Nortel stays mum on reduction details

Although Nortel Networks Corp. is staying mum on where its latest rounds of cuts will occur, rumours about where the company’s axe will fall – and what that could mean for Canadian R&D – are flying.

The Brampton, Ont.-based firm on Wednesday revealed that it would be slashing 7,000 jobs, and that it expects revenue could fall by as much as 10 per cent in the third quarter. [Please see Nortel cuts Q3 revenue forecast, 7,000 jobs cut.]

While some reports indicate senior management positions will be affected by the cuts, one analyst said they will likely be based on the firm’s product lines.

“I don’t believe that (the cuts) will be in their areas of wireless and fibre-optics,” said Dan McLean, director of outsourcing and IT utility research at IDC Canada Ltd. in Toronto. “I think that once the company sees better days that those two areas are going to be pretty key for them.”

Carriers are really taking a look at wireless right now, McLean explained, and Nortel has a lot of great fibre-optic technology, so these are areas that are likely safe. He added that IP is another facet of Nortel’s business that likely won’t be affected.

“I think pretty much all other areas of the company are at risk in terms of product areas. I would also suggest that their traditional telephony communication areas, their circuit-switched areas are probably most highly at risk because that’s technology that is being phased out. It’s the technology that is sort of coming to an end and being replaced by a lot of IP-based stuff.”

Close to 45 per cent of Nortel’s global R&D workforce is based in Ottawa, leading to concerns that the Nortel cuts will have a significant impact on the Canadian R&D market. McLean noted another fact to be taken into consideration.

“The other side to the coin is that you’ve got a lot of R&D that’s being moved up into Canada,” he said. “Companies like Microsoft are looking at Canada as an area where they can draw upon a good base of talented people for their R&D efforts. So I don’t know that even if Nortel decides to pare some of their research and development in Canada that it necessarily cripples the Canadian industry for that because you’ve certainly got other networking companies that are doing R&D up here. I would point to Cisco and Enterasys, for example, as two companies that are certainly very much committed to R&D in Canada.”

Nortel’s workforce in Ottawa has already been sliced in half since the beginning of 2001 to approximately 7,500 employees. The number of Nortel employees worldwide, after the latest reductions are completed, will total approximately 35,000.

A Nortel spokesperson said details surrounding the latest workforce reduction would be revealed in October.