Nortel May Cut 10% of Its Workforce

UBS Research analyst Nikos Theodosopoulos in a note to his clients today says that Nortel, the Ottawa, Ontario-based telecom equipment maker, will make steep staff cuts — “possibly amounting to 10 percent or more of its total workforce, or at least 3,000 employees.” Nortel has some liquidity concerns and needs to make cuts and sell its Metro Ethernet Networks (MEN)  business in order to stabilize itself.

UBS estimates a “cash burn of $686M, $700M and $700M in CY08, CY09 and CY10, respectively,” which would leave the company with about $1.3 billion at the end of 2010, not enough when Nortel also has $1 billion of debt coming due in July 2011. The cuts and sales could boost its year-end cash balance for calendar year 2010 by roughly $800 million to $2.1 billion if the MEN business is sold for about $500 million.