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To: bob zagorin who wrote (44531)	9/17/2008 9:39:50 AM
From: stockman_scott	Respond to of 57684

Nortel Says It May Sell Networking Unit, Cuts Sales Forecast By Amy Thomson Sept. 17 (Bloomberg) -- Nortel Networks Corp., North America's biggest maker of phone equipment, said it may sell a networking business and predicted an unexpected decline in sales this year, sending the shares down 17 percent. Revenue will drop as much as 4 percent in 2008, compared with an earlier goal of growth in the low single digits. Phone companies trimmed budgets more than expected and some corporate clients are delaying investments, Nortel said today. Chief Executive Officer Mike Zafirovski said he is weighing other steps to cope with the slowdown, after cutting about 4,000 jobs since taking over three years ago. Nortel has lost more than $3.5 billion since 2005 as he struggled to turn the business around and resisted calls to shed other units. ``Nortel's additional challenge is its sub-par scale and weak competitive positioning, which could continue to drag performance even when spending resumes,'' Merrill Lynch & Co. analyst Vivek Arya said in a report today. The New York-based analyst rates the shares underperform. The Metro Ethernet Networks business, which lets phone and cable companies offer ``triple play'' packages of phone, Internet and television, accounted for 14 percent of Nortel's $2.62 billion in sales in its latest quarter. The division counts Verizon Communications Inc.'s corporate unit among its customers. Nortel, based in Toronto, fell 90 cents to $4.40 in early trading after closing at $5.30 on the New York Stock Exchange yesterday. The shares had dropped 65 percent this year before today. Trimming Spending Almost half of large corporations across the globe have curbed technology spending for the next year to cope with the spreading global slowdown, according to Cambridge, Massachusetts- based research firm Forrester Research Inc. ``It is clear that the business environment in which we operate requires additional immediate and decisive actions,'' Zafirovski, 54, said in the statement. Global confidence in the economy has been down in the face of a tightening credit squeeze and the worst housing market since the Great Depression. Banks worldwide have tallied more than $500 billion in losses and writedowns this year, marked by the failure of Lehman Brothers Holdings Inc. Nortel said third-quarter revenue will be about $2.3 billion, short of the $2.66 billion average of estimates compiled by Bloomberg. Sales last year were $10.9 billion. Gross margin, or the percentage of revenue left over after production costs, will be about 42 percent for 2008, Nortel said. That's short of an earlier target of 43 percent. Nortel had 32,550 employees at the end of last year, compared with 35,370 at the end of 2005, according to regulatory filings. Zafirovski, a former executive at Motorola Inc., began his latest round of staff reductions in February, announcing plans to cut 2,100 positions. To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net Last Updated: September 17, 2008 09:02 EDT