Nortel cutting 2100 jobs
- 28 February, 2008 07:08
Nortel said it will cut 2100 jobs and shift 1000 more to "higher growth and lower cost geographies" after fourth quarter results fell short of Wall Street expectations.
Revenue in the fourth quarter of $US3.2 billion, was down 4 per cent year over year. Full year 2007 revenue was US$10.95 billion, also down 4 per cent.
Analysts expected revenue to come in at US$3.28 billion for the quarter. Nortel blamed lower than expected carrier spending in North America for the revenue shortfall in the fourth quarter.
Excluding the impact of the divestiture of its UMTS Access business, revenue would have increased 2 per cent in the quarter and the year, Nortel says.
Nortel also posted a net loss in the fourth quarter of $US844 million for the quarter, and $US957 million for the year, because of a $US1.1 billion non-cash charge the company took due to changes in Nortel's Canadian tax profile. This compares to a net loss of US$80 million in the fourth quarter of 2006 and a profit of $US28 million for the year 2006.
Analysts expected a profit of $US219 million for the quarter and about $US243 million for the year.
Despite the lowered results, Nortel increased gross and operating margins in the quarter, though fourth quarter operating margin fell short of the company's internal targets.
Revenue form Nortel's Enterprise Solutions (ES) group was $US762 million in the fourth quarter, a decrease of 3 per cent from the year-ago quarter but up 14 per cent sequentially. ES revenues were negatively impacted by lower revenues from the LG-Nortel joint venture, the company said.
The workforce reduction, meanwhile, is expected to result in annual gross savings of approximately $US300 million, Nortel says. Seventy percent of the reduction will take place this year.
Nortel will also sell certain real estate assets. At this time last year, Nortel cut 2900 positions.
The restructuring will result in total charges to earnings of approximately $US275 million and cash outlays of approximately $US250 million, however the actual costs could be lower with the redeployment of resources, the company says. Nortel expects 70 per cent of the charges to be incurred in 2008 and the remainder in 2009.
For 2008, Nortel expects revenue to grow in the low single digits.
Earlier this week, fellow telecom equipment vendor Siemens aired plans to cut 3800 jobs at its Enterprise Communications subsidiary, including 2000 jobs in Germany.