Canadian telecom giant Nortel Networks on Friday announced it will have a record loss of US$19.2 billion in the second quarter and must cut an additional 10,000 jobs, stinging tech-wary investors and shaking markets worldwide.
The Brampton, Ontario-based firm said it expects a second-quarter loss of US$19.2 billion from operations and the impact of its ongoing restructuring. Market watchers are calling it corporate Canada's largest quarterly loss.
Excluding the restructuring charges, Nortel forecasts a net loss of US$1.5 billion -- or US$0.48 per share -- and revenues of US$4.5 billion in the quarter.
The new job cuts come on top of the 20,000 announced earlier this year and will reduce its worldwide workforce to some 64,000 people.
"Led by the United States, the global telecom industry is undergoing a significant adjustment," said Nortel president and CEO John Roth.
Approximately 65 percent of Nortel's business comes from the United States.
"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," Roth said in a statement issued before North American markets opened.
The news sent Nortel shares on the New York Stock Exchange down sharply, dropping about 15 percent to US$8.92 in the opening minutes of trading Friday, but the stock managed to regain some ground and closed at 9.86, or a seven percent drop.
In Toronto, Nortel shares, which had been trading near two-year lows on the Toronto Stock Exchange, also plunged early on, but traders reversed course and starting buying the stock in the late afternoon.
Nortel closed at C$15.17 dollars (US$10.01), falling about 6.5 percent.
The TSE, where Nortel had had a weighting of 21 percent in January that has dropped to seven percent this month, got hammered by the news, slipping 103.97 -- or 1.31 percent -- to 7,816.08.
Tech stocks in European markets also fell after the Nortel news, notably in London.
The Nortel announcement comes one day after JDS Uniphase cuts its fourth quarter estimates by US$100 million. Nortel is a major customer of JDS.
Roth told investors in a conference call the company would not be issuing any further guidance this year and stressed that the visibility in the industry continues to be "very poor."
"As you know, I plan to retire in about a year from today and my personal goal is that at that point and time Nortel will be operating profitably once again," Roth said Friday in a nationally televised pre-recorded speech.
Roth, who is expected to retire in April 2002, told investors in a conference call that Nortel was seeing fewer purchases in its "optical long-haul business and to a lesser degree in circuit switching in the United States."
He said the industry is going through a "period of adjustment" and not just a downturn.
With the continuing slide in the level of purchases, Roth explained Nortel had to make further job cuts this year. Second quarter charges from the cuts will total US$830 million.
Canadian Prime Minister Jean Chretien, questioned about Nortel -- one of Canada's biggest employers, said he had confidence in the company and reiterated that "other sectors of the economy are performing very well."
In the near future, Nortel plans on focusing on getting cost structure in place, directing research and development into core growth areas, and discontinuing low-market businesses, such as the low-bandwidth access business Access Solutions DSL.
Nortel's cost reduction pro-gram, when fully implemented, is expected to save some US$3.5 billion a year.
Nortel also announced Friday it had arranged to borrow US$2 billion from JP Morgan Chase and Credit Suisse First Boston, will stop making common-share dividend payments after June and will make an adjustment to intangible assets of some US$12.3 billion.
Nortel's second quarter results will be announced on July 19.
In New York, Moody's Investor's Service said it has placed on review for possible downgrade Nortel's A2 long-term debt rating, A3 rating on preferred stock and Prime-1 short-term rating.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last