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Nortel, Slashing Jobs, Hints at Profit

August 20, 2004|From Reuters

Nortel Networks Corp. earned stock market applause Thursday as it slashed more jobs, took steps to clean up its accounting mess and said it would post at least break-even results for the first half of this year.

Nortel, North America's largest provider of telecom equipment, estimated its earnings for the first six months of 2004 at zero to 2 cents a share.

But it said that to keep costs in line it would cut about 3,500 more jobs, or 10% of its workforce, with most of the cuts coming in North America.

The profit estimates provided a much-delayed glimpse into Nortel's finances after the company had spent months untangling accounting irregularities that caused it to postpone releasing results for this year and to restate results for previous years.

While sorting out its accounting mess, Nortel said Thursday that it had fired seven more executives "for cause." They join three top bosses fired in April.

There have been allegations that officers at Nortel cooked the books so that the company could turn a profit in 2003 and they could cash in on a bonus plan that paid out millions of dollars.

Nortel said it was demanding repayment of about $10 million in bonuses paid out to the fired executives. It also said it would establish a chief ethics and compliance officer.

Shares in Ontario, Canada-based Nortel shot up as much as 13% on Thursday, but lost fell later in the session. It closed at $3.74, up 14 cents, or 3.9%, on the New York Stock Exchange. The stock was the day's most actively traded issue on the Toronto and New York exchanges.

Nortel repeated Thursday that its revenue would grow faster than the general market for telecom equipment, which it saw expanding in the low to mid-single digits in 2004.

The company, which plans to restate results for 2001 to 2003, estimated earnings of zero to 1 cent a share in each of the first two quarters of this year.

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