Nortel To Cut Staff By 3,500 As Part Of Streamlining Effort

Meanwhile, the vendor, based here, authorized Sprint as a distributor for a variety of its products.

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 its revenue for the second quarter could be 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 that its second-quarter pro forma loss will be smaller than for the first quarter, in which it reported a pro forma loss of $463 million, or 14 cents per share.

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

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

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

Ruesch attributed the growth to a slight improvement in the economy as well as the cost savings that 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.

Aside from the changes to its second-quarter forecast, Nortel also 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 said it plans to record through the second and third quarters a charge totaling about $600 million.

Nortel said it plans to focus on optical switches, photonic transport capabilities and network management and does not expect a meaningful recovery in the optical long-haul market before late 2003 or early 2004.