When Will the Layoffs Start?

By Mark Evans | Published: February 2, 2009

Nortel Restructuring
There’s a lot of chatter among the AAN comments about Nortel starting to let go large numbers of employees as part of the restructuring.

You have to wonder how close to the bone Nortel is going to go given the bankruptcy filing will let the company “put Nortel on sounding financing footing once and for all”.

For people who see the glass as half empty or expect Nortel to go deep, the news about handing over its R&D campus in Ottawa to the federal government could be a sign of things to come.

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  • TongueInCheek

    Let's get realistic on a few things for a moment.

    First, every corporation manages SG&A expense against forecasted revenues. Clearly Nortel will see a fairly significant decline in revenues in 2009 due to both Bankruptcy Protection and Global Economy impact. Unfortunately, this will result in selective layoffs in attempts to manage the SG&A budgets.

    Second, longer term there will be the Plan of Arrangement or Plan of Reorganization filed with the courts and creditors. Who knows how this will look, but if it is radical surgery on Nortel business, then this plan could result in many more staff reductions through either layoffs or sale of business segments to raise cash for the creditors.

    Third, I see the Ottawa real estate question as having very little meaning or impact. Consider this simple question – Why would a business burn cash in support of real estate running at 50% capacity? Simply put, that is bad business so if there is an opportunity to reduce real estate, making the utilization much better, then that needs to be considered.

  • justinsalesguy

    You have point.

  • NT_survivor

    I disagree TIC somewhat on your third point. An even better follow up question is how long has the property been running at 50% capacity indicating a history of 'bad business'? This to me has a very significant meaning albeit little impact to the growth strategy or cash flow position.

  • less

    Clearly a significant decline in revenues results in selective layoffs in an attempt to manage budgets.

    Okay, some call it selective staff reductions, others it indiscriminate mass carnage.

    Why would a business burn cash in support of real estate running at 50% capacity?

    The best Nortel came up with was a 30%-less-light-bulbs policy perhaps anticpating a huge comeback?

    Nortel could've synergized by turning its unused tile subfloors to into temporary cubicles accomodating smaller employees from overseas.

    http://upload.wikimedia.org/wikipedia/commons/t…

  • less

    No worse than the existing cubes:
    http://i78.photobucket.com/albums/j112/bebesass…

  • protosphere

    Severances and costs were their biggest burdens aside from their largest pension deficit that are being met with dramatic restructuring attempts. The carrot is maintaining their exorbitant pay practices to keep the company alive. Never mind the press releases, actions always did speak louder than words to make them look like pathological liars to put it crassly.

    They may be targeting “sound financial footing” with their credibility but that conflicts with competition already transitioning customers or poaching employees. What will be left, making their assets worth less if I may add even at a further 1/3rd of their size. How profitable if at all would $2B or $3B in sales be to satisfy creditors with an overhead of around 10K employees if their sales to staff linear decline is conisidered?

    In Canada they only have 6,000 employees anyways and more in the US, as they gag them from speaking with the media and cut their severances.

    Today, they even hype an old order on the basis and like doing it on time is good news, like when they reiterated transparency as a privilege than expected. This is order for a company they paid $448M US and well over twice what it is worth. Who knows what they will see on an average of $30M/yr or how much this $300M order will be worth after a whopping decade with plummeting costs, or that they will even be around that long. Same hype and so little has changed, for the better anyways.

    Here the saga gets real interesting though, where the enormous decline in staff and business must appease their creditors enough to take a stake in a much smaller company as things dramatically decline by the very day.

    Will they settle for a fraction of a dollar now (should employee severances be paid) and head straight to inevitable chapter 7 earlier or gamble that Nortel will not file for chapter 7 burning run away costs more frugally to evolve into a much smaller company still struggling to compete after having business and people to others with a sharply declined asset base.

    I do not believe the meltdown will match future prospects and employees and creditors would get more the sooner they took what is left, burning so much daily, that to find after all is said and done too little will be left anyway as they struggle to buy another day. The sooner the better but Nortel just keeps trying is what I see. How can they catch up.

    Their creditors and employees should be as smart as their suppliers who amended their relationship and took what is left now as something than a big nothing or much less later as every high cost day goes by with less business, employees, and declining assets.

