Nortel Predicting a Narrower Loss

Nortel Networks Corp. said Wednesday that it was on track for a narrower loss in the second quarter, but announced plans for 3,500 more job cuts and further asset sales, including its once highflying fiber optics unit.

The company, mired in a telecom slump, also pared its revenue forecast and cut its break-even sales target to $3.2 billion from $3.5 billion by the fourth quarter.

Nortel shares, which initially rose on the announcement, ended the session down 17 cents, or nearly 7%, at $2.35 on the New York Stock Exchange.

Largely expected by the market, the move to cut an additional 8% of Nortel’s work force was seen as good news, analysts said, but a dismal outlook for recovery and the slight reduction of its sales forecast were not encouraging.

“Most of it is stuff that anybody who has been watching the company should have realized” was coming, said Sanford Bernstein analyst Paul Sagawa, who has a “buy” rating on the stock, which he calls cheap.

Nortel, which sells equipment for wireless, Internet and phone networks, said its second-quarter pro forma net loss from continuing operations will narrow from that of the first quarter.

But it wavered on its revenue estimates from its previous forecast of flat growth. Sales expectations range from flat to down 5% from first-quarter sales of $2.91 billion.

Nortel also does not forecast a recovery for the long-haul fiber optics sector until late 2003 or early 2004. In response, as well as shedding staff, it will sell or cut back its optical components unit, once a huge growth business the company had considered spinning off in a public offering.

Technology such as optical switches and network management tools will be maintained in the overhaul, which should be complete by the third quarter.

The cutbacks will further shrink Nortel’s work force to about 42,000. Nortel has slashed its payroll from a peak of 94,500 at the end of 2000.