Nortel Networks on Tuesday cut its revenue forecast for the third quarter and said it will need to cut costs more than expected to break even.
Citing continued reductions in spending by carriers, especially in the US, the telecommunications and networking infrastructure vendor said it expects revenue in the third quarter of 2002 to be lower than second-quarter 2002 revenue by about 10 per cent. It previously had predicted revenue would be flat, from the second to the third quarter.
Nortel still expects to break even by the end of June 2003, according to the company statement released on Tuesday. However, in order to reach that goal, it plans to cut its quarterly cost structure to less than $US2.6 billion, down from a previously stated goal of approximately $3.2 billion. Those figures do not include costs related to acquisitions or special charges or gains.
To cut costs, the Ontario company plans to simplify the structure of its businesses and create a more direct connection between its operations and customer-facing teams, the statement said. The cost-cutting efforts will result in additional charges for workforce reductions and facilities closures. Details are still being worked out and will be revealed with the company's third-quarter results.
Nortel had previously announced plans to cut its workforce to 42,000 by the end of September, and now plans an additional 7,000 job cuts, said Nortel UK spokesman Ben Atherton. Nortel expects the restructuring activity to be substantially completed by the end of 2002, at which point the company will have a work force of about 35,000, according to the statement.
The statement was released after the close of regular trading. In after-hours trading on Tuesday evening, Nortel's stock on the New York Stock Exchange had dipped 5.43 per cent to $US1.22 on The Island ECN's trading network.
Additional reporting by Laura Rohde in London.