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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Shread who wrote (690)	9/11/1998 3:07:00 PM
From: Kenneth E. Phillipps	Respond to of 14638

Nortel planning Triangle layoffs The loss of 700 to 900 employees will be another blow to Durham County. By CHRIS O'BRIEN, Staff Writer RESEARCH TRIANGLE PARK -- Northern Telecom executives plan to lay off 700 to 900 Triangle employees -- as much as 10 percent of the company's local work force -- as it seeks to profoundly reshape its culture to compete in a changing technology market. Sources confirmed the plans but emphasized that no final decisions have been made about the size and timing of the layoffs. The employees who are laid off will be offered early retirement or generous severance packages. Rumors about the layoffs have been rampant among the 8,500 Nortel employees in the Triangle. Carol Anderson, a Nortel spokeswoman, would not confirm the plans for layoffs and said the company is always looking at ways to improve its efficiency. "We recognize that there is speculation going on," Anderson said. "We haven't made any announcements or any decisions about how the business will be run going forward. We'll continue to look at ways to make ourselves competitive." The news surprised local economic development officials as well as analysts who follow the company. It's also a blow for Durham County, where most of Nortel's Triangle facilities are located. This year, Mitsubishi and Motorola announced they were closing their Durham operations and laying off a total of about 800 workers. "There just seems to be some volatility in the market," said Tom White, president of the Greater Durham Chamber of Commerce. "Fortunately, there seems to be some good quality job generation in this area. We'll do everything we can to help these folks find work. But it certainly is disappointing." Nortel has 73,000 employees worldwide, and the Triangle has one of its largest concentrations of employees. Among local companies, only IBM -- with about 13,000 workers -- employs more people here. The layoffs will be part of a sea change in Nortel's business caused by the Internet, a shift that has turned the telecommunications business on its ear. As one of the nation's leading telecom and computer networking regions, the Triangle is experiencing the fallout as well as the benefits of the changes. Even as Ontario-based Nortel plans to cut back, competitor Cisco Systems is adding thousands of jobs at RTP. Research Triangle Park is headquarters for a Nortel division called Carrier Networks that makes "switches" -- computers that telephone companies use to direct phone calls around networks. Nortel has made billions selling this equipment. But telephone companies are planning to overhaul their networks to accommodate growing Internet traffic. Where the old networks were designed primarily to transmit phone conversations, new ones will be equipped to handle voice, video and computer data transmissions. The two lines that connect to a home computer and telephone will be replaced by a single line. This seemingly obscure shift is causing upheaval. Telephone companies have been buying one another and merging. Internet service providers want to offer phone service. And large telecom equipment manufacturers like Nortel have been buying small networking companies to acquire the technology that will be used to build the telephone networks. The latest example of this trend came last week when Nortel completed a $6.7 billion merger with Bay Networks, a Silicon Valley computer networking company. Nortel also announced a reorganization, but with no mention of layoffs. A source said the local job reduction is not the direct result of the merger with Bay. Instead, the source said, it is part of an effort to make Nortel's manufacturing operations more efficient and to streamline the switching organization. Nortel's new competitors are known for being smaller and quicker at adapting to technology changes. Executives at Nortel are determined to build a culture at their company that's just as nimble. "There's a certain level of coincidence that this is occurring along with the Bay merger," said a source familiar with the company's plans. "With or without the Bay merger, adjustments would be necessary." Robert Wilkes, a telecommunications analyst for Brown Brothers Harriman & Co. in New York, said the layoffs were probably a sign that telephone companies are accelerating their shift to new networking technologies. That would mean less demand for Nortel's traditional switching products. "I think potentially we're looking at a product transition," Wilkes said. "One way to react is to take some of the costs out of that business." Jim Kedersha, a telecommunications equipment analyst for SG Cowen Securities Corp. in Boston, said the layoffs may also raise questions about whether Nortel is being affected by Asia's financial problems. "I don't think you'd expect to hear about 800 people from the public carrier group going," Kedersha said. "The way it's going to be interpreted by the investors, it's going to create a concern about demand. How many areas of the world can weaken before it's going to hit you?" Nortel officials have said that Asia accounts for only 3 percent of their business. The company had 1997 revenue of $15.5 billion, and 1998 has been a good year. In July, it reported that profits rose 36 percent over the same period in 1997, excluding one-time gains and expenses. But Nortel's stock price has fallen sharply from its 12-month high of $69.25 in May to a close of $48.31 Thursday. 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