Nortel to pare 2,900 jobs

Nortel this week said it will cut 2,900 jobs and shift another 1,000 to lower-cost locations in an effort to further reduce expenses and align operations with anticipated growth.

Seventy percent of the job reductions will take place this year, with the remainder occurring in 2008, the company said. Most of the job location shifting will occur next year, with 40% being completed this year.

The job reductions will not affect sales positions in targeted growth areas, Nortel said. Plans to increase the company's investment in sales and other customer-facing functions remain unchanged by today's announcement.

Nortel is looking to significantly reduce its general and administrative expenses. Investment in R&D has been trimmed to 15% of total revenues. Nortel is also looking to reduce its global real-estate portfolio by more than 500,000 square feet of space in 2007.

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Nortel this week said it will cut 2,900 jobs and shift another 1,000 to lower-cost locations in an effort to further reduce expenses and align operations with anticipated growth.

Seventy percent of the job reductions will take place this year, with the remainder occurring in 2008, the company said. Most of the job location shifting will occur next year, with 40% being completed this year.

The job reductions will not affect sales positions in targeted growth areas, Nortel said. Plans to increase the company's investment in sales and other customer-facing functions remain unchanged by today's announcement.

Nortel is looking to significantly reduce its general and administrative expenses. Investment in R&D has been trimmed to 15% of total revenues. Nortel is also looking to reduce its global real-estate portfolio by more than 500,000 square feet of space in 2007.

The job and cost reductions are expected to deliver approximately $400 million in annual savings, half of which to be realized in 2007. The cost of these actions could approach $390 million, about $300 million associated with workforce reductions and the remainder to the real estate actions.

Nortel plans to record 75% of these costs as charges to the income statement in 2007 with most of the remainder to be recorded as charges in 2008. The expected cash cost of the plan could be as high as $370 million, the company said, and is expected to be incurred within the same timeframe.

Nortel also released estimated preliminary results for fourth quarter, 2006. Revenues are expected to be approximately $3.26 billion, up 8.8% from $3 billion for the same period in 2005.

"I am pleased with the progress made in 2006, and with the strong performance Nortel delivered towards the end of the year," Nortel CEO Mike Zafirovski said in a statement. "Nortel is committed to our short- and long-term plans, and we are beginning to see the desired results."

The company expects to report its fourth quarter and full year 2006 results later this month in conjunction with the filing of the annual report on Form 10-K.

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