Nortel Announces Redundancies

Nortel says that it is planning to cut a further 2,900 jobs over the next two years, with about 70% of the cuts taking place this year. In addition, the Company plans to shift approximately 1,000 positions from higher-cost to lower-cost locations, with approximately 40 percent of this activity taking place in 2007. These reductions will not affect sales positions in targeted growth areas.

"We are transforming Nortel, and are focused on building a highly competitive organization that drives innovation and profitable growth," said Mike Zafirovski, president and chief executive officer, Nortel. "In early 2006, Nortel laid the foundations of its Business Transformation plan, and we provided additional details and specific targets for our new business model at the time of our third quarter 2006 results and at the November 15, 2006 Investor Conference."

The business model requirements include a significant reduction in general and administrative expenses, driven by simplified operations, reduced systems and improved processes. In addition, R&D investment will continue to be a top priority and though reduced, will be maintained at an industry-competitive 15 percent of total revenues. Funding will shift and increase significantly Nortel's investment in high-growth opportunities. Plans to increase the Company's investment in sales and other customer-facing functions remain unchanged by today's announcement.

"These are tough but necessary measures, and we recognize the impact they will have on affected employees," added Zafirovski. "However, as we roll-out the various initiatives over the next two years, every effort will be made to leverage normal attrition and re-deploy affected employees to other areas of the Company. Our goal is nothing short of creating a high-performance, successful and profitable enterprise based on a highly motivated work environment powered by strong business results."

The company also announced that fourth quarter 2006 revenues are expected to be approximately US$3.26 billion, up 8.8% from US$3 billion for the same period in 2005. Gross margin in the quarter is expected to be slightly above 40 percent of revenue, with a strong contribution from the LG joint-venture and CDMA, up from 39.4 percent in the fourth quarter of 2005.

Cash as at December 31, 2006 was approximately US$3.50 billion, up about US$900 million from September 30, 2006. This includes approximately US$300 million of gross proceeds from the sale of certain assets and liabilities of the UMTS Access business to Alcatel-Lucent.

"I am pleased with the progress made in 2006, and with the strong performance Nortel delivered towards the end of the year," said Zafirovski. "Nortel is committed to our short and long-term plans, and we are beginning to see the desired results."

Posted to the site on 8th February 2007