Wednesday morning Nortel released a mid-quarter update in which it said another 3,500 staff will lose their jobs as it struggles to staunch the bleeding from its bottom line.
Nortel said it will streamline its long haul optical business, to "focus on the capabilities that will be required when increased spending in the long haul optical market is expected to resume." That includes optical switching, next generation photonic transport capabilities and end-to-end network management and intelligence. Nortel says it does not expect the optical long haul market to recover until late 2003 or early 2004.
Optical long haul is one of the business areas that have come to be Nortel's core focus after more than a year of deep cuts. The other two are wireless networks, and metro and enterprise.
Denis Colbourne sees the latest cuts from Nortel in the perspective of a broad industry malaise sparked by the crushing debt structure among telco customers such BCE, AT& T and Sprint, as well the problem of overcapacity as networks were overbuilt to secure market share.
He doesn't expect all that substantial of an impact on Ottawa considering the vast number of startups that are hungry for experienced talent and the hiring spree under way in the civil service. "We haven't seen a large impact from the previous layoffs."
Colbourne, CEO of Optovation Corp., spent much of his 30-year career at Nortel occupying a range of executive positions from chairman of a joint Nortel venture in Shanghai to vice-president and general manager of Nortel's semiconductor division.
He sees a long road ahead with no turnaround before mid-2004. In the meantime he expects half of the existing North American telcos to disappear either through mergers or bankruptcies.
Until the shift is made and the access capacity is absorbed, the long haul optical business will pose a problem for the entire sector, not just Nortel. The most promising areas for recovery and growth will be in the metro-optical market and in the wireless arena, Colbourne said, an area in which Nortel has already expressed strong interest in expanding its market share.
Richard Deboer, CEO of Galazar Networks, also sees a long road to recovery in the long-haul market for Nortel.
"They're reorganizing but they'll always play in the (long-haul) space," he said. "It'll take about two years for a turnaround."
Galazar Networks is made up of former Nortel employees. Deboer is a former Lucent and Nortel executive.
