Nortel rethinks options after shares crash

Nortel Networks is revamping its stock options package to try and keep key staff after its tumbling share price made current deals worthless.

The firm has admitted that at least half of the total share options held by staff are currently 'underwater', where the exercise price is higher than the market price.

A recent Andersen report revealed that over half the share options granted at flotation prices by firms listing on the London Stock Exchange in the last four years are now worthless. Over half the companies questioned for the report were hi-tech firms.

Nortel employees will be eligible to receive two new options for every three granted between 12 November 1999 and 12 February 2001, or three for every four granted on or after 13 February 2001.

New stocks will be issued at least six months and a day after the cancellation of previous options, and are only available to non-board members.

John Roth, chief executive at Nortel, said: "Stock options are a key component of a competitive rewards package in the global technology industry where competition for the best talent is always fierce, even in a market downturn.

"This is an extraordinary step that is essential so we may continue to attract, retain and reward our talent in a highly competitive labour market."

As of 31 May 2001, Nortel said that approximately 333 million options to purchase common stock were issued and outstanding, and that approximately 33 per cent of these options are expected to be eligible for the programme.

Nortel lost $2.6bn in the three months to March and has previously said it will cut more than 15,000 jobs this year.

See also:

Cisco says no to Nortel

Bargain-basement shares not an incentive  22 Nov 2001

Nortel axe falls on 330 UK jobs

Nortel's plans to cut another 10,000 jobs globally will mean 330 losses at its Monkstown factory in Northern Ireland, the fourth lot of cuts at the telecoms components plant this year.  25 Jun 2001

Tech execs cash in before the crash

Silicon Valley's top executives are receiving record amounts of cash in compensation.  18 Jun 2001

Nortel to shed 10,000 staff

Networking giant Nortel is slashing staff numbers to regain ground lost after it incurred second quarter losses of $19.2bn due to market slowdown.  15 Jun 2001

UK staff warned of dotcom tax bomb

Employees made newly redundant from a dotcom may face hefty tax bills for now worthless share options if they haven't taken professional advice, accountants have warned.  09 May 2001

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