Nortel Lowers 2Q Revenue Forecast, Cuts More Jobs

Nortel Networks

With the cuts, Nortel's workforce will number approximately 42,000, down from its previous head-count target of 44,000. Nortel started 2001 with about 92,000 employees.

The telecommunications equipment vendor said it now expects revenue for the second quarter to be flat to down 5 percent compared with the first quarter, updating its previous guidance that second-quarter revenue would not vary significantly from the first quarter.

In April, Nortel reported revenue of $2.91 billion for its first quarter, ended March 31.

In addition, Nortel reconfirmed its expectation for an improved second-quarter pro forma loss compared with the first quarter, in which it reported a pro forma loss of $463 million, or 14 cents per share.

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Nortel did not provide specific pro forma loss or loss-per-share forecasts.

Despite the vendor's financial struggles, Nortel distributor Ronco Communications has seen an increase in sales of Nortel products over the past several months, said Kurt Ruesch, general manager of distribution and director of marketing at Ronco, Tonawanda, N.Y.

"This year started slowly, but we're seeing a ramp up each month," he said.

Ruesch attributes the growth to a slight improvement in the economy as well as the cost savings Nortel's convergence products provide to end users by combining data and voice networks.

"There's more optimism that Nortel is going in the right direction and that it was grossly overstaffed to begin with," Ruesch said.

Nortel, based here, also said it plans by the end of the third quarter to realign its struggling optical long-haul business to meet current market conditions, a move that impacts 3,500 jobs and includes the potential sale or resizing of its optical components business.

As a result of the realignment, Nortel plans to record a charge through the second and third quarters totaling approximately $600 million.

Nortel said it plans to focus on the business of optical switches, photonic transport capabilities and network management, capabilities it says will be required when spending in the long-haul optical market resumes.

The vendor said it does not expect a meaningful recovery in the long-haul optical market before late 2003 or early 2004.

"We are aligning our optical business model to where we see the industry going to ensure we are well positioned when spending resumes," said Frank Dunn, president and CEO of Nortel, in a statement.

Dunn said Nortel has reduced its break-even revenue target to $3.2 billion of quarterly revenue, down from $3.5 billion, a level he expects to reach by the fourth quarter.

Shares of Nortel were trading down 8 cents at $2.44 Wednesday afternoon.