February 25, 2009 / 4:06 PM / in 10 years

UPDATE 2-Nortel cuts another 3,200 jobs, more possible

*Nortel cuts another 3,200 jobs

*Cuts represent about 10 percent of remaining workforce

*Employees will not receive severance

*Nortel will honor country-specific legal obligations -CEO (Adds analyst, CEO comments)

By Wojtek Dabrowski

TORONTO, Feb 25 (Reuters) - Ailing telecom equipment maker Nortel Networks Corp NT.TO made good on its plans to slash more jobs on Wednesday, cutting another 3,200 workers worldwide as it continues its fight to survive under the cover of bankruptcy protection.

The cuts represent roughly 10 percent of Nortel’s workforce of more than 30,000. At the peak of the tech boom in 2000, the company employed more than 90,000 people.

The laid off employees will not get severance payouts, which the cash-strapped company suspended when it filed for bankruptcy protection last month.

“We do not have the flexibility, particularly in North America — Canada and the U.S. — for us to be paying severance pay,” Chief Executive Mike Zafirovski told Reuters, adding that the company will respect whatever country-specific legal obligations it has to its staff.

The latest cuts come just weeks after Nortel — North America’s biggest maker of telephone equipment — warned in a court filing that it was working on a “detailed plan” for more layoffs.

Duncan Stewart, an analyst at DSAM Consulting, said Nortel continues to grapple with weakness in demand for its products, and estimated the company needs a minimum of 15,000 to 18,000 employees to continue in its present form.

“So in other words, no, we cannot say this is the last cut,” he said.

Zafirovski said the company’s view of the market’s future is “quite limited” and did not rule out additional workforce reductions.

“We’ll continue to monitor the situation,” he said. “If required, we of course will make some additional adjustments.”

The Toronto-based company said the cuts announced on Wednesday are on top of another 1,800 planned layoffs that still have to be completed.

It also said it is modifying its compensation structure to reduce bonuses and cut out its equity-based compensation plans.

The company’s equity is almost worthless, with the shares trading unchanged at 10.5 Canadian cents on the Toronto Stock Exchange. In mid-2000, at the height of the company’s success, the stock was worth more than C$1,100, adjusted for a share consolidation that took place in late 2006.

Zafirovski said the company is working “around the clock” to hammer out its strategic and business plans and aims to have them completed by March or April. It hopes to announce them in May, but that could change, he added.

Nortel filed for bankruptcy protection in Canada and the United States last month, blaming the economic crisis for derailing a turnaround effort that began in 2005.

It had about $2.4 billion in cash when it sought court protection from its creditors and about $4.5 billion in long-term debt, according to court documents.

$1=$1.26 Canadian Reporting by Wojtek Dabrowski; Editing by Peter Galloway

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