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Thestar.com > News
Oct. 2, 2001. 06:47 PM
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Nortel hires new CEO, cuts more jobs
Job cuts now affect more than half of workforce
From Canadian Press
CP FILE PHOTO
Nortel chief executive John Roth.
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Nortel Networks warned Tuesday it expected to post a $3.6 billion loss in the third quarter and said it would shrink its work force by almost 20,000 more jobs to less than half the total it started with this year.
Nortel (TSE: NT), a top producer of fiber-optic and other communications equipment, said it will cut about 10,000 jobs, with the remainder eliminated through the divestiture of non-core businesses. The latest round of cuts will reduce its work force to 45,000. The company began the year with almost 95,000 employees.
The company said it was still adjusting to the sudden slowdown in the demand for technology, but that business appears to be stabilizing.
``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,'' president and chief executive officer John Roth said in a release after stock markets closed.
The company had not provided previous guidance for the third quarter.
Contributing to the third-quarter loss are an $815 million restructuring charge related to 10,000 jobs cuts announced in June and related plant closures and restructuring costs; a $750 million to writedown the value of excess and obsolete inventory, and $400 million in charges related to investments.
Nortel will release third quarter results Oct. 18.
In July, Nortel posted a whopping $19.43 billion second quarter loss and said the communications equipment market may not recover for a year. In the third quarter of 2000, Nortel reported a net loss of $586 million or 20 cents per share, including hefty acquisition related costs and some one-time gains that left the company.
Separately, Nortel announced that chief financial officer Frank A. Dunn would succeed Roth as president and CEO on Nov. 1, with Roth then serving as vice-chairman of the board. Roth previously announced he was stepping down.
Board chairman Lynton ``Red'' Wilson said Dunn, who has been with Nortel for 25 years, emerged as the best candidate from an extensive search.
``He has played a leading role putting in place a business structure that ensures the company will be both sustainable and profitable in an industry that has gone through an abrupt and severe correction,'' Wilson said.
The Canadian company has been troubled for almost a year due to problems that have dominated the meltdown of the technology industry: misguided acquisitions at sky-high prices, overly aggressive expansion, risky lending practices with new customers, and a tendency toward exuberant forecasts.
On Tuesday, the company also announced Tuesday that it sold off a high-priced acquisition for a fraction of the cost. The Clarify customer relations management unit was sold to Amdocs Ltd. for $200 million, less than 10 percent of the $2.1 billion in stock Nortel paid for the company last year.
Nortel previously also announced it would retreat from a market the company entered only recently through acquisitions - the business of making DSL equipment for high-speed Web service - dumping some of the companies purchased for that purpose.
The company's stock has plunged 90 percent in less than a year, losing more than $300 billion in market value. Nortel shares traded at $5.29, down 18 cents, Tuesday on the New York Stock Exchange. In after-hours trading, the shares fell another 19 cents, or 3.5 percent, to $5.10
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