Shares of Nortel Networks plummeted during Friday's trading as investors scrambled to unload the company's stock after the previous day's earnings warning.
Nortel revised its expectations Thursday for first-quarter earnings, citing a "severe" US economic downturn. The networking equipment vendor also said it would lay off approximately 10,000 employees in 2001, more than it had previously indicated.
In the wake of this news, Nortel's shares shed 33 per cent of their value by Friday's close on the New York Stock Exchange. Nortel ended at $20.00 per share, down $9.75 on the day. Nortel exceeded its average daily trading volume by 6 times, with more than 121 million shares swapping hands.
Tech shares across the board also fell, sparked in part by Nortel's decline. The tech-heavy Nasdaq sloughed 5 per cent of its value Friday to close at 2425.38.
"While we previously noted that economic uncertainties and capital constraints were impacting our outlook, we are now seeing a faster and more severe economic downturn in the US. We now expect this will result in a slower overall market growth of approximately 10 per cent in 2001," John Roth, president and chief executive officer of Nortel, said in a statement following Nortel's profit warning Thursday.
For the first quarter of 2001, ending March 31, Nortel said it now expects to report revenue of $US6.3 billion and a loss per share from operations of $0.04. That's a substantial drop from the $8.1 billion revenue and $0.16 per share earnings that Nortel said it expected to report just last month.
At that time, officials also said Nortel planned to cut 4000 jobs in low-growth areas.
Nortel still expects its revenue and earnings per share from operations in 2001 as a whole to increase from a year earlier by 15 per cent and 10 per cent, respectively, the company said.