Nortel fires seven beancounters (and 3,500 more)
North America bears brunt
Nortel Networks is firing seven finance employees in the wake of an accounting scandal which has already claimed the scalps of its former president and chief executive officer, chief financial officer and controller. At the same time the data networking equipment vendor is waving goodbye to 3,500 staff, mostly in North America, in cost-cutting moves.
It aims to complete the redundancies by the end of the year, at a cost of $300m-$400m. And it expects to reduce annual costs by $450m-$500m. Nortel CEO Bill Owens warned of the cuts last month. "It is clear," he said, "that our business model is not achieving our targeted operating cost (SG&A and R&D) performance of below 40 per cent of overall revenues and our targeted gross margin per cent of mid 40s."
So today sees a new business model which sees Nortel facing up to the new customer reality, namely enterprise carriers building IP networks in which voice and data converge. Accordingly, it is merging its wireless, wireline and optical businesses into a single carrier networks organization, with effect from 1 October.
Last week, Nortel announced that the RCMP (Royal Canadian Mounted Police) had begun a criminal investigation into its accounting. In April the company fired its CEO, CFO and Financial Controller, after admitting that it would have to restate its accounts for 2003, halveing supposed profits of $732m. It now faces a class action.
Nortel today release unaudited results for the first half of 2004. Sales were approx $5.1bn and net earnings per share were $0.00 to $0.02. ®
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