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Nortel Trims Estimates, 16% of Work Force

Telecom: Job cuts will be made in its slower-growth units and from infrastructure costs, the company says.

March 28, 2001|SUSAN TAYLOR | REUTERS

OTTAWA — Nortel Networks Corp. confirmed analysts' worst fears Tuesday as the world's No. 1 supplier of telecommunications equipment further slashed its first-quarter estimates and said it would cut 5,000 more jobs amid an ongoing downturn in the U.S. economy and pricing pressure from competitors.

In its second recent cut to estimates, Nortel said it now expects a loss from operations of 10 cents to 12 cents a share on revenue of $6.1 billion to $6.2 billion. Analysts polled by First Call/Thomson Financial had expected a loss of 4 cents a share on revenue of $7.7 billion.

In mid-February, Nortel cut its estimates to a loss of 4 cents a share, from expectations of a 16-cent profit, on revenue of $6.3 billion.

The company also abandoned full-year forecasts Tuesday, citing uncertainty about customers' spending plans. In February, Nortel cut revenue-growth estimates in half, to 15%, and profit estimates by two-thirds, to 10%.

"Given the poor visibility into the duration and breadth of the economic downturn, and its impact on the overall market growth in 2001, it is not possible to provide meaningful guidance for the company's financial performance for the full year 2001," Chief Executive John Roth said.

"We continue to feel the impact of the economic downturn in the United States and are now seeing customers globally assess its effect on their businesses," Roth said. "Reduced and/or deferred capital spending and increased pricing pressure are resulting in lower overall revenues, particularly in the United States."

Analysts had estimated full-year earnings of 61 cents on revenue of $35 billion at Nortel, said First Call/Thomson Financial. That stood well below the company's earnings guidance of 80 cents and underscored analysts' skepticism about the company's forecast.

Nortel now plans further staff cuts, laying off 15,000 people by mid-2001. That represents about 16% of Nortel's 94,500 staff at year's end.

The company has already cut nearly 10,000 jobs and said it would see benefits from those reductions in the second quarter of 2001.

Job cuts will be made in Nortel's slower-growth business units and from infrastructure costs, said a Nortel spokesman.

The announcement sent Nortel shares down 12% to $14.75 in after hours trading. The shares had closed off 16 cents at $16.76 on the New York Stock Exchange.

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