Feeds

Nortel acts to avoid cash crunch

In Securities

  • alert
  • submit to reddit

Secure remote control for conventional and virtual desktops

ComputerWire: IT Industry Intelligence

Networking equipment maker Nortel Networks Corp is preparing to raise up to $2.5bn in cash through the issuing of securities in order to increase its liquidity and quell fears that it could fall into a funding gap.

The Toronto, Canada-based company withdrew an SEC filing made eighteen months ago which registered a potential $1.0bn securities sale, and gave notice that it would replace it with a new shelf registration which would give it the right to sell up to $2.5bn worth of equities, warrants or bonds.

Simultaneously the company posted its 10-Q report of its financials for the three months to the end of March 2002. In it, the company explains that it believes that its $3.1bn cash will be sufficient to meet its requirements through the next 12 months, with the help of its credit facilities called in only for cash flow fluctuations between quarters.

However it also states in the filing that it recognizes that if revenues and cash flows are lower than expected, it may need to reduce capital expenditure further and gain external funding.

For the three months to the end of March the company burned through $476m of its cash through its continuing operations, and the company gave little assurance for future quarters. "We expect our customers to continue to limit capital expenditures and, therefore, it is difficult to predict how spending patterns will unfold in 2002," said CEO Frank Dunn last month.

Nortel is currently focused on introducing efficiencies that will help it reach breakeven at a lower top line and has almost halved its workforce over the past eighteen months. It expects to be down to about 44,000 employees when the current round of layoffs is completed.

Its new cost structure, due to be in place by the end of the year, will let it break even at $3.5bn of revenue, not including one-off charges, some $600m more than its first-quarter sales.

With such a high cash-burn rate, and the telecommunications market it serves showing absolutely no signs of recovery, it obviously felt the need to act now to preserve its liquidity.

Should it attempt to raise the cash through bonds, it will have to do so at a higher cost as credit rating agency Moody's cut its status to junk last month. Investors concerned that equity share issues would substantially dilute their own holdings pushed its New York Stock Exchange listed stock down over 14% in early trading yesterday.

© ComputerWire. All rights reserved.

Internet Security Threat Report 2014

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Special pleading against mass surveillance won't help anyone
Protecting journalists alone won't protect their sources
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Apple's iPhone 6 first-day sales are MEANINGLESS, mutters analyst
Big weekend queues only represent fruity firm's supply
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Bill Gates, drugs and the internet: Top 10 Larry Ellison quotes
'I certainly never expected to become rich ... this is surreal'
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
EMC, HP blockbuster 'merger' shocker comes a cropper
Stand down, FTC... you can put your feet up for a bit
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.