Nortel Networks has reported narrowed earnings as its customers largely shied away from making big purchases. Revenues from continuing operations were $2.91 billion for the first quarter of 2002 compared to $5.75 billion in the same period in 2001. The company also announced it is to cut another 3,000 jobs as part of its ongoing restructuring. The cuts will slash Nortel’s workforce to around 44,000, less than half the 94,500 the company employed in January 2000.
Pro forma net loss from continuing operations for the first quarter of 2002 was $463 million, compared to pro forma net loss from continuing operations of $277 million in the first quarter of 2001.
In the first quarter of 2002, Nortel Networks claims its restructuring efforts, and its focus on core businesses and cash management, continued to drive significant improvements in its bottom line results on a sequential basis and helped to enhance its ongoing financial flexibility. The company recorded a cash balance at the end of the first quarter of approximately $3.1 billion, which decreased from approximately US$3.5 billion at the end of the fourth quarter of 2001. The decrease primarily reflected the loss from operations, the cash costs in the quarter associated with restructuring, and capital spending, which was partially offset by approximately $500 million from tax recoveries. The cash reserves, combined with existing committed credit facilities, which are undrawn, provide the company with approximately US$6.6 billion in sources of liquidity.
Commenting on the outlook for Nortel Networks, Frank Dunn, president and chief executive officer, Nortel Networks, said, We expect our customers to continue to limit capital expenditures and, therefore, it is difficult to predict how spending patterns will unfold in 2002. That being said, we do not expect a significant downturn or a significant upturn in our revenues for the second quarter compared to the first quarter of 2002. We will continue to concentrate on our core businesses, focus on building momentum in the market, and gain efficiencies across our business processes. We continue to expect ongoing improvements in our bottom line results as we move through 2002. As we do this, we will be working towards a cost structure, which we expect to be in place by the fourth quarter of 2002, that would drive break even at quarterly revenues of approximately $3.5 billion (not including costs related to acquisitions and any special charges or gains).
At the end of the first quarter of 2002, Nortel Networks workforce numbered approximately 47,000. Following the completion of remaining reductions, primarily related to previously announced European work council and joint venture activities, and anticipated non-core business divestitures, Nortel Networks expects to have a workforce of approximately 44,000.
Despite the lower overall spending by customers, we are making significant inroads in the market with our solutions that deliver the value and cost savings that our customers are looking for from Nortel Networks, said Dunn.