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The downsizing agonies are continuing at Nortel Networks as the networking company reported a sharp increase in net losses of $844 million for its fourth quarter and another 2,100 in job cuts.
The company has been relentlessly downsizing in the wake of an accounting scandal; its workforce numbered nearly 95,000 in 2000 and had slipped to 32,500 by the end of the last quarter. In addition to the 2,100 jobs slated to be eliminated now, Nortel said it will shift another 1,000 employees to "higher growth and lower cost geographies" like China and India.
It's small consolation, but the company has plenty of company as other networking firms including Motorola, Ericsson, and Alcatel Lucent have also been downsizing as carriers have cut orders in anticipation of delivering a new generation of wireless infrastructures.
Nortel's revenue dropped to $3.2 billion in the quarter -- a drop of 3.7%. A whopping $1.04 billion tax-related charged heavily impacted the quarter's results.
Nortel president and CEO Mike Zafirovski said there were some bright spots in the quarter, namely improvements in growing technologies like VoIP, WiMax, and CDMA infrastructures.
"In a period of significant change for our industry, we have now reported six consecutive quarters of strong year over year improvement in operating margin," Zafirovski said in a statement. "Although our fourth quarter operating margin was below target, it is the highest in 12 quarters."
Still, the work force reduction was necessary as the industry continues to suffer from too much competition and constrained revenue streams.
"It is a challenging environment," Zafirovski told analysts during a conference call. "As a result of it, we came at the lower end of our previous revenue guidance."
The Canadian firm's stock plunged 15% on the news Wednesday.