    I would have thought everyone would have neglected a single word Nortel claims by now. What “sound financial footing” after already burning so many billions selling assets and printing paper let alone now.

  • justinsalesguy

    let it be known, i have seen some customers turn away but I am surprised to see those that have sent us large PO's, even after the filings. Id say 80 of my customer base is confident their Nortel enterprise solutions will still be orderable in years to come… all are in agreeance that Nortel whey ill no doubt look different but at least the technology they are buying will be support and will have a POR behind them. (IBM, Avaya, or even Nortel Enterprise inc.)

  • protosphere

    They jeopardized profits to look big, for ongoing support buying below cost revenues and losing companies floating along pay happy at an ongoing loss until all of their profits crashed (UMTS). Outlook sank and numbers would reflect a horror, hence bankruptcy.

    Now all we see is the larger they are, the faster they fall. Why didn't they get rid of the dead space earlier than the 11th hour with the sheriff blocking the wolves at their door.

    It is the entire balance of catch-up this hinges on with declining business, assets, and staff where I feel the final balance will tally to an outweighed Chapter 7, leaving everyone with less the longer management strives to pay themselves.

    Employees and creditors should have moved as fast as their suppliers, they already had their chance when they were more solvent and less by the day. Too bad their owners/shareholders can't change their gambles in options to cash =)

    What don't we know about might prove most worrisome given the SEC monitoring numbers and amount of time they said they had left when downplaying folding.

  • AnotherSlave

    How much additional damage can this leadership team do by themselves without the creditors approval? Doesn't it make sense that they would want to have something that could be molded into a company left to sell?

  • Casual_Observer

    When Will the Layoffs Start?
    By Mark Evans | February 2, 2009
    There’s a lot of chatter among the AAN comments about Nortel starting to let go large numbers of employees as part of the restructuring.

    Start ? They started 9 years ago. Restructuring ? Nortel has never not been restructuring since the last decade. Amazing to think its now 2009. By the end of the year Nortel will have been in restructuring mode for 9 years.

  • Tk910

    Agreed – we're seeing quite a few large enterprise deals coming through fairly steadily, and more requests all the time. And not one large customer I've spoken with has even suggested moving to another vendor for the coming 18-24 months.

  • exnt2

    I thought it already started from a week or two ago. 4 weeks notice period from what I am told.

  • penske_file

    This just in…
    Bank of Nova Scotia cut the pay of its chief executive in 2008 after the bank missed profit targets, while Royal Bank of Canada CEO Gord Nixon turned down much of his pay package after his company had a tough year.

    Scotia Bank chief executive officer Rick Waugh will receive $8.7 million in salary, bonus and other compensation. Scotia, after deducting $1.17 million for a pension adjustment, said his total pay package was $7.5 million compared to $10.1 million the year before.

    Royal Bank said CEO Gord Nixon was awarded $8.75 million in total compensation, down 20 percent from his 2007 pay package of $10.9 million. However, the bank said Nixon will “voluntarily forfeit” share units and stock options valued at $4.95 million.

    I certainly don't feel sorry for the top bankers and I doubt it will change their dinner plans but isn't this the kind of symbolic (& monetary) gesture that the rank & file at Nortel have been looking for? I'm pretty sure Jean Monty took a $1 salary at BCE for a couple of years. Sometimes a sincere and genuine decision helps to imrpove morale and send the right message but we all know that is not the type of character traits that we're dealing with here. In fact, it wouldn't surprise me if ZMan decides to do something similar in light of all the criticism but we all know that it would be too little too late. On second thought, I still want him to do it!

  • less

    Are they paying Norte,l are they getting loyalty discounts?

  • justinsalesguy

    they are paying and buying via our resellers and at healthy margins.

  • brett5

    Couldn't agree more. The message is load and clear based on current actions. Choosing to work for a $1 would send a message that is 180-degrees from what everyone is thinking. Especially if Zman and other Nortel Execs worked for $1 in 2009.

  • joremero

    aren't they supposed to happen until after the creditor's board is formed and the plan approved by them?

