Nortel to fire another 3,500, to sell off unit

In a clear signs the troubled computer and telecommunications networking

industry continues to struggle, Nortel Networks said it must lay off another

3,500 workers in order to break even on current quarterly revenue levels of

about $3.2 billion.

Nortel said its second quarter pro forma net loss from continuing operations

will narrow over the first quarter. But at sales of about $2.9 billion, the

company remains far short of reaching a financial break-even point.

The company also said it may consider selling its fiber optic networking

operations. The company is not seeing a recovery for this segment of the market

until late 2003 or early 2004. Even ahead of a sale of the unit, Nortel is going

to overhaul the optical unit including drastic cut backs in the operation's

staff.

Just two years ago, Nortel had high hopes for spinning off the optical unit

and reaping in billions from the sale of its stock to the public. Technology

such as optical switches and network management tools will be maintained in the

overhaul, which should be complete by the third quarter.

The optical business overhaul will result in charges of $600 million. After

the cutbacks, Nortel will have 42,000 employees, making the current company a

mere shadow of its former self when the outfit employed 94,000 people at the end

of 2000.