Solectron Corporation and Nortel Networks Announce Industry's Largest-Ever Electronics Manufacturing Services Contract - Company Business and Marketing

Cambridge Telcom Report, April 10, 2000

Solectron Corporation (NYSE: SLR), the world's premier supply-chain facilitator for customized electronics technology, manufacturing and service solutions, Tuesday announced it has signed a definitive agreement for Solectron Corporation to acquire certain Nortel Networks' (NYSE: NT; Toronto: NT) New Product Introduction (NPI) prototyping, printed circuit board (PCB) and telephone set ("telset") assembly assets in North America and Asia. The companies are also discussing the divestiture or outsourcing of certain manufacturing and repair operations in Europe.

Under the terms of the agreement, and the proposed agreements, Solectron will pay approximately US$900 million to assume these operations contemplated in this agreement. The companies also agreed to enter into a four-year supply agreement, valued in excess of US$10 billion, with the option to renew. Solectron will provide NPI prototyping, manufacturing and repair services for Nortel Networks' optical, carrier, enterprise and wireless products.

At the close of the proposed transactions, Solectron will offer employment to all of the approximately 4,200 associates at the acquired sites and will add approximately 1.2 million square feet (120,774 square meters) of manufacturing capacity as a result of the transactions. Solectron will offer terms and conditions of employment that are identical, or the same in the aggregate, as those that the employees currently maintain at Nortel Networks.

As a result of the agreement for North America and Asia, Solectron will be gaining NPI prototyping and manufacturing capabilities in Calgary, Canada, and Research Triangle Park, North Carolina; and manufacturing capabilities in Monterrey, Mexico, and Istanbul, Turkey. Under the terms proposed in Europe, Solectron would acquire NPI prototyping and manufacturing operations in Monkstown, Northern Ireland, and manufacturing and repair capabilities in Cwmcarn, Wales. In addition, Solectron has submitted an offer to acquire certain PCB assembly and telset assets of Matra-Nortel Communications S.A.S. in France.

In addition to the acquired locations, Solectron will be transferring other Nortel Networks products to Solectron locations to align the global supply chain with Nortel Networks' cost-to-market (CTM) and time-to-market (TTM) strategies. All transactions are subject to customary conditions, regulatory approvals and the employee consultation processes in Europe. It is expected that the transactions will close in North America by the end of the second quarter of calendar year 2000; in Europe, by the end of the second quarter or beginning of the third quarter of calendar year 2000; and in Asia, in the third quarter of calendar year 2000.

As part of the agreement, Solectron will be setting up a new operating unit comprised of the acquired Nortel Networks sites. This business unit will be a part of the manufacturing and operations business unit, and will be focused on maintaining continuity of supply and enhancing competitive performance to Nortel Networks, while the sites transition to the Solectron business model.

"Solectron is a world-class electronics manufacturing services company with a superior record for quality, reliability, cost-effectiveness and performance," said Chahram Bolouri, president, global operations, Nortel Networks. "Solectron's global presence and breadth of capability will improve our ability to meet the growth, agility and New Product Introduction requirements of our customers."

"This announcement is part of Solectron's core strategy to continue to expand our business units, capabilities and presence in the telecommunications industry," said Ko Nishimura, Ph. D., Solectron's chairman, president and CEO. "We are excited to participate in the largest OEM divestiture to an EMS provider to date in the EMS industry, which brings our partnership with Nortel Networks to the next level and expands our customer portfolio as it relates to telecommunications products."

By supporting products globally where they are sold, as opposed to where they are manufactured, Solectron enables its OEM customers to save both time and money. Solectron partners with its OEM customers to take responsibility for the complete supply chain and for all activities required to support a product from the time of manufacture until its removal from the market. This gives OEMs access to a global footprint, a highly efficient and integrated supply chain, and engineering excellence which helps them realize lower total cost of service, faster time-to-market and improved asset velocity and utilization.

This ongoing relationship enables customers to devote more resources to developing their next generation of products while Solectron serves their current products' needs. In essence, OEMs gain a critical competitive advantage and are able to focus scarce resources on their areas of core competency, which include research and development, sales and marketing.

Founded in 1977, Solectron Corporation (www.solectron.com) is the world's largest electronics manufacturing services company offering a full range of integrated supply-chain solutions for the world's leading electronics original equipment manufacturers. Solectron's integrated technology solutions, materials, manufacturing and operations, and global services offer customers competitive outsourcing advantages, such as access to advanced manufacturing technologies, shortened product time-to-market, reduced total cost of ownership and more effective asset utilization.