Nortel Networks on Tuesday said it is cutting more jobs, exiting more markets, closing more offices and lowering future revenue targets as it prepares to record a third-quarter loss of $US3.6 billion.
For the quarter that ended September 30, Nortel expects to report revenues of $3.5 billion and a net loss of $3.6 billion, which includes charges and other expenses. Excluding the charges, the loss will be $910 million, Nortel stated.
Nortel will cut another 15,000 to 20,000 positions and divest itself of more "non-core" businesses to lower costs in light of further reductions in service provider spending. Nortel's total workforce will number 45,000 after the new cuts.
Nortel today announced the sale of its Clarify CRM business, and the sale, divestiture or liquidations of several other "non-core" businesses this year.
Frank Dunn, chief financial officer, will succeed John Roth as president and CEO of the company from November 1. Roth, who has served as CEO since October 1997 and who had announced in April his plans to step down, has agreed to serve as vice chairman until the end of 2002.
In addition to the Dunn and Roth appointments, Nortel announced the creation of the Office of the Chief Executive to facilitate the transition, assist in setting the strategic direction of the company, and act in an advisory capacity to the new senior management team. The Office of the Chief Executive will consist of executive chairman of the board Red Wilson, Dunn and Roth.
Nortel had been conducting an internal and external search for Roth's replacement since April. Roth was not expected to depart as president and CEO until April 2002.
The workforce reduction and related charge will be recorded in the fourth quarter of 2001.
"While the magnitude of the market adjustment from previous levels of expenditures has been challenging, we believe we are beginning to see some early signs that the expected capital spending by service providers is approaching sustainable levels," said John Roth, president and CEO of Nortel, in a statement. "Early indications of the outcome of the rationalisation among service providers are beginning to become apparent and we have also seen recent announcements of major reductions in telecom spending."
In light of the current levels of expected industry spending, Nortel is adjusting its cost structure to breakeven on a quarterly revenue level "well below $4 billion" instead of the $5 billion the company was expecting. This new cost structure is expected to be in place in the first quarter of 2002.
Nortel has also whittled down its target growth markets. They now include long-haul optical, metro networking, and wireless. Last quarter, IP networking and IP services solutions were two markets included in Nortel's "growth" roundup. Now, IP networking and "intelligent service engines" are subsets of the company's metro focus, which also encompasses security, voice-over-packet, and circuit-to-packet systems for service providers and corporations.
Nortel expects to take a restructuring charge of $1.1 billion in the third quarter to complete previously announced workforce reductions, facility closures, product cancellations, and a 50 per cent reduction in manufacturing capacity of its photonics components business.
Nortel will announce its third-quarter results on October 18.
