Nortel details plans to lay off 3,250 employees

Nortel Networks will lay off approximately 1,400 employees in the US and about 950 in Canada, with those employees to be notified by the end of June 2005, the network equipment vendor said in a regulatory filing Thursday that fleshed out earlier announcements of the coming layoffs.

The Brampton, Ontario, company also will eliminate about 650 positions in the Europe, Middle East and Africa region and 250 elsewhere in the world. The layoffs aren't as deep as the company forecast in August when it announced plans to cut 3,500 employees, or 10 percent of its workforce. Nortel expects to notify about two-thirds of the employees by the end of this year and the rest by June 30, it said in a statement on the filing.

The disclosures came in a regular biweekly filing to the Ontario Securities Commission, which is investigating Nortel's restatement of its financial results for periods going back as far as 2001. The company is also under investigation by the U.S. Securities and Exchange Commission regarding the restatements, which took place against the backdrop of the telecommunication industry's downturn. Nortel fired its president and chief executive officer, Frank Dunn, and other executives in April. Two weeks ago it disclosed that it expects its 2004 revenue growth to lag the industry.

In addition to the layoffs, Nortel's "work plan" for reducing costs includes a voluntary retirement program, real estate cutbacks and other moves. The real estate changes will involve cutting back on space at many facilities rather than leaving any facilities entirely, according to spokeswoman Tina Warren.

The work plan is expected to deliver cost savings of about US$500 million in 2005 and greater savings in subsequent years, according to the filing. But it will also bring charges to Nortel's income statements of about US$220 million for layoffs and US$230 million for real estate. About 35 percent of those charges should be incurred in 2004 and the remainder in 2005, according to the company statement.

For competitive reasons, Nortel will not break down the layoffs by department, Warren said. The cuts are focused to protect sales and customer-facing jobs and to keep up product development at the company, according to the statement. When the cuts were announced in August, new President and Chief Executive Officer Bill Owens said they would mainly affect middle management.

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Stephen Lawson

IDG News Service
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