  • TongueInCheek

    We need to remember the previously announced cuts from before the CCAA/CH11 filings. I doubt they are fully completed. From there, there is possible downsizing as a function of Revenues and SG&A.

    However I do agree with you that any major cuts likely won't happen until after the filing of the Plan of Reorganization. Who knows what those cuts could look like as it may also include sale of various businesses to generate more funds for the creditors.

  • Nortel_Sucker

    Wrong. They are stockpiling. Not like they can use a second source if Judas Z. and the rest pull the plug. It also buys them time to transistion.
    January is ALWAYS the slowest month for Telecom/IT.

  • justinsalesguy

    I see you are quite the positive guy. This week we sold a new CS1000E with 2000 ip phones to a professional services firm and yes, Cisco and Shoretel were on the table. We won due to proof of concept and on the bake off.///

  • Nortel_Sucker

    Wow a sale. 2000 ip phones. Isn't that what your supposed to be doing? I guarantee that they were firesaled just like all the Nortel equipment that has been sold in the past 10 years. Give this 3rd world Country free infrastructure. Whoops, now they can't pay. Why do you think a Company that has 15 Billion in revenue cannot generate a profit. Keep believing pal.

  • justinsalesguy

    i am not in a 3rd world country. lol nice try///

  • Pingback: What could have been « Nortel Insider - by Desk Jockey

  • scalpcutter

    Good Point.
    Management and the BOD sure have done a stellar job haven't they.
    I wonder if it possible to give them some kind of award based on this.
    Roasted Turd on a stick maybe?

  • CatchNortel

    Its actually too late to discuss what had happened. Now, Zman should try and focus on what is left. To me, if they really wanna focus on Enterprise then they should stop/reduce investing in Carrier. MEN is already out for sell. May be they are already considering carrier to sell off too. To me, there are two options:
    1) Layoffs in large number in Carrier and very little in Enterprise (Focus on Enterprise)
    2) Sell Enterprise as well (there was a speculation that IBM was interested to buy Enterprise). Not sure about this news as there are lot of rumors in the air….

  • Casual_Observer

    Enterprise is the focus but even within enterprise the focus is software/services only because that is where the margins are. I suspect they will sell much of enteprise hardware to a pure hardware vendor and become more a software/services play. The problem is they aren't a leader here either as Cisco, Avaya, Microsoft and IBM are the clear leaders. Given market and economic conditions, I think the liabilities of Nortel will be greater than the assets for much of 2009.

  • Casual_Observer

    Regarding the $1 salary, I doubt he would do it unless mandated by a court. Mike Z could have given up Nortel in the best interests of shareholders to private equity back in 2007 for a pretty penny but declined. The reason is he would have had to be replaced and give up not only short term compensation but also long term compensation similar to what Bill Owens was getting. The ego is always the last to go when it comes to GE leadership. They will never admit failure. It is more about ego than doing what's in the best interest of all stakeholders involved. Nortel could be private like Avaya and be on more solid footing but Z wouldn't let it happen.

  • yes4aapl

    customers are waiting for Nortel to tell them what company will ultimately emerge, Lowe said. “Our sales guys are just waiting for that story, but right now we don’t have a story to tell.”
    ============
    re
    Let's see.
    Customers are waiting, Lowe said
    Sales guys are waiting, Lowe said
    I know that employees are waiting
    I know that creditors are waiting
    Everybody is waiting, I guess.
    So where is the Plan?
    It's been 2 months since Nortel hired BK experts to make that Plan.
    Is something wrong again? Even in the protection mode Nortel is screwing up?
    Nortel has no time to waste, Lowe said but Nortel is wasting time anyway, I say.
    yes4

  • Cataractus

    You'd have to drag Zeroman kicking and screaming before he'd take the $1 deal. And the same goes for Hacker and the rest. In fact the bankruptcy filings have already made clear that Mikey not only intends to keep his $ 1.2 million base salary but will also ask for a KEIP bonus as well. Even the largely irrelevant BOD is demanding huge cash salaries for their remaining “services” while Nortel is in bankruptcy.

    Zeroman's incompetence at Nortel has ended any chance of future employment in anything even close to the executive level he has now and he knows it. He's also clueless about leading Nortel back to viability. So he's going to get while the getting's good.

