Nortel cutting 2,100 jobs

Nortel said it will cut 2,100 jobs and shift 1,000 more to "higher growth and lower cost geographies" after fourth quarter results fell short of Wall Street expectations.
Revenue in the fourth quarter of US$3.2 billion, was down 4% year over year. Full year 2007 revenue was $10.95 billion, also down 4%.

Analysts expected revenue to come in at $3.28 billion for the quarter. Nortel blamed lower than expected carrier spending in North America for the revenue shortfall in the fourth quarter.

Excluding the impact of the divestiture of its UMTS Access business, revenue would have increased 2% in the quarter and the year, Nortel says.

Nortel also posted a net loss in the fourth quarter of $844 million for the quarter, and $957 million for the year, because of a $1.1 billion non-cash charge the company took due to changes in Nortel's Canadian tax profile. This compares to a net loss of $80 million in the fourth quarter of 2006 and a profit of $28 million for the year 2006.

Analysts expected a profit of $219 million for the quarter and about $243 million for the year.

Despite the lowered results, Nortel increased gross and operating margins in the quarter, though fourth quarter operating margin fell short of the company's internal targets.

Revenue form Nortel's Enterprise Solutions (ES) group was $762 million in the fourth quarter, a decrease of 3% from the year-ago quarter but up 14% sequentially. ES revenues were negatively impacted by lower revenues from the LG-Nortel joint venture, the company said.
The workforce reduction, meanwhile, is expected to result in annual gross savings of approximately $300 million, Nortel says. Seventy percent of the reduction will take place this year.

Nortel will also sell certain real estate assets. At this time last year, Nortel cut 2,900 positions.
The restructuring will result in total charges to earnings of approximately $275 million and cash outlays of approximately $250 million, however the actual costs could be lower with the redeployment of resources, the company says. Nortel expects 70% of the charges to be incurred in 2008 and the remainder in 2009.

For 2008, Nortel expects revenue to grow in the low single digits.

Earlier this week, fellow telecom equipment vendor Siemens aired plans to cut 3,800 jobs at its Enterprise Communications subsidiary, including 2,000 jobs in Germany.