Nortel Reports Loss of $3.4 Billion - Cuts 1,300 Jobs
Published on: 9th Nov 2008
Note -- this news article is more than a year old.
Nortel Networks has posted its largest loss in the past seven years and announced another round of job cuts after customers cut their investment plans. The company lost USD3.4 billion in the 3rd quarter of this year which included a write down of USD3.2 billion, compared to a profit of USD27 million a year ago. Revenue in the third quarter of USD2.32 billion decreased 14 percent year over year and down 1 percent on a year to date basis.
The company aims to cut a further 1,300 jobs, on top of the previous round of cuts of 1,200 staff. About a quarter of the job cuts will occur this year, with the rest in 2009. None of the remaining staff will receive pay rises in 2009, unless already agreed. The cost savings are expected to reduce annual gross costs by approximately USD400 million in 2009.
The company also announced a freeze on substantially all internal travel and the curtailing of all travel that is not customer facing.
Commenting on the market dynamics, Nortel President and Chief Executive Officer Mike Zafirovski said: "In September, we signaled our view that a slowdown in the market was taking place. In the weeks since, we have seen 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."
Addressing the non-cash charges related to goodwill and the deferred tax asset, Mr. Zafirovski said: "We took prudent and appropriate actions in re-evaluating key assumptions and projections supporting our deferred tax and goodwill assets. The benefit of the tax asset remains available to potentially offset the Company's future tax liability. It is important to note that these charges have no bearing on our current cash position."
Starting from the beginning of next year, Nortel said that it will decentralize several corporate functions and transition to a vertically integrated business unit structure to give greater financial and operational control to the business units, increase accountability for overall performance, and reduce the duplication inherent in matrix organizations.