Nortel reports $3.4B loss, plans layoffs and internal overhaul

IDG News Service - Nortel Networks Corp. today reported a third-quarter net loss of $3.4 billion and announced plans to cut 1,300 more jobs and eliminate its centralized development, sales, marketing and support organizations.

Those functions will be folded into three vertically integrated business units, one focused on enterprise customers and two on network service providers, Nortel said as part of its Q3 financial report. One of the latter units will serve telecommunications carriers, while the other — which may be sold off — will develop products for metro Ethernet networks.

The new layoffs, which follow an earlier cutback of 2,100 jobs that was announced last February, had been expected in the wake of Nortel's mid-September announcement that its third-quarter revenue would be lower than expected.

Revenue for the quarter totaled $2.32 billion, a 14% decrease from the same period last year, when Nortel reported a net profit of $27 million. Nortel blamed the drop-off in business on the challenging economic environment, as well as competitive pressures and reduced spending by key carrier customers, especially in North America.

And the bad news didn't end with the Q3 results. The Brampton, Ontario-based company also lowered its business forecast for the full year, saying it now expects revenue to decline by about 4% compared with the 2007 level. Nortel previously had said that it expected a decline of between 2% and 4%.

The networking vendor cited the deteriorating economic conditions for the more pessimistic forecast and said that unfavorable currency exchange rates will also take a toll on revenue. Because of the dynamic nature of the economic situation, the actual results for the year as a whole could be even lower than the diminished projection, Nortel added.

In addition to the layoffs and internal restructuring, Nortel is putting in place several other measures aimed at lowering costs, including a freeze on most salaries and the extension of an existing hiring freeze through next year. The company said it also will make deeper cuts in discretionary spending, including suspending most of its internal travel and all external travel that doesn't involve meetings with customers. And Nortel officials plan to review all of the vendor's real estate holdings.

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