Nortel Details Layoff Plans
Nortel Networks Ltd. (NYSE/Toronto: NT) today fleshed out its staff reduction plans by announcing that 3,250 posts will be cut, down from the expected 3,500 (see Nortel Cuts 3,500 Jobs). North America is hit the hardest, accounting for more than 70 percent of the cuts (see Nortel Provides Status Update).
Giving approximate figures, Nortel says 1,400 jobs will be cut in the U.S., about 950 in Canada, 650 in the EMEA (Europe, Middle East, and Africa) region, and the remaining 250 job cuts are described as "other." This doesn't mean Asia/Pacific and Latin America though. A Nortel spokesman says the company is not breaking down the details of those jobs any further at present, and they could impact any geographic region.
Two thirds of those affected, about 2,170, will get their slips by the end of 2004, while the rest will be notified by June 30, 2005. The cuts mean that about 2 million square feet of "occupied space" will be freed up as remaining staff locations are consolidated, and the company is set to auction off its empty buildings by the end of 2005.
The vendor now believes the overall cost of these rationalizations will total $450 million, an increase from the previous estimate of $300 million to $400 million. The costs comprise $220 million for the job cuts and $230 million from the "real estate actions." About 35 percent of the total costs will be booked in 2004 and the rest in 2005.
The company says the costs are higher than previously thought because of "more extensive real estate actions which are expected to result in increased longer term cost savings."
Previously Nortel said it would save between $450 million and $500 million a year as a result of the cuts. Now it says it will save $500 million in 2005, and then more each year after that.
Nortel has also obtained a new defaults waiver from Export Development Canada (EDC) regarding the EDC's $750 million support facility. The waiver is until October 31, or earlier if Nortel files its outstanding financial reports with the Securities and Exchange Commission (SEC). Those reports are still expected to be filed before the end of October (see Nortel Restates Delay of Restatement ).
Nortel's share price is up 1 cent to $3.52 this morning, valuing the company at $14.7 billion.
— Ray Le Maistre, International News Editor, Light Reading