1,300 redundancies at Nortel Networks after poor third quarter


1,300 redundancies at Nortel Networks after poor third quarter

Antony Savvas

Nortel Networks is slashing another 1,300 jobs on the back of poor third quarter results.

The firm announced 2,200 redundancies last February. The 1,300 to go this time do not include the 1,200 staff yet to leave as part of the February announcement.

Nortel CEO Mike Zafirovski said, "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.

"We are therefore taking further decisive actions in an environment of decreased visibility and customer spending levels."

Reducing costs and preserving cash are now Nortel's priorities, he said.

The job cuts and other cutbacks - including a salary freeze - are expected to reduce the firm's annual gross costs by around £250m in 2009. The company's recruitment freeze will also continue.

Nortel's sales in the third quarter decreased by 14% to £1.45bn. Addressing the non-cash charges related to goodwill and a deferred tax asset, Zafirovski said, "We took prudent and appropriate actions in re-evaluating key assumptions and projections supporting our deferred tax and goodwill assets.

"The benefit of the tax asset remains available to potentially offset the company's future tax liability. It is important to note that these charges have no bearing on our current cash position."

The charges did, however, result in the company going into the red on the balance sheet, creating a £742m operating loss for the three months ended 30 September. There will be no preferred share dividend.

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