What might surprise many, and anger people too, is that the vendor is lining up bonus payments for some of its senior executives and staff in North America.
Only a week after announcing 3,200 staff will lose their jobs in 2009 without any automatic financial compensation (they will need to chase any payments through the bankruptcy claims process) and with a cash balance of $2.4 billion, Nortel has applied to the District of Delaware Bankruptcy Court for approval to make retention bonus payments to "key employees." (A separate application will be made for staff based in Europe.) (See Nortel Cuts 3,200 Jobs.)
In its application to the court, Nortel noted: "In order to thrive in such a technically complex and highly competitive industry, it is necessary for Nortel to retain the highly-skilled and well-trained members of its workforce. Notwithstanding the current economic conditions, Nortel's key employees are highly sought after by Nortel's competitors. If these key employees resign, the Debtors' [Nortel's] operations will be impaired significantly and the Debtors' plans to maximize the value of the Debtors' estate will be hampered severely."
Brutal as it may seem, Nortel wants to reward key staff to stop them jumping ship. Even in this economy...
Nortel uses a number of criteria to identify the employees it wants to include in the bonus scheme, including their direct value to the company, the difficulty of replacing them, and the rating they received in their most recent employee reviews.
One part of the proposed scheme, the Key Executive Incentive Plan, aims to reward 92 senior executives, comprising eight members of the Senior Leadership Team and 82 members of the Executive Leadership Team, plus two other employees. If approved, their bonuses will range from 20 percent to 183 percent of their salaries and will cost up to $23 million in aggregate.
CEO Mike Zafirovski is NOT one of the executives included in the proposed scheme.
Another part of the scheme aims to reward 880 key staff with a bonus of between 13 percent and 44 percent of their salary. That scheme would cost $22 million if approved.
A Nortel spokesman noted that the vendor has restarted its Annual Incentive Plan for all staff, having canceled it for 2008, and will make payments on a quarterly basis. The company doesn't have any details about the levels of bonuses it's possible for employees to be awarded or what the aggregate payments for 2009 might be under that scheme.
Meanwhile, the company has just announced an annual loss for 2008 of $5.8 billion.
The headline story for the fourth quarter is that, compared with a year earlier, revenues were down in each business segment, and down 15 percent overall to $2.7 billion. Perhaps worryingly for Nortel, its Enterprise Solutions division suffered the biggest decline in revenues, down 30 percent. (See table below.)
Table 1: Nortel's Q4 2008 Revenues By Division
|Revenues in millions||Q4 2008||Year on Year change||Quarter on Quarter change|
|Metro Ethernet Networks||$371||-14%||17%|
Non-cash charges of $2.19 billion (a goodwill writedown and a reduction in deferred tax assets) sent Nortel's fourth-quarter net income deep into the red at nearly $2.14 billion. For the full year the vendor reported a net loss of $5.8 billion (including non-cash charges of $5.4 billion) from revenues of $10.4 billion.
Gross margins for the fourth quarter and full year were 40.4 percent and 41.1 percent respectively.
Orders were $2.64 billion during the fourth quarter, down from $3.24 billion a year earlier. The company isn't providing any guidance for the coming quarters.
–Ray Le Maistre, International News Editor, Light Reading