Networking player Nortel, which employs 300 people in Ireland, said it expects to implement a net reduction of its global workforce by around 2,900 people. Around 70pc of these cuts will take place in 2007, the company said.
Nortel, which has operated a facility in Galway for over 30 years, said it intends to shift 1,000 positions from higher-cost to lower-cost locations, with 40pc of these taking place this year.
The company said its business model requirements include a significant reduction in general and administrative expenses, driven by simplified operations, reduced systems and improved process.
“We are transforming Nortel and are focused on building a highly competitive organisation that drives innovation and profitable growth,” said Mike Zafirovski, president and chief executive officer, Nortel.
Research and development investment, the company said, will remain a top priority but will be reduced. Despite the reduction in R&D spend, Nortel said that it will be maintained at an “industry-competitive” 15pc of total revenues.
Funding will shift and investment in high-growth opportunities will increase. Investment in sales and customer-facing functions will be untouched. The plan will see Nortel reduce its real estate portfolio by over 500,000 square feet of space in 2007.
“These are tough but necessary measures and we recognise the impact they will have on affected employees,” added Zafirovski. “However, as we roll out the various initiatives over the next two years, every effort will be made to leverage normal attrition and redeploy affected employees to other areas of the company.
“Our goal is nothing short of creating a high-performance, successful and profitable enterprise based on a highly motivated work environment powered by strong business results,” Zafirovski added.
The company said the actions will save the company US$400m annually, with half of these savings expected to be realised this year.
The cost of the business transformation plan could be as high as US$390m, out of which US$300m relates to workforce reductions and US$90m relates to real estate actions.
By John Kennedy