Nortel's workforce to drop by another 4,000; losses continue as sales tumble

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Last Updated Thu, 18 Apr 2002 20:00:22
BRAMPTON, ON - Nortel Networks (TSE:NT) said Thursday its worldwide workforce would be shrinking by another 4,000 jobs as it continues its struggle to return to profitability.


Sees improvements in bottom line later in year

BACKGROUNDER: Nortel: Canada's Troubled Tech Giant

The additional job cuts, which will come in part from selling non-core parts of its business, will eventually bring its workforce to 44,000 ? less than half the 94,500-strong workforce that was in place at the beginning of last year.
In its last earnings report three months ago, Nortel said it expected to have 48,000 employees once all its workforce reductions had worked their way through the system. In this latest report, Nortel said it had 47,000 workers at the end of March, meaning that 1,000 of the 4,000 job cuts have already been made.

News of the cuts came in Nortel's first quarter earnings report, which showed the company had a net loss of $841 million US (26 cents a share) in the quarter, compared to a loss of $2.58 billion US (82 cents a share) in the same quarter of last year.

Q1 losses and revenues in line with lowered expectations

The company's pro forma loss from continuing operations was $463 million US (14 cents a share). That loss was in line with analysts' expectations and the revised guidance the company gave last week.

Revenues, while also meeting lowered expectations, were barely half what they were in the same quarter of last year. Nortel's revenues were $2.91 billion US ? down from $5.75 billion US last year ? as customers sat on their wallets amid a sector-wide slowdown. And Nortel said that slump is likely to continue.

"We expect our customers to continue to limit capital expenditures and, therefore, it is difficult to predict how spending patterns will unfold in 2002," Nortel president and CEO Frank Dunn said in a release.

On a later conference call, Dunn was reluctant to provide a specific revenue figure for the second quarter. In the earnings release, Dunn said only that he did not expect "a significant downturn or a significant upturn in our revenues for the second quarter compared to the first quarter of 2002," he said.

Nortel still hopes for Q4 break-even

The company expects further cost reductions will allow it to be able to break even with revenues of $3.5 billion US a quarter by the end of the 2002 fiscal year. Dunn said he was "comfortable" that Nortel would be able to get to that $3.5 billion US revenue figure by Q4 2002.

Nortel, like most of its competitors, is struggling to cope with a telecom equipment spending drought that has forced drastic cost-cutting and pink slips for tens of thousands of its employees.

The company's stock price, once over $120 a share in mid-2000, is now trading below $7. Where Nortel was once Canada's largest company by market capitalization, it is now a distant tenth.

Billions of dollars worth of Nortel's long-term debt was downgraded earlier this month to "below investment grade" ? otherwise known as "junk" status.


Written by CBC News Online staff
 
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