Nortel May Cut 10% of Its Workforce

nortelstockUBS 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.