  • CatchNortel

    True…Everyone has waited for a long time now..but lets have some more patience as they will have to declare their plans before Feb 14th . Till then, people are enjoying their coffee @Timmies

  • Theleftbehind

    An insider video on Nortel at RTP to die for….

    http://www.youtube.com/watch?v=Te7za5upSWk&anno…

    Nortel Downfall (updated version)

  • NortelTragedy
  • broadbandbill

    Forced smile, soul-less eyes, phony image = empty picture. Scary…–bb

  • ohibelieve

    The Carling facility has been schleped to the GoC for a lot longer than this news. They've been trying to lease out the facility for several years. The deluded idiots in real estate are trying to pitch the Carling facility to the Department of Defence to move their headquarters to Carling with some backroom swap deal to move the remaining Carling employee base into a Barrhaven Strandherd facility. The sq. footage being searched is less than 1M. Rumor is 8000 hc reduction is imminent. As well MEN is old news. AAN… Shame on you… how come no one has leaked that two PE firms have made offers for Nortel Enterprise and the GE crowd is scrambling to figure out how slice out the entire business as a turnkey operation? Wonder why wonderboy HackAttack! and a bunch of other executive moocows are choking themselves to get attached to Enterprise?… it's really too bad that they werent able to flip the alteon line to radware before they fired all the next gen vss5000 devs and qa in december.

  • NTHATER

    I find it very funny that you Nortel folks are all running around looking for jobs here in RTP. Why would I hire anyone from NT? hmmmm,,,,,maybe because they just ruined their company? Oh yes, please come work for me, save me like you did Nortel….I hope you all get layed off!

  • NTHATER

    I didn't say “laid” off because that would be giving you pinheads way too much credit. haha!

  • NTHATER

    Had a Nortel exec interview with me today and I tore him a new one, as we say down South. Should have seen him squirm when I asked him why he thought I should hire him and if he did such a great job why is the company he helped so much in the shape it is in today?

  • Another_Nortel_Watcher

    That is an ignorant and classless post. There are many fine people at Nortel who are victims of the GEniuses that the BoD brought in to run the place and painting them all with the same brush is small-minded. If you are so insecure that you must prop yourself up using other people's misfortune, then I feel sorry for you because your life must be sad.

    The vast majority of Nortel employees are dedicating and hard-working individuals who are a cut above most in their field. It's a shame what damage a few rotten leaders can do.

    And btw, nobody here is fooled into thinking that you're interviewing executives, and it isn't just because spelling is a challenge for you.

  • NTHATER

    Truth hurts, eh? I worked for that sorry company for 14 years, ahole. Dont talk to me like I don't know what you losers do there, which is make up a bunch of slogans,etc. I hope you starve.

  • NTHATER

    Hey I heard there is a new tchnoloty called “COCOS” that NT is going to invest in.

  • Nortel watcher

    Mark, here's one for your filter…

  • NTHATER

    Cant take it can you? hahah. Figures. You must be a big man like your boy who tries to beat up women down here. Big man on campus, haha.

  • forgive

    It could be worse if you don't let him post here. I

  • NTHATER

    Why dont you send a COCOS to him and maybe on his x.25 high speed data line he can get it faster?

  • NTHATER

    Yeah, I might have “parking lot rage” like your fearless leader did on some poor college girl……guess he kept you in place….

  • Another_Nortel_Watcher

    Thank you for making my point. All the best to you, I hope you find a better place some day.

  • Another_Nortel_Watcher

    I agree.

  • NTHATER

    I did and I'm not the one that's going to be looking for another job VERY soon! You better get that application in to the mcdonald's, although if you have been at Nortel you don't know how to do an honest day's work,.

  • NTHATER

    Why, because I know all you do is blog and call meetings with other project managers who do nothing?
    Oh, I forgot about all the great powerpoint slides you Nortel folks know how to make. Great Job! Too bad those jobs will be taken by the people who make 5 bucks an hour, like you should be making!

  • exnt_x_2

    The vast majority of Nortel employees are dedicating and hard-working individuals who are a cut above most in their field.

    That's funny. Just the opposite, in fact. They are where they are now for a reason. Blaming management is just a canard to make themselves feel better.

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