Nortel losses $3.4bn in Q3
1,300 heads will roll
The economy is certainly doing no favors for Nortel Networks, North America's largest telecom equipment shop.
Nortel today posted its largest quarterly loss in seven years, along with plans to cut 1,300 jobs, including several executive positions.
The Toronto-based firm lost $3.4bn during its third calendar quarter 2008. This includes a $3.2bn write-down in the value of deferred tax assets and its Ethernet and enterprise businesses.
Revenue in Q3 was $2.32bn, a 14 per cent drop year-over-year.
Nortel blames sales drying up on a "sustained and expanding" economic downturn, competitive pressures, and reduced spending from their biggest phone carrier customers.
Mike Zafirovski, Nortel's president and CEO, notes the company prepared investors for impact two months ago.
"In September, we signaled our view that a slowdown in the market was taking place," Zafirovski said. "In the weeks since, we have been worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally, further impacting the industry, Nortel and its customers. We are therefore taking further decisive actions in an environment of decreased visibility and customer spending levels."
Those decisive actions include dropping about 1,300 workers, a salary freeze, and extending its current hiring freeze through 2009. It's also pushing a scheme to "flatten the corporate structure" by focusing on eliminating and consolidating executive and management positions across the company.
At least four top brass will get booted as of January 1, including Nortel's Chief Technology Officer John Roese and Chief Marketing Officer Lauren Flaherty. Global services president Dietmar Wendt and executive veep of global sales Bill Nelson will also leave.
The global services and sales units will then be merged into Nortel's business units by April 1, 2009.
"The work accomplished by these executives is nothing short of exceptional, and Nortel and our customers will continue to benefit from the capabilities they have build," said Zafirovski. "It is always difficult to see colleagues go, but we made the necessary decision to consolidate our executive layer and reshape Nortel."
Nortel is also dialing back its revenue outlook for the full year 2008 to drop around four per cent compared to 2007. The company earned about $10.9bn last year. ®