In apparently the final restructuring move and another sign it needs to get leaner and meaner to remain competitive, Nortel will slash another 2,900 employees over the next two years, while moving another 1,000 jobs to “lower-cost locations”. Nortel also plans to shrink its real estate portfolio by 500,000 sq. feet this year – a move that follows the $100-million sale of its sprawling corporate headquarters in Brampton, Ont. last year to Rogers Communications. When completed, the moves will save Nortel about $400-million a year: $300-million due to workforce reductions and $90-million related to real estate.
“We are transforming Nortel, and are focused on building a highly competitive organization that drives innovation and profitable growth,” said Nortel CEO Mike Zafirovski, who added the company will maintain its “industry-competitive” R&D spending at 15% of revenue.
It’s another interesting and probably necessary decision – and you wonder if there is any link between it and CFO Peter Currie’s decision to resign yesterday. Clearly, Zafirovski realizes Nortel can’t be competitively viable if its operating costs aren’t reduced. The question is why now as opposed to six months ago? Another way to look at it is Nortel has little choice but to reduce costs if it wants to remain a stand-alone entity – whereas competitors such as Alcatel and Lucent are trying to do it through consolidation and cost synergies.