Nortel reports $3.4bn quarterly loss

NORTEL NETWORKS reported a $3.4 billion quarterly loss yesterday and announced sweeping new cost cuts, including 1,300 layoffs, as the global economic downturn eroded its business and strained its balance sheet.

The economic downturn also forced Nortel, North America's biggest maker of telephone gear, to cut its 2008 outlook again as telecommunications customers reduce spending on equipment.

The news pushed Nortel's stock, once valued at C$1,100 a share, down another 18 per cent to C$1.22.

The new job cuts represent about 5 per cent of Nortel's 30,000-strong workforce.

The company said it would also freeze salary increases, cut back on consultants and review its real estate portfolio.

Nortel employs 300 staff in Ireland, primarily at a site in Galway city, which carries out a range of activities including finance, IT and other functions for overseas subsidiaries. It also carries out RD and support for customers.

The company did not return calls last night on the possible impact of cuts on its Irish operations.

The moves are Nortel's latest response to a rapid deterioration of the business environment that the company had highlighted earlier this autumn, said chief executive Mike Zafirovski.

"I can assure you that the sense of urgency which we had in mid-September has only accelerated these last two months. This is a critical time for Nortel."

He said several senior executives would leave the company early next year as the company streamlined its operations.

The company said the latest cost-cutting, along with the moves announced earlier, would lead to annual savings of $400 million in 2009.

However, the new moves would also mean total charges to earnings and cash outlays of $130 million. The loss included a tax adjustment of $2.07 billion and a $1.14 billion writedown of goodwill. - (Reuters)