Nortel Networks, a telecommunications equipment maker, lost $957 million last year and announced another reorganization. To stop the bleeding, the company will cut 2,100 jobs and move another 1,000 jobs from North America to low-wage countries.
News of the staff reduction sent shares down 13% to $9.93 a share in New York trading. Several analysts are questioning Nortel’s reliance on a fading cellphone network technology and its withdraw from a new technology that may be the future of telecommunications.
“The big question that looms over the company’s head is: when we look out over three or four years, is Nortel still relevant to their target markets?” said David Hodgson, an analyst with Genuity Capital Markets in Toronto. “Nortel continues to cover a lot of bases, and one questions whether the company has the money and the scale to continue its very broad-based approach.”
In a conference call, Mike S. Zafirovski, Nortel’s chief executive, acknowledged during the call that the company was not a market favorite.
“We’re not blind to the skepticism facing us,” he said
Gimme Credit, a debt analysis firm, said that Nortel’s revenue and profit come almost entirely from sales of wireless software and equipment based on an aging technology known as C.D.M.A. This technology is used in North America but isn’t used much in other parts of the world. Currently G.S.M. is the global standard, and Nortel is a relatively small supplier of this system.
Now both C.D.M.A. and G.S.M. are on the way out to be replaced by a faster, more data-friendly technology, U.M.T.S. Nortel has abandoned its efforts in U.M.T.S. Analysts are asking what Nortel is going to do to offset the inevitable decline for C.D.M.A.
Nortel is working on products for the next generation of wireless networks but it will face tuff competition from larger firms. It has been ten years since Nortel began promoting a unit that makes equipment for high-speed local, rather than nationwide or global, networks. Little has come of this initiative.
Nikos Theodosopoulos, an analyst with UBS Securities, isn’t sure what will work for Nortel, but he thinks Nortel should jettison most of its current businesses and focus on select precuts and services.
“I don’t know what the magic formula is,” he said. “But I know the magic formula is not ‘all of the above.’ ”
Ms. Noland agreed that Nortel was spread too thin. “Right now they’re muddling along,” she said. Though there is not a crisis, she added, there also “doesn’t seem to be a clear path for improvement.”