Nortel signed a $10 bln outsource agreement with Solectron (SLR) that included SLR purchasing $900 mln of Nortel assets and the transfer of approximately 4200 Nortel employees to SLR. The following day, Nortel signed a deal with PricewaterhouseCoopers to outsource human resources and employee training. More recently, talks were held with optical components maker, Corning (GLW) regarding the possible sale of Nortel's components unit to Corning. Word is that in addition to failing to come to terms on price, Nortel could not force Corning into providing preferential treatment to Nortel once the unit was sold. Although we can't confirm those rumors, it makes sense as the strong demand for optical components is well documented, component shortages can significantly hurt a fiscal quarter of a company like Nortel, and Corning presumably wanted to keep their selling options open, thus no deal. We wouldn't be surprised to see Nortel pull a move similar to the tracking stock issuance that Alcatel (ALA) announced last week for their optical components business. The market is placing huge premiums on optical components makers, so why not take advantage? Further evidence that Nortel is focused on core operations came last week when it announced a $1.9 bln investment to double its global optical Internet production capacity over the next 18 months. We continue to applaud Nortel's strategy to become more lean by concentrating their resources toward their core business of supplying fiber-optic network systems. - Matt Gould, Briefing.com
