Nortel to cut 2,100 jobs

Q4 results fell below expectations

Nortel Networks Corp. said it will cut 2,100 jobs and shift 1,000 more to "higher-growth and lower-cost geographies" after fourth-quarter results fell short of Wall Street expectations.

Revenue in the fourth quarter was $3.2 billion, down 4% year over year, the company said in a statement. Full-year 2007 revenue was $10.95 billion, also down 4%.

Analysts expected revenue to come in at $3.28 billion for the quarter. Nortel blamed lower-than-expected carrier spending in North America for the revenue shortfall in the fourth quarter.

Excluding the effect of the divestiture of its UMTS Access business, revenue would have increased 2% in the quarter and the year, Nortel said.

Toronto-based Nortel also posted a net loss of $844 million for the fourth quarter, and $957 million for the year, because of a $1.1 billion noncash charge the company took as a result of changes in Nortel's Canadian tax profile. This compares with a net loss of $80 million in the fourth quarter of 2006 and a profit of $28 million for fiscal 2006.

Analysts expected a profit of $219 million for the quarter and about $243 million for the year.

Despite the lowered results, Nortel increased gross and operating margins in the quarter, though the fourth-quarter operating margin fell short of the company's internal targets.

Revenue from Nortel's Enterprise Solutions group was $762 million in the fourth quarter, a decrease of 3% from the year-ago quarter but up 14% sequentially. The revenue for the group was hurt by lower revenue from the LG Electronics Inc.-Nortel joint venture, the company said.

The workforce reduction, meanwhile, is expected to result in annual gross savings of approximately $300 million, Nortel said. Seventy percent of the reduction will take place this year.

Nortel will also sell certain real estate assets. At this time last year, Nortel cut 2,900 positions.

The restructuring will result in total charges to earnings of approximately $275 million and cash outlays of approximately $250 million. However, the actual costs could be lower with the redeployment of resources, the company said. Nortel expects 70% of the charges to be incurred in 2008 and the remainder in 2009.

For 2008, Nortel said it expects revenue to grow in the low single digits.

Earlier this week, telecommunications equipment vendor Siemens AG announced plans to cut 3,800 jobs at its Enterprise Communications subsidiary, including 2,000 jobs in Germany.

This story, "Nortel to cut 2,100 jobs" was originally published by Network World.

Copyright © 2008 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon