Nortel Networks Corp reported it biggest loss in seven years and announced it would axe a further 1,300 jobs as part of sweeping cost-cutting measures as its customers continue to cut spending due to the financial downturn.

North America’s biggest telecoms equipment maker posted a third-quarter loss of $3.4 billion (£2.1 billion), or $6.85 per share, compared with a $27 million profit, equal to 5 cents per share, a year ago.

The loss includes a $1.14 billion goodwill write-down and a $2.07 billion deferred tax adjustment.

The latest job cuts amount to nearly 5 per cent of Nortel’s 30,000-strong workforce and come on top of 1,200 jobs being cut as part of previously announced restructuring measures.

Nortel said a raft of cost-cutting measures, which include freezing salary increases, cutting back on consultants and reviewing its real estate portfolio, would save the group $400 million next year.

Revenue for the quarter fell to $2.32 billion, down from $2.71 billion a year earlier, in line with analysts’ estimates.

Nortel attributed the revenue decline to the rapid deterioration of the economy, competitive pressures and reduced spending by key telecoms operators.

The group and its rivals, including Alcatel-Lucent, where Ben Verwaayen, the previous head of BT has just taken over as chief executive, are facing stiff competition from Chinese equipment makers such as Huawei Technologies.

Gross margins of 39.2 per cent were slightly higher than Nortel’s projected figure of 39 per cent.

In September, Nortel’s shares fell more than 45 per cent, plunging to their lowest level in the company's history, after the group cut revenue, sales and profit forecasts and said it was considering selling its Metro Ethernet Networks business, which includes its optical and carrier ethernet technology.

The group's shares have fallen more than 90 per cent in the last 12 months.

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