Canadian telecommunications equipment maker Nortel posted a third-quarter loss Monday, reversing a year-ago profit as the economic turmoil and a large goodwill impairment charge hurt results. The struggling company also announced a new round of job cuts, saying it plans to eliminate about 1,300 positions starting this year and ending in 2009.
Nortel's US stock shares fell 16 cents, or about 14 percent, to $1.01 in afternoon trading. The company's shares have lost 93 percent of their value since the beginning of the year, and last month they hit their lowest level since the early 1980s. For the three months that ended Sept. 30, Nortel lost $3.41 billion, or $6.85 per share, down from a profit of $27 million, or 5 cents per share, in the same period a year earlier. Revenue fell 14 percent to $2.32 billion.
"In September, we signaled our view that a slowdown in the market was taking place," said Mike Zafirovski, Nortel's chief executive, in a statement. Since then, he added, "we have seen worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally, further impacting the industry, Nortel and its customers."
In a report titled "I would like to refill my Prozac prescription," RBC Capital Markets analyst Mark Sue said Nortel's "marginalized industry position," combined with the bad economy, means the company's outlook may deteriorate before stabilizing. Sue rates Nortel "Underperform" with a target price of $1.50, down from an earlier $2.
Nortel said its priorities are cutting costs and preserving cash. Along with the job cuts, the company is generally freezing salaries and hiring, re-evaluating its real estate holdings and cutting discretionary spending. The company is also suspending its dividends on certain preferred shares, saying while it is in a position to pay them, "it would be prudent to maintain liquidity and preserve cash."
In addition, several executives, including Nortel's chief marketing officer, its chief technology officer and its global services president, will be leaving the company.
The job cuts disclosed Monday are in addition to 1,200 positions that are being eliminated as part of a previous restructuring plan. Nortel has about 31,200 employees. (info from The Associated Press)