Ottawa will likely feel pain of Nortel cuts: analyst

Employees at Nortel's Ottawa campus are probably right to be worried after the company announced Monday that it would make 1,300 job cuts between now and 2009, says a local technology business analyst.

Nortel's share price hit a record low of $1.08 on the Toronto Stock Exchange before closing at $1.11 Monday after the company announced the cuts and reported a third-quarter loss of $3.41 billion.

Tyler Chamberlin, an assistant professor at the University of Ottawa's Telfer School of Management, said even though the company hasn't specified what jobs will be cut, the fact that Nortel's Ottawa operations are focused on research and development doesn't bode well for employees.

"Put together the fact that they're scaling back R and D, and they're scaling back employees — I don't think it's too much of a stretch to think that a large part of those cuts are going to come in Ottawa," Chamberlin said.

The company also said Monday that four top executives will be leaving Jan. 1, 2009, including chief technology officer John Roese. Chamberlin said that's a bad sign suggesting Roese doesn't have faith either in the technology or the company's future prospects. On Monday, many of the company's 4,200 Ottawa employees were bracing for the worst.

"I've been in the company for 16 years — this is probably the most I've worried about my job," said Brian Stanke, a software architect for Nortel's metro Ethernet networks unit, which is up for sale.

Another Ottawa Nortel employee, Barry Beadman, said it's getting hard to go to work.

"My fear is they're going to be cutting entire groups," he said. "I think onesies and twosies are out the door already."

Analysts such as Duncan Stewart said many employees believe things are only going to get worse.

"Every industry watcher is saying this a company that is almost certainly going to be broken up or sold entirely in the next 12 to 24 months."

Jeffrey Dale, president and CEO of the Ottawa Centre for Research and Innovation, said the whole telecom sector, not just Nortel, is suffering right now.

"Customers aren't just buying the amount of product we thought they'd be buying," he said.

Chamberlin said the problems go beyond telecom, and it's a tough economic environment right now for high-tech.

"In a bad environment, do you need to upgrade your phone, and do you need an expensive data plan for example, in order to make that product go? Probably not, I think, is the answer."