Nortel to slash 10 per cent of workforce

Networking company Nortel Networks is to lay off nearly 10 per cent of its workforce and replace another three per cent of staff with workers in low-cost countries.

The cuts, which will affect 3,900 individuals, were described by Nortel chief executive Mike Zafirovski as "tough but necessary". They are part of Zafirovski's wider "business transformation plan", with which he aims to cut $1.5bn in costs by 2008. Along with the staff cuts, Nortel will reduce its R&D spend from 17 per cent to 15 per cent of revenues.

Following the cuts, which are scheduled to take place through 2007 and 2008, Nortel will have just one-third of the number of staff it had after the dot-com boom in 2000. Revenues had already shrunk by two-thirds between 2000 and 2005.

Nortel is facing increased pressure from competitors, some of which are merging (such as Alcatel and Lucent) and some of which are new rivals entering its markets. Most of the latter are low-cost suppliers from several Asian countries, including China.

Alcatel-Lucent said last week it would revise upwards its previously announced job cuts from 9,000 to 12,500.

Richard Thurston writes for ZDNet UK