Nortel lowers guidance, cuts 10,000 jobs

Nortel Networks has lowered its revenue guidance for second quarter 2001 while announcing an additional 10,000 layoffs.

For the quarter ending June 30, Nortel expects revenue from continuing operations to be in the range of $4.5 billion, down 38% year over year. Net loss for the quarter is expected to reach a whopping $19.2 billion, or 48 cents per share.

The key driver in that decrease is the decline in sales of optical inter-city and circuit-switching gear in the U.S. Included in the loss is a $950 million pre-tax charge for increased provisions and charges. Approximately $650 million of that is margin related, including a $350 million charge due to more than a year of excess optical equipment inventory.

“It’s becoming clear now that our industry is not going through a downturn, it’s going through what we now think of as a period of adjustment,” said John Roth, Nortel’s president and CEO.

In response to the slowdown, Nortel said it would layoff an additional 10,000 workers, on top of the 20,000 layoffs that were announced in April. The cuts are expected to be completed by the end of September and will result in workforce reduction-related charges in the third quarter. Nortel will also take a charge of about $830 million due to the 20,000 layoffs that were announced in April.

Nortel also announced that it was cutting its access solutions operations. The operations, which accounted for 7.7% of the company’s revenues in 2000, are being discontinued because of their low margins. Nortel expects to take a charge of approximately $2.6 billion in the quarter for the closure and disposition of the various businesses. In addition, a $750 million charge will be applied due to the write down of goodwill associated with the acquisitions of Promatory Communications and Sonoma Systems. Nortel expects to exit, dispose of or other wise transition out of these businesses in the next 12 months.

In addition, due to the adjustments of technology valuations and the current business outlook, Nortel expects to take a second quarter charge of about $12.3 billion to reflect the write down of intangible assets. These write-downs are primarily related to the goodwill associated with the acquisitions of Alteon WebSystems, Xros, Qtera and the 980 nanometer pump-laser chip business.

Today’s news wasn’t all bad for Nortel, though. The company also announced that it had received a $2 billion unsecured credit facility from affiliates of J.P Morgan Chase & Co. and Credit Suisse First Boston. The 364-day loan will be used to fund Nortel’s operational needs.