Nortel warns on revenue and announces sale of ethernet division

Metro Ethernet Networks sale to finance Nortel restructuring

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By  George Bevir Published  September 18, 2008

Canadian telecommunications equipment company Nortel yesterday issued a sales warning and announced that it will sell its Metro Ethernet Networks (MEN) business as it struggles to cope with the global economic slowdown.

In a statement released yesterday, Nortel said it was experiencing “significant pressure” from “a sustained and expanding economic downturn”, as networks cut back on and defer their IT infrastructure projects. It also blamed foreign exchange rates for applying additional pressure to the business.

Nortel warned that revenue for 2008 would decline between 2% and 4% compared to 2007.

The company’s share price fell by 49% as investors reacted to the announcement.

CEO Mike Zafirovski said: “It is clear that the business environment in which we operate requires additional immediate and decisive actions.

“A comprehensive review of our business is taking place and we are determined to reshape the company to maximize its competitiveness, drive a significant increase in effectiveness and efficiency company-wide, and re-focus to establish a clear path for growth, profitability and renewed shareholder value,” he added.

Funds from the sale of MEN, which makes equipment for the backhaul of bandwidth hungry services such as mobile voice, data and multimedia traffic, will go towards the restructuring of the business, Nortel said.

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