Electronics giant Filtronic is in talks with a leading defence and aerospace firm to rescue a struggling hi-tech site.

The Shipley firm is looking to reverse the decline at its Newton Aycliffe operation in Durham, which is losing about £1 million a month.

The joint venture would allow for the creation of a new company which would be helped by an injection of equity from the as yet unnamed partner and allow it to fund growth at the site.

A spokesman for Filtronic, which makes components for mobile phone networks, said talks between the two companies were still at an early stage but the announcement was made to end market rumours about Filtronic and its involvement with the site. He said both parties saw a future for the site.

"The site is surrendering about £1 million in revenue a month - which is of great concern - but the second company is keen to keep the operation going because it also sees substantial long term future for the site," he said.

The Filtronic plant produces chips used in base stations for mobile phone networks. They will also be used when 'Third Generation' phones are rolled out. It had been seen as a way for Filtronic to extend its global influence, but has turned into a huge burden for the company.

Negotiations are also seen as a way to satisfy the stock market and revive a share price which has fallen from a high of 2,332.5p last August to 276.5p yesterday.