Nortel cuts jobs, shakes up managementNovember 10, 2008: 10:33 AM ET
By Scott Moritz
Nortel (NT) plans a major restructuring and another round of job cuts as demand for tech gear plunges.
The Toronto networking equipment giant said Monday it would trim 1,300 jobs on top 1,200 cuts previously announced. Nortel had 32,550 employees at the end of 2007.
The company also said four top executives, including its head of sales and its chief technology officer, would leave at year-end.
The news comes as Nortel posted third quarter earnings that met lowered targets. The company warned, however, that 2008 sales would fall 4% -- at the lower end of its previous guidance of 2% to 4%.
Like other tech shops that have lowered forecasts, including Qualcomm (QCOM), Cisco (CSCO), Microsoft (MSFT) and Intel (INTC), Nortel cited a sudden slowdown in orders that started in September and has shown no signs of letting up. Corporate spending cuts, tight-fisted phone companies and a weaker consumer demand have sent the tech sector into a deep slump.
In September, Nortel slashed guidance and said it would look to sell or eliminate some business units. The news shocked investors who sent the stock down 43% in a one-day selloff Sept. 17.
In addition to plans to cut a total of 2,500 jobs, Nortel has shuffled its management. Marketing chief Lauren Flaherty, technology chief John Roese, head of global services Dietmar Wendt and head of sales Bill Nelson will leave the company at the end of the year, Nortel announced.
For the third quarter, Nortel took a one-time charge of $3.2 billion ($2.1 billion in writedowns for tax adjustments, and $1.1 in goodwill charges) putting the net loss at $3.4 billion, or $6.85 a share. Excluding those charges, pro forma profit was 30 cents a share, well below the 8-cent adjusted profit last year but in line with analysts expectations.
Sales for the third quarter were $2.3 billion, down 15% from year-ago levels but meeting Wall Street expectations.
Looking ahead, Nortel cut its full year sales projection to about $10.5 billion or about 4% below 2007 levels. Analysts had anticipated a 4% full year slide in sales for Nortel.