Nortel to Cut More Jobs, Post $3.6-Billion Net Loss
Nortel Networks Corp. said Tuesday it would slash its payroll by a further 30% and post a $3.6-billion third-quarter loss as the telecom equipment maker trims operations to break even in future quarters.
Nortel also said Chief Financial Officer Frank Dunn would succeed John Roth as chief executive, effective Nov. 1. Roth will serve as vice chairman through the end of 2002, and Terry Hungle, former president of finance, will become chief financial officer.
Nortel said it would lay off 10,000 more workers on top of 10,000 set to leave the payroll because they work for divisions being sold, Nortel said. It said Tuesday it inked deals to sell its Clarify unit to Amdocs Ltd. and its French distribution division to Spie.
With the 30,000 jobs that already have been slashed, staff will number 45,000, less than half the peak work force.
Although carrier spending will not return to the levels of 2000, the “industry is now starting to reach sustainable levels of spending,” Roth said.
Analysts said the announcement was not completely unexpected as companies, still reeling from the effects of the Sept. 11 attacks, did not go to extraordinary lengths to pack sales into the September quarter.
Nortel said it could not point to any specific consequences from the aftermath of the attacks, but did say customers were showing interest in security products like those that protect computer systems from viruses.
Nortel said in a statement after the close of markets on Tuesday it expects third-quarter revenue from continuing operations of about $3.5 billion, and a loss, excluding charges, of about $910 million, or 28 cents a share.
It also will record incremental charges of $1.3 billion, restructuring charges of $735 million, and charges for amortization of assets of $650 million, for an after-tax net loss of $3.6 billion, or $1.13 a share.
This follows a stunning $19.2-billion second-quarter loss. Nortel also wrote down almost $14 billion in goodwill to adjust for the reduced value of a string of acquisitions.
By the first quarter of 2002, it will have a cost structure allowing it to break even at a quarterly revenue level below $4 billion, instead of the previous $5 billion, it said.
The company stressed it is in good financial shape with cash and lines of credit of about $7 billion.
Including Wednesday’s sale of Clarify for about $200 million, Nortel expects to generate $700 million from the proceeds of divestitures, some yet to be announced.
Christin Armacost at SG Cowan said she had been expecting revenue of $4.6 billion for the third quarter, while analysts polled by Thomson Financial/First Call had expected $3.9 billion on average, and an operating loss of 21 cents a share.
Shares of Nortel closed down 18 cents at $5.29 on the New York Stock Exchange, near a year low of $4.76.
