Nortel Takes Big Charge, to Slash 2,100 Jobs
A big one-time charge was to blame Wednesday as Nortel Networks reported a steeper fourth-quarter loss, and said it planned to slash 2,100 jobs and relocate another 1,000 as the company pushes ahead with its make-over.
North America's biggest maker of telephone equipment said it lost $844 million, or $1.70 a share during the quarter, compared with a loss of $80 million, or 19 cents a share for the same time in 2006.
The 2007 results included a one-time non-cash tax charge of about $1.1 billion related to changes in the company's Canadian tax profile.
Nortel also said it planned to slash 2,100 jobs and shift another 1,000 jobs to "higher growth and lower cost geographies" as part of the ongoing remake of the company.
Nortel said the cuts will result in annual gross savings of approximately $300 million, with total charges to earnings of approximately $275 million. About 70 percent of the charges are expected to incur in 2008 and the remainder in 2009.
Nortel said revenue fell 3.7 percent to $3.2 billion, from $3.32 billion a year earlier. That was in line with analysts' expectations, according to Reuters Estimates.
The company said it expected 2008 revenue to grow by "low single digits" compared with 2007.
Earlier this month, a newspaper report said Nortel and mobile phone maker Motorola were in talks to combine their wireless infrastructure units, but no deal has materialized thus far.
Nortel was once an investor darling that could boast of a triple-digit share price. But since the tech bubble burst at the start of this decade, the Toronto-based company has had to contend with massive layoffs and cost-cutting amid a slump in demand and tough competition around the globe.
It has also seen its rivals consolidate while it deals with its internal problems, including an accounting scandal.
On Wednesday, Nortel Chief Executive Mike Zafirovski called 2007 a "pivotal year in our transformation" in which "significant progress has been made while upholding the highest standards of ethics and integrity."
The company has switched its management team several times while it continues to try and right its course, but investors remain skeptical -- the stock is down 69 percent in the last 12 months.