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Fresh off the news wire...

NEW YORK, N.Y. ( - Nortel Networks will reduce its
workforce by an unprecedented 120 percent by the end of 2001, believed
to be the first time a major corporation has laid off more employees
than it actually has. Nortel stock soared more than 12 points on the

The reduction decision, announced Wednesday, came after a year-long
internal review of cost-cutting procedures, said Nortel Networks
Chairman and CEO John Roth. The initial report concluded the company
would save $1.2 billion by eliminating 20 percent of its 88,000 employees.

From there, said Roth, "it didn't take a genius to figure out that if
we cut 40 percent of our workforce, we'd save $2.4 billion, and if we
cut 100 percent of our workforce, we'd save $6 billion. But then we
thought, why stop there? Let's cut another 20 percent and save $7
billion. "We believe in increasing shareholder value, and we believe
that by decreasing expenditures, we enhance our competitive cost
position and our bottom line," he added.

Nortel Networks plans to achieve the 100 percent internal reduction
through layoffs, attrition and early retirement packages. To achieve
the 20 percent in external reductions, the company plans to
involuntarily downsize 18,000 non-Nortel employees who presently
work for other companies.

"We pretty much picked them out of a hat," said Roth.

Among firms Nortel has picked as "External Reduction Targets," or
ERTs, are Quaker Oats, AMR Corporation, parent of American Airlines,
Lockheed, Boeing, and Charles Schwab & Co. Nortel's plan presents a
"win-win" for the company and ERTs, said Roth, as any savings by ERTs
would be passed on to Nortel, while the ERTs themselves would benefit
by the increase in stock price that usually accompanies personnel
cutback announcements.

"We're also hoping that since, over the years, we've been really
helpful to a lot of companies, they'll do this for us kind of as a
favor," said Roth. Legally, pink slips sent out by Nortel would have
no standing at ERTs unless those companies agreed. While executives at
ERTs declined to comment, employees at those companies said they were
not inclined to cooperate.

"This is ridiculous. I don't work for Nortel. They can't fire me,"
said Kaili Blackburn, a flight attendant with American Airlines.
"Reactions like that", replied Roth, "are not very sporting."

Inspiration for Nortel's plan came from previous cutback initiatives,
said company officials. In January of 2001, for instance, the company
announced it would trim 10,000 jobs over the next year. However, just
two months later, Nortel said it had already reached its quota. "We
were quite surprised at the number of employees willing to leave
Nortel in such a hurry, and we decided to build on that," Roth said.

Analysts credited Roth's short-term vision, noting that the
announcement had the desired effect of immediately increasing Nortel's
share value. However, the long-term ramifications could be
detrimental, said Bear Stearns analyst Beldon McInty.
"It's a little early to tell, but by eliminating all its employees, Nortel may jeopardize its market position and could, at least theoretically,
cease to exist," said McInty. Roth, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
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