Nortel plans further restructuring

Posted February 11, 2009

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— Workers at Nortel (NYSE: NT) are bracing for another round of job cuts.

In a bankruptcy case update, which it filed in Canada on Feb. 5 and which the media reported earlier this week, Ernst & Young, the court appointed monitor of Nortel’s bankruptcy filing, said further restructuring and other cost-cutting are under consideration.

Late Tuesday, Ernst & Young said the Ontario Superior Court of Justice had extended bankruptcy protection to May 1. Nortel had received a 30-day protection period when it filed for bankruptcy on Jan. 14. Nortel was due to make a debt payment of $107 million.

The extension will "provide Nortel with an opportunity to develop a comprehensive business and financial restructuring plan for consideration by their creditors and the Canadian court," the company said.

Nortel employs some 2,000 people at its Triangle campus.
Nortel said the court also approved an amended financing deal with Export Development Canada to give the company access to $30 million of export-related financing help up to May 1.

Nortel and its subsidiaries also obtained a court order allowing the company to postpone its annual meeting beyond a June 30 deadline.

Nortel also has grounded two private jets, one of which was used largely by Chief Executive Officer Mike Zafirovski. The jets cost the company some $1 million a month, but Nortel can escape its lease agreements because of the bankruptcy.

In the update it gave the court, Ernst & Young said Nortel is considering “a detailed plan for the reduction of its global work force” and “a review of real estate and other property leases” plus “a review of information system equipment leases, contracts and licenses.” The company also is developing “a detailed plan” to reduce “discretionary spend.”

Other steps include the termination of a joint agreement with the company Alvarion to develop and sell WiMax network technology. Nortel sent a "notice of repudiation” of that deal on Jan. 29, according to the filing.

Nortel also is reviewing its “many subsidiaries.”

As for the annual meeting, it "would be a distraction to both management and other company resources at a time when they are required to be focused on stabilizing and restructuring the business," Ernst & Young said in a report posted on its Web site.

Other initiatives the company said it is investigating include a "detailed plan" to reduce its global work force, reviewing its real estate, supplier and customer contracts and looking more closely at cutting its discretionary spending.

"Although a comprehensive restructuring plan is still at a preliminary stage, Nortel believes these initiatives are essential to reducing costs and preserving existing cash resources," the report said.


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  • affirmativediversity Feb 11, 2009 missed the entire point

    but allow me to simplify it for you...

    its like the old hebrew tale:
    They came for the baker, I was not the baker, I said nothing, because it didn't affect me,
    They came for the cobbler, I was not the cobbler, I said nothing, because it didn't affect me,
    They came for my neighbor, I didn't live next door, so I said nothing, because it didn't affect me,
    Then they came for me!

    I'm sorry for your husband's pending employment trouble BUT my point was...while a lot of people where running around bleeting "hope/change" they didn't really take seriously WHAT WAS BEING SUGGESTED...because they figured "it didn't affect them" IT DOES...and the proposals STINK!

  • determined2win Feb 11, 2009

    Hmmm... Nortel is still around? I thought that they died on the vine years ago...

  • radixlecti Feb 11, 2009

    I worked at Nortel for 10 years before being laid off... They have always had some very "creative accounting" there...

  • rabbitrabbit Feb 11, 2009

    Yeah, LOL affirmativediversity, it's just hilarious. My husband is a Nortel employee, and we have three small children. Lots of people will be affected by this, not just the top level management. We HOPE that my husband will keep his job a little longer, but if not and all we have after that is road construction and public work projects, then thank God for that. You should really CHANGE your lousy attitude.

  • affirmativediversity Feb 11, 2009

    Hey look at it this way...all the Nortel folks are likely to really enjoy their new careers BUILDING BRIDGES and ROAD CONSTRUCTION!

    Congratulations you managed to bring all of us down with you...enjoy your new "ordinary people" status

    and, remember,


  • FoolOnTheHill Feb 11, 2009

    I got this the other day ... funny parody on the situation at nortel...

  • dentech Feb 11, 2009

    I heard their executive washrooms are magnificent.

  • Sumo Vita Feb 11, 2009

    So the courts let them terminate severance and health benefits for hundreds of employees - but let Zafirovski keep his million/month jets? Disgusting doesn't even begin to describe the sentiments that come to mind. Then again, just look at Wall St - CEOs run their companies into the ground, get Paulson to bail them out at taxpayer expense, then reward themselves with $18 billion in bonuses to boot.

  • Conservative Feb 11, 2009

    I did a career switch and joined Nortel in July 2000 and was laid off in May 2001. During my 10 months I saw how much money was being wasted on "open houses" where they fed the entire town and rewarding employees for mediocrity. I was given a bonus check for a software project that, frankly, in my opinion was nothing earth-shaking. Anyway, I was lucky because I was not there long-enough to make it difficult to return to my preivous career! I was fortunate that I had a foot in another field.

  • fyiarp Feb 11, 2009

    How is Nortel still in existence? The state of employment is bad enough as it is now, I can't imagine working for Nortel during these times. Here's a tip, if you get a meeting request for later that same day and don't know what it's about, go ahead and take the day off...