Nortel in crisis again, plans new restructuring
By Wojtek Dabrowski and Susan Taylor
TORONTO/OTTAWA (Reuters) - Nortel Networks Corp stumbled into crisis mode once again on Wednesday as it cut its revenue forecasts, prepared for a new wave of layoffs and said it was looking at selling one of its businesses.
Blaming the weak economy and cutbacks in spending by telecom companies that buy the equipment it makes, Nortel projected lower third-quarter sales than analysts had expected, sending its shares plummeting to their lowest level on record.
The announcement was reminiscent of the numerous restructurings and turnaround efforts the company undertook in the years following the bursting of the technology bubble at the start of the decade. Thousands of jobs have been shed since then, amid billions of dollars in losses.
It was also a surprise. As recently as August 1, chief executive Mike Zafirovski told Reuters there were no plans for a restructuring.
Although the change in tone was sudden, Duncan Stewart, president of Duncan Stewart Asset Management in Toronto, said Zafirovski couldn't be blamed for trying to run the company calmly for as long as possible.
"When you're the captain of the Titanic, it's a bad idea to run around screaming and weeping. It tends to alarm the passengers."
Since joining Toronto-based Nortel from Motorola in 2005, Zafirovski's promised turnaround has proved elusive. He has overhauled senior management, slashed jobs and made new technology bets by repositioning the company's $1.7 billion R&D budget.
Shares of the one-time market darling dropped 52 percent on Wednesday to close at C$2.76 on the Toronto Stock Exchange. Nortel, once the Toronto market's most heavily weighted stocks, now has a market cap of just C$1.4 billion. Continued...