Nortel cuts Q3 revenue forecast, warns of cost cuts

Nortel Networks Tuesday cut its revenue forecast for the third quarter and said it will need to cut costs more than expected to break even.

Citing continued reductions in spending by carriers, especially in the U.S., the telecommunications and networking infrastructure vendor said it expects revenue in the third quarter of 2003 to be lower than third-quarter 2001 revenue by about 10 percent. It previously had predicted revenue would be flat year-over-year.

Nortel still expects to break even by the end of June 2003, according to the company statement released Tuesday. However, in order to reach that goal, it plans to cut its quarterly cost structure to less than US$2.6 billion, down from a previously stated goal of approximately $3.2 billion. Those figures do not include costs related to acquisitions or special charges or gains.

To cut costs, the Brampton, Ontario, company plans to simplify the structure of its businesses and create a more direct connection between its operations and customer-facing teams, the statement said. The cost-cutting efforts will result in additional charges for workforce reductions and facilities closures. Details are still being worked out and will be revealed with the company's third-quarter results.

Nortel expects the restructuring activity to be substantially completed by the end of 2002, at which point the company will have a work force of about 35,000, according to the statement.

The statement was released after the close of regular trading. In after-hours trading Tuesday evening, Nortel's stock (New York Stock Exchange: NT) had dipped 5.43 percent to US$1.22 on The Island ECN Inc.'s trading network.

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