Wednesday said it is experiencing "significant pressure" as carrier customers cut back capital expenditures further than previously expected and other customers defer new information technology and optical investments.
Nortel also said it intends to explore a divestiture of its metro Ethernet networks business.
The communications-equipment maker said it's seeing additional pressure on revenue from foreign exchange and certain product delivery delays into the fourth quarter from the third quarter.
Nortel said it expects third-quarter revenue of about $2.3 billion, with gross margins of 39%.
The company also revised its full-year 2008 outlook and said it expects revenue to decline between 2% to 4% from 2007, and gross margin of about 42% of revenue.
The company said planning is under way for further restructuring and other cost-reduction initiatives.