Nortel: More Layoffs?

Nortel hasn't hit bottom, sources say. There may be more layoffs on the way

September 18, 2001

3 Min Read
Nortel: More Layoffs?

Nortel Networks Corp. (NYSE/Toronto: NT) may be preparing yet another round of layoffs, according to sources close to the company.

Despite assertions by CEO John Roth this past July that Nortel's reached its limit in layoffs (see Has Nortel Hit Bottom?), industry sources -- the same sources that predicted that last round in advance of the news -- now say that Nortel is preparing to lay off another 5,000 employees, which would come in addition to the 30,000 employees that have already been given pink slips.

"There was a major shuffling last week, and the winds indicate something big is coming," says one VP at an Ottawa company, who asked for anonymity. "The speculation is that some older and smaller programs in Nortel's portfolio are going to be cancelled soon."

Nortel may not find it difficult to shed even more staff. Sources within the company acknowledge that morale is at an all-time low, as employees struggle to weather the storm that has cut so many colleagues from the ranks. Some outsiders say Nortel is bleeding staff, and that some who stay are simply waiting for "word and package" before jumping ship.

Nortel says it won't comment on rumor and speculation.

In a talk to a Canadian business group in Alberta a week and a half ago, John Roth said recovery is still in the distance. "We're taking the point of view that we've got at least 12 months of drought ahead of us," he is quoted as saying by the Ottawa Citizen newspaper. "Nobody knows when the spending will resume. It may even drift a little lower."

All of this gloom and doom has also given rise to speculation that Nortel may be courting a merger with, say, Cisco Systems Inc. (Nasdaq: CSCO). But Roth denied this possibility during his Alberta visit. "We are not open to combining companies," he is quoted as saying during the Calgary presentation, in which he shared the stage with Cisco senior VP of telecom sales William Nuti.

Despite the rumors, analysts point to many recent positive announcements from Nortel, including a successful debt offering in August (see Nortel Feathers Its Nest); an ATM contract with Cingular Wireless (see Nortel Building Wireless Backbone); a 10-Gbit/s optical ring underway for Brazil's Embratel (see Nortel Runs Ring Around Brazil); and the sale of bits of company's access business to Zhone Technologies Inc. (see Cogent Debuts in LA).

The figures being bandied about also need to be kept in perspective. Nortel has laid off about 25 percent of its workforce as of January 2001. If the company were to lay off another 5,000, the total would be about 29 percent of that figure.

In comparison, Lucent Technologies Inc. (NYSE: LU) has laid off roughly 27 percent of its total staff. Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has laid off 27 percent of its U.S. workforce. (Its international figures aren't disclosed.) ADC Telecommunications Inc. (Nasdaq: ADCT) has let go 40 percent of its January quota. And component maker JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) has lost 60 percent (see Grim Reaping: A Downturn Tally).

— Mary Jander, Senior Editor, Light Reading

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