Nortel’s stock plunges on poor quarterly loss: Company plans to cut 2,100 jobs

Nortel Networks Corp. reported a loss of $844 million during the fourth quarter of 2007 and said it would fire 2,100 employees and move another 1,000 positions to lower cost locations. The losses compounded an already tumultuous year for the infrastructure vendor, as it sent the company’s stock down more than 13% to a 52-week low of $9.89. The stock’s 52-week high is $30.27.
The company lost $80 million the fourth quarter of 2006. The most recent losses come after a bullish previous quarter that sent stock surging 18% when the company reported $27 million in net income for the third quarter. The previous quarter is the only period the company hasn’t reported a loss in the last six quarters. It appeared the company might finally be on track for a turnaround, but that was not to be.
The continued financial strain on the company could push it to merge with Motorola Inc.’s infrastructure business, which both companies were reportedly discussing earlier this month.
Last February, Nortel lost its CFO, paid out $2.4 billion in cash and stock to settle shareholder lawsuits stemming from accounting errors, announced a 9% cut in its workforce, and delayed the filing of its annual financial report for 2006. Until that point, the company failed to accurately report financial reports for any year in the current decade, which led to various financial restatements with the Securities and Exchange Commission.
The next month four former executives were charged with repeatedly engaging in accounting fraud to bridge gaps between the network-equipment maker’s true performance, its internal targets and Wall Street expectations.
Today, Nortel said it will cut at least 70% of the 2,100 jobs it plans to eliminate by the end of the year. Last year, the Toronto-based company cut 2,900 jobs and moved 1,000 jobs to other locations. The new cuts will slash 6.5% of the current workforce.
“I recognize the impact this will have on affected employees,” President and CEO Mike Zafirovski said in a prepared statement. “Similar to last year’s restructuring, we will maximize normal attrition and will work to re-deploy affected employees to other opportunities within the company, whenever appropriate. I am pleased to report that in 2007 approximately 30% of the employees in affected positions were redeployed or transferred to other roles in the company.”