Nortel's woes worsen

Nortel Networks Thursday said that growth will slow considerably this year due to a "more severe economic downturn" and that 10,000 employees will lose their jobs.

"We are now seeing a faster and more severe economic downturn in the United States which we now expect will result in a slower overall market growth of approximately 10% percent in 2001," Nortel president and CEO John Roth said in a statement.

Nortel told Wall Street analysts last month that the company expects to grow 30% this year and that 4,000 people would be let go due to business "streamlining and realignment." Now, an additional 6,000 heads will roll.

Today's news indicates that business is in far worse shape than companies can forecast. The extent of the economic downturn caught Nortel rival Cisco by surprise, resulting in a disappointing second quarter for the data networking giant.

Both Cisco and Nortel say visibility into future quarters is murky given the unpredictable economy.

"We are seeing longer than expected delays in spending by our U.S. customers as they continue to assess the impact of the economic and market conditions on their businesses," Roth stated. "We now expect the U.S. market slowdown to continue well into the fourth quarter of 2001."

Roth says that Nortel can continue to grow faster than the market but revised guidance for 2001 to 15% revenue growth and 10% earnings growth over 2000. For the first quarter of 2001, Nortel expects revenue of $6.3 billion and a loss of four cents per share from operations, Roth stated.

Analysts were expecting a profit of $0.16 per share for the first quarter. For the fourth quarter of 2000, Nortel posted revenue of $8.8 billion and earnings of $0.26 per share.

Six thousand of the 10,000 job cuts have already been "addressed," Nortel says.

Nortel continues to see "solid growth" in Europe, the Asia Pacific and Latin America regions, Roth stated.

Contact Edge Managing Editor Jim Duffy

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