Nortel cuts again, matches warning

(Telephony) After a recent warning that earnings would be lower than original estimates, Nortel Networks yesterday reported a first-quarter loss. The company had a net loss from operations of $385 million, or 12 cents per share. For the same quarter last year, Nortel had net earnings of $347 million. Nortel recorded a net loss for the first quarter of $2.58 billion, or $0.82 per share.

To make matters worse for the company, it also announced 5,000 more layoffs, bringing the total employee cut to 20,000 since December 2000. Those reductions will be complete by midyear, according to John Roth, president and CEO of Nortel. Roth conceded the cuts are causing concern among shareholders and employees.

“This was a very challenging quarter,” Roth said. “The market moved from the boom of last year to [much difficulty] this year,” he said.

Similar to the previous warning about earnings, Roth noted the tight availability of capital and reduced carrier spending as the reason for the losses and greatly depleted sales.

“It is hard to say where the next dollar will come from in many cases,” Roth said, noting that many providers are buying capacity on competitors’ routes rather than building their own.

“Many are lighting up each others’ routes--the sharing of routes is definitely underway,” Roth said.

Many companies want to buy equipment but simply don’t have the funds to do so, Roth said.

As for when Nortel will be able to pull out of the slump, the outlook apparently depends on a turnaround of the economy.

“We are really just waiting for a more favorable economy,” Roth said.

Most of Nortel’s customers’ networks are utilizing about 70% to 85% of their designed capacity, according to Roth. Because 90% is about the maximum that those can operate safely, there is definitely room for growth, he said.

In addition to what Nortel hopes will be escalating demand for bandwidth and equipment to drive it, Roth noted the company is having much success in Asia. However, the European market is following a similar pattern as the U.S., he said.