Nortel Begins Restructuring, More Job Cuts Possible

Less than a month into bankruptcy protection, Nortel Networks has begun its restructuring process that could involve further job cuts around the world.

TORONTO (CP) -- Less than a month into bankruptcy protection, Nortel Networks Corp. has begun a new restructuring process that puts nearly every aspect of the business on the table and will involve further job cuts around the world.

The details are disclosed in a filing by Ernst & Young, Nortel's court-appointed monitor in the bankruptcy case.

The filing says the maker of telecom gear is reviewing the strategic and economic value of its assets and looking at reworking supplier and customer contracts as it continues to bleed cash under bankruptcy protection.

The filing says initiatives include "a detailed plan for the reduction of its global work force" and "a review of real estate and other property leases."

The filing offered no details on the restructuring plan, saying it would take some time to develop.

Last September, Nortel announced plans to reorganize itself into three divisions, which analysts said would pave the way for the breakup of the company. Executives also said they were looking for a buyer for Nortel's Metro Ethernet Networks unit, which includes cutting-edge optical Ethernet products and is responsible for about 14 percent of overall sales. But asset sales are now on hold as Nortel reviews its options.

On Jan. 14, when Nortel filed for creditor protection, it had a consolidated cash balance of about US$2.4 billion, but much of that money is unavailable to fund operations because it is tied up in joint ventures and by international regulations.

Of the $2.4 billion, cash available from North American operations amounted to just $731-million. A cash flow forecast for the entire company showed that Nortel expects to run in the red to the tune of $90 million between Feb. 1 and May 2, with receipts of $348 million and disbursements of $438 million.

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