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Nortel reports Q3 loss; cuts to come

Mon, 11/10/2008 - 7:05am
Kristine Owramk, AP

NEW YORK (AP) – Canadian telecommunications equipment maker Nortel Networks Corp. posted a third-quarter loss Monday, reversing a year-ago profit as the economic turmoil and a large goodwill impairment charge weighed on results. The company also announced a new round of job cuts, saying it plans to eliminate about 1,300 positions starting this year and ending in 2009.

Toronto-based Nortel's U.S. shares fell 15 cents, or 13 percent, to $1.02 in morning trading. The company's shares have lost nearly 93 percent of their value since the beginning of the year, and last month they hit their lowest level the early 1980s.

For the three months that ended Sept. 30, Nortel lost $3.41 billion, or $6.85 per share, down from a profit of $27 million, or 5 cents per share, in the same period a year earlier.

The results include a noncash charge of $3.21 billion to write down goodwill and deferred tax assets. Excluding items, Nortel earned 30 cents per share in the latest quarter.

Revenue fell 14 percent to $2.32 billion.

Analysts polled by Thomson Reuters expected, on average, a loss of 30 cents per share and revenue of $2.31 billion for the third quarter.

"In September, we signaled our view that a slowdown in the market was taking place," said Mike Zafirovski, Nortel's chief executive, in a statement. Since then, he added, "we have seen worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally, further impacting the industry, Nortel and its customers."

Nortel said its priorities are cutting costs and preserving cash. Along with the job cuts, the company is generally freezing salaries and hiring, re-evaluating its real estate holdings and cutting discretionary spending.

In addition, several executives, including Nortel's chief marketing officer, its chief technology officer and its global services president, will be leaving the company.

Besides the previously announced restructuring plans, Nortel said it expects annual gross savings of about $400 million in 2009.

The job cuts are in addition to 1,200 positions that are being eliminated as part of a previous restructuring plan. The company has about 32,500 employees, according to CapitalIQ.

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