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Analysts say Nortel needs roughly half its current employees to continue to operate

It took a while for massive layoffs to hit many technology companies in the face of the weak global economy. Once the financial turmoil hit the technology sector and Silicon Valley, it hit with great force and many firms ceased to operate.

One of the biggest firms to find itself in rough financial waters was Nortel. Nortel announced in January that it was filing for Chapter 11 bankruptcy protection. The firm also filed for protection in Canada as well.

Bankruptcy was the first step for the telecom giant to attempt to save it from going out of business completely and now the company has announced more steps to protect itself. Nortel says that it will cut 3,200 jobs, 10% of its current workforce. Losing your job is bad enough, but eWeek reports that the firm didn’t offer the employees severance packages.

Nortel's workforce today is at about 30,000 and at the companies highest point it had 90,000 global employees. Severance packages were suspended when the firm filed bankruptcy in January.

Nortel CEO Mike Zafirovski said, "We do not have the flexibility, particularly in North America—Canada and the U.S.—for us to be paying severance pay." Zafirovski did say that Nortel would honor any country-specific legal obligations it has to its staff.

Nortel warned a week ago that it was working on a plan that would include more layoffs. According to an analyst from DSAM Consulting Duncan Stewart Nortel only needs about 15,000 to 18,000 employees to continue operating in its current form. That means that Nortel will likely shed up to half of its current workforce before the cuts are through.

The cuts announced this week would be in addition to another 1,800 workers still to be shed reports eWeek. Nortel is also changing its compensation structure to reduce bonuses and cut equity-based payment plans.

Court documents showed that Nortel had about $2.4 billion in cash when it filed bankruptcy with about $4.5 billion in long-term debt.





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Nortel Files for Chapter 11 Protection
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