Nortel Networks Corp. today warned that it now expects to report a first-quarter loss because of delays in spending by U.S. customers, and the networking equipment vendor said about 10,000 employees will be cut from its workforce this year as a result of the lowered business outlook.

The Brampton, Ontario-based company also sharply reduced the revenue and earnings growth that it's projecting for this year as a whole. Nortel previously said both revenue and earnings were expected to increase 30% on an annual basis, but it's now forecasting growth of 15% and 10%, respectively. This quarter's loss from operations is likely to be roughly 4 cents per share on revenue of $6.3 billion, the company said.

The warning came less than a month after Nortel reaffirmed its earlier projections while reporting its fourth-quarter financial results. And the workforce reduction plan follows a statement issued last month in which the company said it planned to cut 4,000 employees but to hire an equal number of people in other areas (see story).

But John Roth, Nortel's president and CEO, said in a statement today that the company is "seeing a faster and more severe economic downturn" in the U.S. than it had expected. That's resulting in "longer-than-expected delays in spending by our U.S. customers as they continue to assess the impact of the economic ... conditions on their businesses," Roth added. And the slowdown will likely continue "well into the fourth quarter," he said.

Because of the uncertainties, Nortel said it will move immediately to streamline internal operations. The planned cuts would reduce the company's workforce by 11% from 94,500 employees at the start of January. About 6,000 workers have already been let go, Nortel said, adding that it hopes to minimize the number of layoffs through attrition and retirement.

» posted by ITworld staff

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