Nortel to slash 1,300 jobs

Telecoms equipment maker Nortel Networks has flagged plans to cut 1,300 staff as it reported its biggest quarterly loss in seven years amid a worsening economy.

The company said it lost $3.4bn, or $6.85 per share, during the third quarter of 2008. This included a $3.2bn write-down on the value of part of its business as well as deferred tax assets.

Due to sharp losses in the third quarter, the company announced 1,300 job cuts as well as other cuts across the business.

Specifically, the company plans to freeze travel, end salary increases, and consolidate upper management, which includes losing at least four top executives. CTO John Roese and chief marketing officer Lauren Flaherty are among the executives losing their jobs. Since CEO Mike Zafirovski came onboard in 2005, Nortel has lost more than $4.5bn. And he has cut more 6,000 jobs, or about 18 per cent of Nortel's workforce.

The biggest problem for the telecom equipment maker is that much of the company's wireless sales are centred around an older technology called code division multiple access, or CDMA.

This technology is used by Sprint Nextel and Verizon Wireless in the US but it's not widely used outside the US. And as Sprint and Verizon move towards next-generation wireless technology, Nortel will have to compete with other suppliers for that new business.

And then there is the economy. Cisco Systems CEO John Chambers noted last week during his company's profits call that it had seen a sharp decline in sales from September to October. Nortel's Zafirovski also noted its customers had scaled back spending significantly toward the end of the quarter.

The company has already been trying to sell some of its businesses, including its Ethernet switch business. But as the economy worsens, analysts believe it will be even more difficult for Nortel to find a buyer who is willing to pay the price it had hoped it could get for the business unit.

Original article: Nortel earnings tank with worsening economy from CNET News.com