RealTime IT News

Solectron, Nortel Recast Multi-Billion Dollar Deal

Solectron has signed a renegotiated contract to make telecom equipment for Nortel 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 and Cisco 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 , have been upbeat about work flowing from companies supplying routers, switches and other equipment to direct the flow of voice and data traffic.