Nortel reaches rock bottom
And gets its pick axe out
Nortel Networks has revised its forecasts to warn of deeper net losses of $3.6 billion on lower than expected revenues of $3.5 billion.
Nortel's losses include restructuring charges of $735 million, extraordinary charges of $1.3 billion and ongoing amortisation of intangible assets of $650 million, as well as operating losses of $910 million.
Along with the profit warning, Nortel announced a major management overhaul that sees John Roth replaced as chief executive by chief financial officer Frank Dunn from November 1. Roth will remain vice-chairman until 2002, while Terry Hungle will take over the chief financial officer role.
Nortel tried to put a positive spin on the news by stating that its restructuring plan is going well and that it expects to have a structure in place that will allow it to breakeven by the first quarter of next year on quarterly revenues of "well below" $4 billion. It previously thought it could break even on quarterly revenues of $5 billion.
Further job cuts and divestment of non-core businesses (involving perhaps 10,000 workers) will leave Nortel with a headcount of just 45,000.
The Canadian telecoms manufacturer will concentrate its business on three main areas optical long haul networks wireless networks and metro networks.
The collapse of competitive carriers and dotcom firms in the States, has had a calamitous effect on networking firms, while a slowdown in IT spending in general has piled on the misery. Nortel failed to give any firm indication of when it expects matters to improve and in a conference call declined to give any guidance for its fourth quarter. ®
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