Nortel Trims Its Optical Networking Unit

Amid a slump in technology spending, networking giant Nortel Networks is cutting about 3,500 jobs in its optical long haul business, which it is considering selling.

Nortel Networks Corp. is cutting 3,500 jobs in its optical long haul business and is considering selling the optical components part of that business outright.

Nortel, of Brampton, Ontario, said on Wednesday that it is focusing on restructuring its optical long haul business, including optical components, because it doesnt expect the current market to recover before late 2003 or early 2004. The cuts are expected to be completed in the third quarter, and Nortel also plans to take a charge of about $600 million mainly in the second and third quarters.

"We are aligning our optical business model to where we see the industry going to ensure we are well positioned when spending resumes," said Nortel President and CEO Frank Dunn in a statement.

Nortel plans to concentrate on areas it believes will rebound when spending picks up, including optical switching, next generation photonic transport capabilities and end-to-end network management and intelligence. To do so, the company said it might sell the optical components business, resize it or do a combination of both.

Nortel announced the restructuring as it provided updated guidance on its second quarter financials. The networking company now expects revenues for the quarter to be flat or down 5 percent compared to the first quarter of 2002. It previously had expected revenue to be neither significantly up nor down.

The additional job cuts would bring Nortels headcount to 42,000 employees, down from previous estimates of 44,000 that had included some of the optical long haul cuts.