SAN FRANCISCO – Battered telecommunications equipment giant Nortel Networks Corp. (NT) said it would cut another 7,000 jobs and lowered its third-quarter revenue forecast on Tuesday, blaming lower spending by U.S. phone companies.
Nortel said it planned to cut its work force to 35,000 people, about 17 percent smaller than the 42,000 workforce the company had hoped to have a few months ago. The company had 95,500 employees in December 2000.
"They're losing market share on top of being in a bad market," said Chet White, an analyst with Wells Fargo Securities. "Those combined factors just put them into a difficult position."
The Brampton, Ontario-based firm has seen demand plunge for its products that used in telephone, wireless and Internet networks. Phone carriers suffering from overexpansion and crippling debt loads slashed equipment purchases.
Saying its top priority is to return to profitability by the end of June 2003, Nortel said it would cut costs to allow it to break even on less than $2.6 billion in quarterly revenue. The company's previously stated break-even cost structure was $3.2 billion.
It now expects revenues to be about 10 percent lower on weaker-than-expected demand, the firm said. It had previously said expected revenues from operations in the third quarter to be about the same as in the second quarter,
But it said it expects to see improvements in its pro-forma bottom line in the third and fourth quarters of this year.
Nortel reported a second-quarter loss before charges of 9 cents per share on sales of $2.77 billion.
Analysts, on average, expected Nortel to post a loss excluding charges of 6 cents per share in the third quarter and a loss before charges of 3 cents per share in the fourth quarter, according to tracking service Thomson First Call.
Nortel shares closed on Tuesday at $1.23, down 6 cents, or 4.7 percent, on the New York Stock Exchange. The shares, which traded as high as $84.94 in July 2000, have rallied since hitting an all-time low of 76 cents on July 26 after a wireless customer scaled back plans for a network expansion.