HONG KONG -- Telecommunications equipment maker Nortel Networks Corp. is targeting a return to profitability by June 2003, following a massive cost- cutting effort, the company's Chief Executive Frank Dunn said Wednesday.
The company has nearly finished repositioning itself for a drastically shrunken global market, he told The Asian Wall Street Journal.
"The (telecommunications) industry is not going to come back to where it was in 1999 and 2000," he said.
Nortel was near its target workforce size of 35,000, but would still need to cut more than 3,000 additional jobs, he said, adding that the new cost structure would enable the company to profit with less than $2.4 billion in quarterly revenue. Sales have been falling steadily since 2000 and totaled $2.7 billion in the quarter that ended June 30.
The abrupt collapse of demand for Nortel's key product, optical network infrastructure, plunged the company deep into the red and prompted it to lay off a total of about 65,000 staff globally.
Although Nortel is pinning its long-term hopes on new technologies like third- generation mobile networks and Internet Protocol networks, the $2.4 billion cost figure doesn't assume these will take off any time soon, Mr. Dunn said. "It's going to be a slow journey."
If results continue to disappoint, he said he would make further adjustments within business units, rather than toward the company as a whole. If any of Nortel's four main businesses -- wireless, wireline, optical networks and enterprise -- fails to break even in today's operating environment, "we'll take corrective action," he said.
"Each has to carry its own water up the hill."
Mr. Dunn also took aim at analysts who he said had unfairly exaggerated the financial danger the company was in.
Nortel posted a gross margin of 38% in its last quarterly report -- up three percentage points from the previous quarter and much higher than its competitors, he said.
"We have no significant debt payments due until 2006," he said, adding the company had $6.4 billion in cash.
Worries about the company's survival have been allayed slightly by a rally in its stock price since the middle of this month, when it dipped as low a 42 US cents. But Nortel's shares on the New York Stock Exchange closed 16 cents, or 13%, lower on Tuesday at $1.09, capping the gains.
The company has nearly finished repositioning itself for a drastically shrunken global market, he told The Asian Wall Street Journal.
"The (telecommunications) industry is not going to come back to where it was in 1999 and 2000," he said.
Nortel was near its target workforce size of 35,000, but would still need to cut more than 3,000 additional jobs, he said, adding that the new cost structure would enable the company to profit with less than $2.4 billion in quarterly revenue. Sales have been falling steadily since 2000 and totaled $2.7 billion in the quarter that ended June 30.
The abrupt collapse of demand for Nortel's key product, optical network infrastructure, plunged the company deep into the red and prompted it to lay off a total of about 65,000 staff globally.
Although Nortel is pinning its long-term hopes on new technologies like third- generation mobile networks and Internet Protocol networks, the $2.4 billion cost figure doesn't assume these will take off any time soon, Mr. Dunn said. "It's going to be a slow journey."
If results continue to disappoint, he said he would make further adjustments within business units, rather than toward the company as a whole. If any of Nortel's four main businesses -- wireless, wireline, optical networks and enterprise -- fails to break even in today's operating environment, "we'll take corrective action," he said.
"Each has to carry its own water up the hill."
Mr. Dunn also took aim at analysts who he said had unfairly exaggerated the financial danger the company was in.
Nortel posted a gross margin of 38% in its last quarterly report -- up three percentage points from the previous quarter and much higher than its competitors, he said.
"We have no significant debt payments due until 2006," he said, adding the company had $6.4 billion in cash.
Worries about the company's survival have been allayed slightly by a rally in its stock price since the middle of this month, when it dipped as low a 42 US cents. But Nortel's shares on the New York Stock Exchange closed 16 cents, or 13%, lower on Tuesday at $1.09, capping the gains.
