Nortel forecasts $19.2 billion loss
  06/15/2001 12:31:16 PM MDT Albuquerque, Nm
  By Dustin D. Brand; Owner AMO

Last quarter it was 20,000, and now it's 10,000 more...Nortel is hurting...   NORTEL NETWORKS forecasted today, a quarterly net loss of around $19.2 billion and a net loss on operations of $1.5 billion based on revenue from continuing operations of $4.5 billion in the second quarter of 2001.

  Along with their grim forecast, Nortel said it would cut an additional 10,000 employees bringing it's total cut jobs announced this year to 30,000.

  John Roth, Nortel's CEO described the US Market as "disastrous" and said the market continues to be volite and unpredictable.

  Nortel isn't alone in their troubles, but a loss of $19.2 billion isn't something to squint at.

  "We're seeing it across the board. We're seeing it from Cisco and from Juniper last week," said Lawrence Orans, a senior analyst from research firm Gartner. Juniper slashed its earnings projection for the second quarter by two-thirds and announced it would cut 8 percent to 9 percent of its workforce. Cisco announced it would lay off 8,500 employees in April, along with issuing an earnings warning.

  Lucent Technologies, a Nortel rival is also in trouble. Lucent failed to find a way to merge with Alcatel and ceased talks with the French telecommunication equipment maker last month. Lucent's bond rating went to horrible levels earlier this week, and it must raise $2 billion by selling assets to maintain its credit faculty. It lost $3.7 billion last quarter and also announced plans to lose 10,000 workers earlier this year.

  Nortel's new plan is to focus on its high-growth areas, such as the optical backbone, core Internet networks, and wireless networks while losing it's low-end access business like DSL products.

  "You have to look at the access business and who's doing the main business in it is CLECs [competitive local exchange carriers]," said Jim Slaby, a senior industry analyst for Giga Information Group. "Clearly, if you're in the DSL business, your growth prospects have been greatly diminished in the last six to nine months."

  Many CLEC's have fallen recently most notably with the bankruptcy of NorthPoint Communications Group and Rhythms NetConnections, which is looking for a buyer. Carriers and large businesses buy Nortel products, and the shakeout has reduced the money available to many carriers to make purchases.

  While CLEC's may have been dropping out of competition, the larger Carriers are still around, and they need to upgrade their networks in the long haul, and this is a good outlook for Nortel.

  Nortel's forecast net loss includes an adjustment to the value of intangible assets of $12.3 billion in connection with the acquisitions of Alteon WebSystems, Xros, Qtera, and JDS Uniphase's 980-nanometer pump-laser chip business.

  "The result of this action adjusts the asset value on our books for these stock for stock acquisitions to reflect current market valuations, or in other words, it is the equivalent of having made these acquisitions at the current stock prices," Roth said in the statement.

  Related AMO Articles:
   Nortel to slash 10,000 jobs.