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Wednesday, 3 October, 2001, 13:44 GMT 14:44 UK
Shake-up for troubled Nortel
Nortel Networks logo
The troubled Canadian telecoms and communications equipment maker Nortel Networks has announced that it will cut 20,000 more jobs, warned of billion-dollar losses and named a new chief executive.

In the latest of several rounds of sweeping job cuts at Nortel, 20,000 workers will have to go, at least half being involuntary redundancies

Nortel went into the year 2001 employing 95,000 people, but had already announced 30,000 job cuts before the latest announcement.

In an effort to cut costs, Nortel is divesting the majority of its manufacturing activities to electronics manufacturer C-MAC Industries of Montreal.

C-MAC will supply the firm with systems integration, configuration and testing services for its DMS circuit-switching products from its facilities in North Carolina and Northern Ireland.

Uncertain future

Leading the company into an uncertain future will be its chief financial officer, Frank Dunn. He will replace John Roth, who had announced his intention to resign in April.

Nortel also warned that it would post a third-quarter loss of about $3.6bn.

And in a sign of how bad things are, Nortel said the "visibility" for the fourth quarter was so bad that it could not make any further earning forecasts.

In afterhours trading, Nortel shares dropped more than 8%.

Industry weakness

Not too long ago, Nortel was considered one of the top names in the hi-tech industry, and its heady share price made it at one point one of the most valuable company in the world.

It specialises in building components and the infrastructure for the data networks of the internet economy.

But the sharp slowdown in the technology sector worldwide has hit Nortel hard. Other victims in the sector are well-known names like Lucent in the US and British firm Marconi.

Nortel hopes that the sweeping job cuts will allow it to cut costs and regain some profitability, at least in the medium-term.

Sell-off - and hopes for a turnaround

Sales of subsidiaries are another option to cut losses, and Nortel has already announced the sale of its Clarify subsidiary for about $200m in cash. Nortel had bought the customer relations management company just a year ago, for $2.1bn in stock.

Outgoing chief executive John Roth said while the "magnitude of the market adjustment from previous levels of expenditures has been challenging, we believe we are beginning to see some early signs that the expected capital spending by service providers is approaching sustainable levels".

This assumes that some telecoms and internet firms are seeing the first signs of a turnaround.

AOL Time Warner is one of these companies, with a huge interest in broadband internet services. Its boss, Steve Case, told a conference in New York that he could not "predict that it is an absolute bottom, but it feels like it will be up from here".

See also:

19 Jul 01 | Business
Nortel reports near $20bn loss
04 Jul 01 | Business
Marconi slashes jobs
01 Oct 01 | Business
Marconi shares hit by US attacks
05 Jul 01 | Business
Global gloom for hi-tech shares
31 Jul 01 | Business
Nortel sheds more Devon jobs
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