By Scott Foster, Ottawa Business Journal Staff
Thu, Sep 9, 2004 1:00 PM EST
William Owens
In the next 10 days to two weeks, Nortel Networks will know "the numbers and names" of employees whose jobs will be cut, CEO Bill Owens said Thursday.
"We're putting names to the list right now," he told members of Ottawa's high-tech community during a technology executive breakfast sponsored by the Ottawa Centre for Research and Innovation.
The new chief executive referred to the 3,500 layoffs that were recently announced by the telecom equipment maker.
He told the audience that Nortel will conduct the layoffs in "a smart way".
"We're not focused, certainly, on Ottawa. But there will be some reductions here, and I don't know precisely the numbers. But in the next 10 days to two weeks, we'll know the numbers and names."
The layoffs are expected to be split evenly between Nortel's R&D arm and the firm's SG&A (selling, general and administrative) areas.
Mr. Owens added the company's job reductions ? which are expected to affect upper management as well as regular employees ? are "very painful".
"You start to see not just 35,000 employees, you see individuals who have given their lives to the company. You see families who suffer when you release an employee. I take that very seriously. And we're trying to do some innovative things ... in terms of new kinds of programs."
In terms of cuts to R&D, Nortel will focus on those areas that support legacy systems, he said.
"As we go into 2005, we want the basic cost structures of R&D and SG&A to be less than 35 per cent of revenues. We're focused on 30 per cent after that and we'll have time horizons for that as we get into 2005."
Some of the cuts are prompted by the consolidation of the firm's three business areas: optics, wireless, and wireline, he said.
"Each of those areas had HR, finance and IT functions. When you consolidate the three, you find savings."
While the layoffs are "painful", they are nonetheless necessary to cut costs and ensure Nortel is able to compete with new industry entrants that have "very low cost structures", such as ZTE and UTStarcom, said Mr. Owens, adding some of these rising companies weren't heard of even a year ago.
Now they are competing "face to face" with Nortel, he said.
"We see (our competitors) competing in first world countries ... we see them in South America, and their cost structures are very competitive. And we're seeing them as part of our marketplace as we speak."
Aside from cost-cutting, Nortel continues to focus on the accountability conundrum that first surfaced in April. Then, former CEO Frank Dunn and the firm's two top financial executives were fired "with cause". The company also postponed the release of its first-quarter results, sending its stock price into a tailspin.
Currently, the company's financials are being investigated by the Ontario Securities Commission and the U.S. Securities and Exchange Commission.
More recently, Nortel said it would need until the end of October to file financial reports for 2003 and the first two quarters of 2004. Previously, the company had said it would file the reports by the end of the third quarter on Sept. 30.
On Thursday, Mr. Owens said he expected the financial audit of the company to be completed sooner than the end of October.
He reiterated the complexity of the undertaking, citing new policies such as the U.S. Sarbanes-Oxley Act. The company must go back and manually review every book-keeping entry made over the last few years, he said.
"We find this is a really time-consuming event, and we don't want to do it wrong. So the goal is to make sure this is a restatement that is absolute."
After the release of its financials reports, Nortel will then address the issue of whether past bonuses allocated to those executives who were fired should be clawed back.
"We will do the right thing with the bonuses," he told reporters following the speaking engagement.
As for customer reaction to Nortel's woes, Mr. Owens assured the crowd that they have been "very understanding of the issues of financial accountability we've had".
"We'd had a sad serious of events with the issues of financial accountability," he said, adding Nortel shareholders and employees have experienced a "hellish roller-coaster ride" of share price drops and layoff announcements.
"But in fact, the people of Nortel are honest and sincere ... (about) doing a good job for the shareholders. The entire story isn't told yet, but I think you will see as time goes on the right things have happened at Nortel and will continue to happen at Nortel."
Thu, Sep 9, 2004 1:00 PM EST
William Owens
In the next 10 days to two weeks, Nortel Networks will know "the numbers and names" of employees whose jobs will be cut, CEO Bill Owens said Thursday.
"We're putting names to the list right now," he told members of Ottawa's high-tech community during a technology executive breakfast sponsored by the Ottawa Centre for Research and Innovation.
The new chief executive referred to the 3,500 layoffs that were recently announced by the telecom equipment maker.
He told the audience that Nortel will conduct the layoffs in "a smart way".
"We're not focused, certainly, on Ottawa. But there will be some reductions here, and I don't know precisely the numbers. But in the next 10 days to two weeks, we'll know the numbers and names."
The layoffs are expected to be split evenly between Nortel's R&D arm and the firm's SG&A (selling, general and administrative) areas.
Mr. Owens added the company's job reductions ? which are expected to affect upper management as well as regular employees ? are "very painful".
"You start to see not just 35,000 employees, you see individuals who have given their lives to the company. You see families who suffer when you release an employee. I take that very seriously. And we're trying to do some innovative things ... in terms of new kinds of programs."
In terms of cuts to R&D, Nortel will focus on those areas that support legacy systems, he said.
"As we go into 2005, we want the basic cost structures of R&D and SG&A to be less than 35 per cent of revenues. We're focused on 30 per cent after that and we'll have time horizons for that as we get into 2005."
Some of the cuts are prompted by the consolidation of the firm's three business areas: optics, wireless, and wireline, he said.
"Each of those areas had HR, finance and IT functions. When you consolidate the three, you find savings."
While the layoffs are "painful", they are nonetheless necessary to cut costs and ensure Nortel is able to compete with new industry entrants that have "very low cost structures", such as ZTE and UTStarcom, said Mr. Owens, adding some of these rising companies weren't heard of even a year ago.
Now they are competing "face to face" with Nortel, he said.
"We see (our competitors) competing in first world countries ... we see them in South America, and their cost structures are very competitive. And we're seeing them as part of our marketplace as we speak."
Aside from cost-cutting, Nortel continues to focus on the accountability conundrum that first surfaced in April. Then, former CEO Frank Dunn and the firm's two top financial executives were fired "with cause". The company also postponed the release of its first-quarter results, sending its stock price into a tailspin.
Currently, the company's financials are being investigated by the Ontario Securities Commission and the U.S. Securities and Exchange Commission.
More recently, Nortel said it would need until the end of October to file financial reports for 2003 and the first two quarters of 2004. Previously, the company had said it would file the reports by the end of the third quarter on Sept. 30.
On Thursday, Mr. Owens said he expected the financial audit of the company to be completed sooner than the end of October.
He reiterated the complexity of the undertaking, citing new policies such as the U.S. Sarbanes-Oxley Act. The company must go back and manually review every book-keeping entry made over the last few years, he said.
"We find this is a really time-consuming event, and we don't want to do it wrong. So the goal is to make sure this is a restatement that is absolute."
After the release of its financials reports, Nortel will then address the issue of whether past bonuses allocated to those executives who were fired should be clawed back.
"We will do the right thing with the bonuses," he told reporters following the speaking engagement.
As for customer reaction to Nortel's woes, Mr. Owens assured the crowd that they have been "very understanding of the issues of financial accountability we've had".
"We'd had a sad serious of events with the issues of financial accountability," he said, adding Nortel shareholders and employees have experienced a "hellish roller-coaster ride" of share price drops and layoff announcements.
"But in fact, the people of Nortel are honest and sincere ... (about) doing a good job for the shareholders. The entire story isn't told yet, but I think you will see as time goes on the right things have happened at Nortel and will continue to happen at Nortel."
