Another round of layoffs has been announced by troubled Nortel Networks.
This time the Toronto company, which has been in bankruptcy protection since Jan. 14, said 3,200 will be let go over the next few months. This is in addition to the 1,800 let go late last year.
“There is nothing more difficult than notifying employees, and Nortel is extremely conscious of the personal financial burden this will cause affected employees and their families,” Nortel president and chief executive officer Mike Zafirovski said in a release. “But with the unprecedented economic environment and resultant impacts on revenues, significant changes are required to regain our financial footing. Tough decisions are being made to restructure the company and work towards a successful emergence from creditor protection.”
The company has yet to say when it will reveal a restructuring plan.
Nortel is working with several parties, including its creditors, on a plan that has to be presented to the courts in several countries where it has filed for protection. But it suggested these layoffs are the first step in the plan.
The company said in the release that it is taking “the initial steps announced today in a disciplined fashion to ensure it has appropriate resources to fully serve its customers with leading solutions and innovations.”
Nortel also said that its board has approved management’s recommendation to not pay any bonuses under the Nortel Annual Incentive Plan (AIP) for 2008. In addition, Nortel is seeking Canadian court approval to terminate its equity based compensation plans, including all outstanding equity under the plans (including stock options, restricted stock units and performance stock units), whether vested or unvested, and no further equity will be awarded in 2009.
To keep staffers from fleeing in this uncertain period, the incentive plan will continue this year for all eligible full and part-time employees, but is being modified to allow quarterly rather than annual award determinations and payouts. This, Nortel hopes, will provide a more immediate incentive for employees upon the achievement of critical shorter-term corporate performance objectives, including meeting specific customer service targets, as the it works through the restructuring.
As soon as it was granted bankruptcy protection Nortel gained some stability, but lost the potential to sell to new customers. Industry analysts have noted that now Nortel’s market is restricted to its existing customers. The company’s shaky financial state – which has been going on for at least a year – is also impacting sales. On Tuesday, the head of Concord, Ont., IP PBX maker Aastra Technologies told financial analysts that it has seen some benefit from Nortel’s woes as buyers hunt for suppliers who are financially secure.
