Nortel said the move was an attempt to bring the company to break-even status by year's end.
Nortel also announced that it was downgrading previous earnings estimates for the second quarter. The company now expects earnings to be either flat or down 5% from the same quarter last year.
The move surprised at least one analyst. "I was under the impression that optical was one of their remaining strengths," said Martha Young of Enterprise Management Associates.
Young said she wonders about the long-term viability of the troubled company. "As much as you like to believe [the layoff and realignment are] for efficiency, I would rather doubt it at this point."
Nortel faces stiff competition from a variety of sources and pointed to such companies as Extreme Networks as continuing to make trouble for Nortel, she added.
While big telecommunications companies are hindered by government regulation, smaller companies such as Extreme do not face the same regulations, and that spells trouble for the likes of Nortel.
Young said Nortel has some strong intellectual property, including its optical networks, switches, policy-based management solution and its voice-over-IP strategy, that could make it a takeover target.
Chamberlin said the company had no comment on Young's speculation regarding a sale or takeover.
Nortel, which employees about 44,000 people, has been hit with thousands of job cuts in the past 18 months.
In February 2001, the company announced it would lay off 10,000 workers, and in March 2001 it announced it would let go of another 5,000.
Nortel has had other troubles. In April, the company's credit rating was reduced to junk bond status. In February, chief financial officer, Terry Hungle, resigned after it was revealed he had made trades in his personal pension ahead of company financial press releases and outside company trading windows.