Nortel Networks on Monday announced it lost $3.41 billion in the third quarter and plans to eliminate 1,300 jobs amid an economic downturn trickling through the tech sector. Nortel also plans salary and hiring freezes, fewer management positions, and a suspension of certain preferred-share dividends.
“In September, we signaled our view that a slowdown in the market was taking place. In the weeks since, we have seen worsening economic conditions, together with extreme volatility in the financial, foreign-exchange, and credit markets globally, further impacting the industry, Nortel and its customers,” said Nortel President and CEO Mike Zafirovski.” We are therefore taking further decisive actions in an environment of decreased visibility and customer spending levels.”
‘Multiyear Customer Wins’
Zafirovski said Nortel’s performance in the third quarter is in line with its Sept. 17 expectations. Operating expenses for the quarter are down significantly, partly, he said, as a result of immediate actions taken by the company to cut costs by $100 million.
“It is important to note that, despite the business environment, we continued to see important, multiyear customer wins in key areas of our business, validating the value and innovation that Nortel delivers to customers,” Zafirovski said.
Nortel said reducing costs and preserving cash are priorities. The moves to cut jobs and dividends while consolidating executive management and freezing salaries and hiring are expected to reduce annual gross costs by approximately $400 million in 2009.
Zeus Kerravala, a vice president at The Yankee Group, said he’s not surprised at Nortel’s stiff losses. Nortel, he said, typically sells to companies looking for an alternative to Cisco Systems. “In tough economic times, buyers tend to go with the vendors they know and the vendors they trust,” he explained. “An alternative vendor that may be cheaper has some appeal, but it’s just a much tougher sell in a…