Nortel Networks Corp. is warning of cutbacks and asset sales as it slashes its business outlook amid a worsening economic climate.

The company didn't announce any layoff numbers Wednesday, but did say it is planning to sell its 1,100-employee metro ethernet unit based largely in Ottawa.

The bad news, including management estimates that Nortel's 2008 revenue will be between two and four per cent lower than the previous year, sent shares plummeting on the TSX to an all-time low of $2.76, down $2.96 or more than 51 per cent from Tuesday's close.

Nortel shares traded as high as $18.96 during the past year.

The Toronto-based telecommunications equipment supplier, which has its research and development hub in Ottawa, will conduct a comprehensive review of its business, said CEO Mike Zafirovski.

"As part of the review, planning is underway for further restructuring and other cost-reduction initiatives," he said.

More info in November

In a conference call, he said the company will provide another update in November.

"Throughout this process we will be maintaining our (research and development) investments, our new product introduction timetables and, of course, all customer commitments," Zafirovski told investors.

He also reminded them that when he first joined Nortel almost three years ago, "I indicated to all of our stakeholders, I would not hesitate to take the tough decisions that were the right ones for the company and the shareholders."

In a release Wednesday, Nortel said it is experiencing significant pressure as carrier customers cut back capital expenditures more than previously expected, "and certain enterprise and metro ethernet customers defer new IT and optical investments."

Nortel has said it will seek a buyer for its metro ethernet networks (MEN) unit, described as "a premium asset with a highly differentiated offering."

John Roese, Nortel's chief technology officer, said he is confident the 1,100 employees of the unit, who are mostly based in Ottawa, will keep their jobs.

"The value of MEN is tremendous innovation that's come out of the R&D work, so clearly the people are the most significant asset and the real value of MEN."

Zafirovski said Nortel will "maximize its competitiveness, drive a significant increase in effectiveness and efficiency company-wide, and refocus to establish a clear path for growth, profitability and renewed shareholder value."

In 2000, at its peak share price, the telecom network supplier accounted for more than a third of the value of the entire benchmark index of the TSX. At that time, each share was worth $124.50, or $1,250 after a one-for-10 stock consolidation since then has been taken into account.

The price plunged over the next two years amid the dot-com bust and an accounting scandal. It hit 67 cents – the equivalent of $6.70 – in October 2002. So far in 2008, it has reached new all-time lows a number of times.

The dive in its value has been accompanied by cuts totalling 70,000 jobs since 2001.

With files from the Canadian Press