Turnaround Restructuring
Update: Nortel reports $2.1B loss as revenue falls by 15%
Auteur : Mikael Ricknäs
Du : 03/03/2009
Company also names CFO Binning to oversee Chapter 11 restructuring
November 10, 2008 (IDG News Service) Nortel Networks Corp. today reported a third-quarter net loss of $3.4 billion and announced plans to cut 1,300 more jobs and eliminate its centralized development, sales, marketing and support organizations.
Those functions will be folded into three vertically integrated business units, one focused on enterprise customers and two on network service providers, Nortel said as part of its Q3 financial report. One of the latter units will serve telecommunications carriers, while the other — which may be sold off — will develop products for metro Ethernet networks.
The new layoffs, which follow an earlier cutback of 2,100 jobs that was announced last February, had been expected in the wake of Nortel's mid-September announcement that its third-quarter revenue would be lower than expected.
Revenue for the quarter totaled $2.32 billion, a 14% decrease from the same period last year, when Nortel reported a net profit of $27 million. Nortel blamed the drop-off in business on the challenging economic environment, as well as competitive pressures and reduced spending by key carrier customers, especially in North America.
And the bad news didn't end with the Q3 results. The Brampton, Ontario-based company also lowered its business forecast for the full year, saying it now expects revenue to decline by about 4% compared with the 2007 level. Nortel previously had said that it expected a decline of between 2% and 4%.
The networking vendor cited the deteriorating economic conditions for the more pessimistic forecast and said that unfavorable currency exchange rates will also take a toll on revenue. Because of the dynamic nature of the economic situation, the actual results for the year as a whole could be even lower than the diminished projection, Nortel added.
In addition to the layoffs and internal restructuring, Nortel is putting in place several other measures aimed at lowering costs, including a freeze on most salaries and the extension of an existing hiring freeze through next year. The company said it also will make deeper cuts in discretionary spending, including suspending most of its internal travel and all external travel that doesn't involve meetings with customers. And Nortel officials plan to review all of the vendor's real estate holdings."We are acting quickly to become a simpler and leaner company," Nortel President and CEO Mike Zafirovski said in a statement. He added that the changes are designed to make Nortel more flexible and "more customer-centric."
The newly decentralized business units will begin operating on Jan. 1, although Nortel said that customer service won't be shifted to them until April, in an attempt to ensure that there is no impact on users. Four senior executives — Chief Technology Officer John Roese, plus the company's chief marketing officer and the heads of its sales and services operations — will leave at the end of this year as part of the decentralization move, Nortel said.The work done by those executives was "nothing short of exceptional," Zafirovski said. "But we made the necessary decision to consolidate our executive layer and reshape Nortel."
The company also said that its chief legal officer and chief compliance officer will both retire over the next few months, with their duties being absorbed by other executives.
The third-quarter results included a $2.07 billion charge for deferred taxes and a $1.14 billion goodwill write-off related to Nortel's enterprise and metro Ethernet networks businesses. The vendor said that it had no update on the possible divestiture of the metro Ethernet unit.
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November 10, 2008 (IDG News Service) Nortel Networks Corp. today reported a third-quarter net loss of $3.4 billion and announced plans to cut 1,300 more jobs and eliminate its centralized development, sales, marketing and support organizations.
Those functions will be folded into three vertically integrated business units, one focused on enterprise customers and two on network service providers, Nortel said as part of its Q3 financial report. One of the latter units will serve telecommunications carriers, while the other — which may be sold off — will develop products for metro Ethernet networks.
The new layoffs, which follow an earlier cutback of 2,100 jobs that was announced last February, had been expected in the wake of Nortel's mid-September announcement that its third-quarter revenue would be lower than expected.
Revenue for the quarter totaled $2.32 billion, a 14% decrease from the same period last year, when Nortel reported a net profit of $27 million. Nortel blamed the drop-off in business on the challenging economic environment, as well as competitive pressures and reduced spending by key carrier customers, especially in North America.
And the bad news didn't end with the Q3 results. The Brampton, Ontario-based company also lowered its business forecast for the full year, saying it now expects revenue to decline by about 4% compared with the 2007 level. Nortel previously had said that it expected a decline of between 2% and 4%.
The networking vendor cited the deteriorating economic conditions for the more pessimistic forecast and said that unfavorable currency exchange rates will also take a toll on revenue. Because of the dynamic nature of the economic situation, the actual results for the year as a whole could be even lower than the diminished projection, Nortel added.
In addition to the layoffs and internal restructuring, Nortel is putting in place several other measures aimed at lowering costs, including a freeze on most salaries and the extension of an existing hiring freeze through next year. The company said it also will make deeper cuts in discretionary spending, including suspending most of its internal travel and all external travel that doesn't involve meetings with customers. And Nortel officials plan to review all of the vendor's real estate holdings."We are acting quickly to become a simpler and leaner company," Nortel President and CEO Mike Zafirovski said in a statement. He added that the changes are designed to make Nortel more flexible and "more customer-centric."
The newly decentralized business units will begin operating on Jan. 1, although Nortel said that customer service won't be shifted to them until April, in an attempt to ensure that there is no impact on users. Four senior executives — Chief Technology Officer John Roese, plus the company's chief marketing officer and the heads of its sales and services operations — will leave at the end of this year as part of the decentralization move, Nortel said.The work done by those executives was "nothing short of exceptional," Zafirovski said. "But we made the necessary decision to consolidate our executive layer and reshape Nortel."
The company also said that its chief legal officer and chief compliance officer will both retire over the next few months, with their duties being absorbed by other executives.
The third-quarter results included a $2.07 billion charge for deferred taxes and a $1.14 billion goodwill write-off related to Nortel's enterprise and metro Ethernet networks businesses. The vendor said that it had no update on the possible divestiture of the metro Ethernet unit.
Related Articles
[28/05/2009] PEI Asia, July/August 2009, Mapping the turnaround market
[14/03/2007] March 28-31 Dallas TMA Conference Updates Corporate Renewal Professionals on Best Practices
[01/03/2006] KPMG adds turnaround executives to its restructuring practice
[01/02/2006] Chief Restructuring Officers: The Lender’s Secret Weapon
[01/11/2005] Northern California Turnaround Pioneer Receives ACTP Lifetime Achievement Award
[01/11/2005] Tom Ridge and Cokie Roberts Speak at Turnaround Management Association's Chicago Convention, Oct. 20-21
[01/11/2005] Turnaround Professionals to Take on Gulf Coast Business Renewal Project