Nortel shares plunge on outlook cut

The stock of Nortel Networks Corp. plunged Wednesday to a multi-decade low after it slashed its business outlook and said it plans another round of cutbacks in the face of a struggling economy.

North America's biggest maker of telecommunications equipment saw its U.S.-listed shares lose nearly half their value, sinking $2.62, or 49.4 percent, to close at $2.68. Earlier, the stock fell to $2.60, the lowest level since at least the early 1980s.

The Toronto-headquartered company said Wednesday morning that it now expects revenue this year to be 2 percent to 4 percent lower than last year's. It had previously forecast growth in the low single digits.

"It is clear that the business environment in which we operate requires additional immediate and decisive actions," Chief Executive Mike Zafirovski said in a statement.

Zafirovski said factors such as competitive pressures and the potential for further reduced spending are ravaging the company.

Nortel also said revenue in the current quarter is being hampered by foreign exchange fluctuations and some product-delivery delays into the fourth quarter.

The company is conducting a "comprehensive review" of its business, which will include further restructuring and other cost-reduction initiatives, it said.

Nortel also intends to seek a buyer for its metro ethernet networks segment, described as "a premium asset with a highly differentiated offering."

Nortel, which keeps its accounts in U.S. dollars, now projects revenue in the current third quarter at $2.3 billion, down 14 percent from a year ago.

The company lost $113 million in the second quarter on revenue of $2.62 billion, which was down from a top line of $2.76 billion in the first quarter.

Morgan Keegan analyst Simon Leopold said Nortel's forecast did not come as a surprise, given that U.S. carriers are reining in their infrastructure spending. At UBS, analyst Nikos Theodosopoulos kept his "Neutral" rating and $6 price target, based on the estimate of next year's earnings at 50 cents per share.

The stocks of Nortel's competitors were also hit by the news. Alcatel-Lucent shares shed 52 cents, or 10.5 percent, to finish at $4.43 and Ciena Corp. fell 92 cents, or 8.2 percent, to end at $10.31.