Nortel Sets More Job Cuts, Says Revenue to Trail Estimates

Nortel ( NT) warned Tuesday that third-quarter revenue would come in below its previous guidance and said it would cut 7,000 additional jobs. The network-equipment giant cited continued spending cutbacks among U.S. telecommunications carriers.

"We continue to see reductions in near-term spending plans by service providers especially in the United States," said Frank Dunn, president and chief executive. As a result, the company said it expects quarterly revenue from operations to drop 10% on a sequential basis, compared with its initial forecast of essentially flat revenue growth. The company posted revenue of about $2.77 billion in the second quarter.

Nortel also outlined additional restructuring efforts, saying it plans to pare its cost structure to below $2.6 billion from $3.2 billion by cutting jobs and shutting down some of its facilities.

"Despite the reduction in capital spending and revenues, we continue to expect ongoing sequential pro forma bottom line improvement in the third quarter and fourth quarters of 2002, reflecting the impact of our ongoing restructuring activities," Dunn said. The company lost a pro forma 9 cents a share in the second quarter.

The company expects the restructuring activities to be largely completed by the end of the fourth quarter of 2002, including a reduction in its workforce to 35,000, and projects a return to profitability by the end of June 2003.

Shares fell 10.6% to $1.10 in premarket trading on Instinet.

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