Nortel lowers Q3/2002 outlook again; aims for reverse stock split
30 September 2002 -- Due to "further deterioration in spending by services providers, generally in the US and for wireless networks in Asia", Nortel Networks Corp has lowered its Q3/2002 sales forecast again. About a month ago it forecast sales "up about 10%" on Q2's EUR2.77bn, but now it forecasts sales "down 15%" to USD2.3bn.
"Our top priority remains to return to profitability by the end of June of 2003," reiterates president and CEO Frank Dunn. "We will continue to monitor the market and the spending environment and take additional actions, as appropriate, to achieve our profitability goals."
At the end of August Nortel said it was cutting another 7,000 staff by end-Q4/2002 to 35,000. This is 17% fewer than the 42,000 it forecast at end-May after announcing 3,500 job cuts from its long-haul business by end-Q3/2002. Nortel had 95,500 staff in December 2000.
Nortel also continues to assess its overall liquidity needs and expects to enter into discussions with its banks about renegotiating its existing credit facilities, all of which are currently undrawn (USD1.175bn renegotiated earlier this year in response to its threat to draw down an existing USD1.75bn line rather than risk having no credit).
Nortel shares have been falling into the sub-dollar range, risking de-listing. To keep its place on the New York Stock Exchange, Nortel plans to present a proposal to its shareholders for a consolidation of its outstanding common shares (a reverse stock split) at its annual meeting planned for spring 2003. The consolidation ratio will be set by the board in early 2003 at a level which would be expected at that time to result in an initial post-consolidation common share price of USD10-20.