UBS Research analyst Nikos Theodosopoulos in a note to his clients today says that Nortel, the Ottawa, Ontario-based telecom equipment maker, will make steep staff cuts — “possibly amounting to 10 percent or more of its total workforce, or at least 3,000 employees.” Nortel has some liquidity concerns and needs to make cuts and sell its Metro Ethernet Networks (MEN) business in order to stabilize itself.
UBS estimates a “cash burn of $686M, $700M and $700M in CY08, CY09 and CY10, respectively,” which would leave the company with about $1.3 billion at the end of 2010, not enough when Nortel also has $1 billion of debt coming due in July 2011. The cuts and sales could boost its year-end cash balance for calendar year 2010 by roughly $800 million to $2.1 billion if the MEN business is sold for about $500 million.
Om,
Do not be surprised if it’s more than 10%. As well, the sale of the metro Ethernet network business involves another 4K to 5K employees.
Mark
Anyone selling to the telco industry is in for a tough slog for the next couple of years. IMO, this was the worst IT sub-category to be in during the ‘01 / ‘02 dog days.