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
Confucius 12/4/2012 | 7:50:28 PM
re: Nortel: More Layoffs? Mary- how did you arrive at your 27% number for Alcatel's layoffs? What numbers did you use for before and after employee populations? I get just over 15%, by starting with 130,000 and ending up at 110,000.
Mary Jander 12/4/2012 | 7:50:23 PM
re: Nortel: More Layoffs? The Alcatel percentage is for their U.S. workforce only. Sorry -- I have clarified this in the story. International figures for Alcatel are undisclosed.
hitecheer 12/4/2012 | 7:50:21 PM
re: Nortel: More Layoffs? There is a big difference between your number and the number I got from the following article.

Refer to http://www.ottawabusinessjourn...

Could you clarify the difference?
Mary Jander 12/4/2012 | 7:50:19 PM
re: Nortel: More Layoffs? I stand by my sources.
HarveyMudd 12/4/2012 | 7:50:15 PM
re: Nortel: More Layoffs? Nortel has been laying off a lot of low level employees. But Nortel has notlaid off too many people at the upper management level. In fact, there is wide spread feeling that the incompetent management that brought down the company is still in-charge.

It is sad that Nortel has not evaluated it high level management and their suitability for the job.
Metadata123 12/4/2012 | 7:50:12 PM
re: Nortel: More Layoffs? The storm that hit Nortel has still not cleaned out the bureaucratic Aegean stables that Roth had assiduously created over the last several years. Rank incompetency in the management ranks is still being tolerated to unprecedented levels. Individuals like G. Donahee, V. Yohe, S. Schilling, K. Srikant, and C. Childers still hang on to their jobs while much of Nortel's talent got decimated. Roth had initiated a cleanup when he let A. Khatod and his minions out the door. But the scandalous nature of the self-preservation tactics that these individuals have resorted to, is a disgrace to any public company.

Overseeing this assault on shareholder value is a board, which has kept Roth in his job when booting him out two years ago was the right thing to do. Roth has ruined CanadaG«÷s reputation in the world and bankrupted countless widows and orphans who had counted on CanadaG«÷s technology giant to take care of them during their waning years.

Nortel, at the rate it is going, will be far less valuable than Lucent in the not too distant future. Already Lucent has a much higher market cap. And all of this has ROTH written all over it. Let us hope he fires himself and does all of us a favor. He can take his racecars and his millions and leave the company. Waiting for another 6 months for a new CEO would be a mistake. Roth has destroyed morale in Nortel. DonG«÷t just blame the market. IT is all ROTH.
dodo 12/4/2012 | 7:48:34 PM
re: Nortel: More Layoffs? Looks like 12500 more layoffs will be announced this Friday ( PC: another realignment in the works)

Another message board is buzzing with this rumour, including messages from current employees who will be affected.Seems that they can't implement a salary cut policy to save jobs because of some laws and rules in Europe
hitecheer 12/4/2012 | 7:47:18 PM
re: Nortel: More Layoffs? Well, your sources suck!
pagla 12/4/2012 | 7:33:59 PM
re: Nortel: More Layoffs? Rumor has it Zettacom laid off 15% of the workforce yesterday. Can someone confirm?
astf1 12/4/2012 | 7:33:58 PM
re: Nortel: More Layoffs? It is true. I heard that the CEO and managers pulled the selected ones into a room and made the
announcement. The selected ones were asked to leave the door
in 1 hour. The CEO put up quite a show and cried (without tears). He left the room afterwards
and his follower finished the show.
A sad day.
Sign In