Nortel sounds warning bell, may sell unit

Nortel Networks is still having a tough time, but in estimating lower-than-anticipated third-quarter sales and lowering its revenue forecast for the year this week, the vendor blamed a trend that could have broader impact on the telecom industry. Nortel said it was seeing customers cutting their capital spending by more than it had expected. Telecom spending overall was expected to be lower in the second half, but perhaps this is the first sign that it could be even lower than previous expectations.

For Nortel's part, the company has taken numerous actions to recover from its own internal and financial problems earlier this decade. Just a couple of months ago, the company said it was on track to grow revenue at least incrementally, but now its outlook is for a third-quarter revene decline of between 2 percent and 4 percent. CEO Mike Zafirovski said Nortel needs to act decisively to further stoke recovery, and may explore the sale of its Metro Ethernet business at a time when that sector is seeing great investment by carriers, but also tough competition among vendors.

Nortel has been pushing further into the enterprise market over the three years since Zafirovski took charge, and a Metro Ethernet sale and other cost-cutting moves could carry it further away from its traditional carrier customers.

For more:
- see this report at The Wall Street Journal
- read this story at Light Reading

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