Nortel Warns Again

Nortel (NT) forecast a substantial second-quarter revenue shortfall, disclosed plans to cut an additional 10,000 jobs and said it will record a charge of $12.3 billion for the writedown of intangible assets, primarily related to goodwill associated with acquisitions.

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The telecom equipment maker expects to post revenue of $4.5 billion for the second quarter, while analysts polled by Thomson Financial/First Call expect a top line of $6.22 billion.

Additionally, Nortel projected a loss from operations of about $1.5 billion, or 48 cents a share. Analysts expect the company to lose 6 cents for the quarter. Including costs associated with a restructuring plan, Nortel expects a net loss of about $19.2 billion in the second quarter.

"Led by the United States, the global telecom industry is undergoing a significant adjustment," John Roth, the president and chief executive of Nortel, said in a press release. "After several years of capital expansion exceeding the pace of business performance, the capital markets have significantly reduced the flow of funds to service providers. In response, service providers have made driving return on invested capital their primary focus. Consequently, new capital expenditures are being curtailed as service providers look to drive further efficiencies from the investments they have already made. As a result, we are seeing a very significant reduction in equipment purchases in the second quarter of 2001 compared to the first quarter of 2001 and the second quarter of 2000."

After the market closed yesterday, JDS Uniphase (JDSU), a maker of optical components for telecommunications networks, lowered its own financial targets.

In April, Nortel set plans to cut about 20,000 jobs and close some facilities. The company expects to complete the latest workforce reduction by the end of September and record charges for the move in the third quarter.

"While there can be no certainty as to the duration or severity of this industry adjustment, meaningful growth in spending is not expected to occur before the second half of 2002 after economic concerns subside and rationalization of the telecom industry is well underway," the company said. "Our visibility continues to be impeded for the near term as these market trends persist." As a result, Nortel said it wouldn't provide guidance for the third quarter or full year.

Separately, Nortel signed agreements giving the company access to an additional $2 billion through unsecured credit facilities. The company will release its second-quarter results on July 19.

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