Technology giant Nortel is slashing 1,300 positions, extending a hiring freeze and implementing a freeze on salaries until at least 2009 in an effort to weather an economic downturn ravaging the company's profits.

Revenues have plummeted 14 per cent, contributing to a third quarter loss of $3.41 billion -- the company's biggest loss since the tech bubble burst seven years ago.

The net loss was swollen by a $1.14-billion writeoff of goodwill -- the amount paid for previous acquisitions above their tangible value -- as well as a $2.13-billion income tax hit.

In releasing the results, Nortel also said it is suspending dividend payments on two series of preferred shares.

"We have seen worsening economic conditions, together with extreme volatility in the financial, foreign exchange and credit markets globally, further impacting the industry, Nortel and its customers," CEO Mike Zafirovski stated.

"We are therefore taking further decisive actions in an environment of decreased visibility and customer spending levels."

Roese among those let go

The job cuts are also changing the company's corporate structure with several executive positions being slashed, including the Ottawa-based job of chief technology officer.

John Roese, who was hired just two years ago, is credited with having a vision of the types of technology Nortel should pursue. He was responsible for more than $1 billion dollars in research, which will now be run by three new business units.

"John did fantastic work in setting out our priorities in research and that work will continue just in a different model. In these economic times, it's cheaper to decentralize our research work," said Nortel spokesperson Ann Fuller.

Reacting to the news

The CEO of Ottawa's Centre for Research and Innovation, meanwhile, told CTV Ottawa he believes Nortel is a bell weather company and must react to the situation of the global economy.

"We in Ottawa can only hope that they can continue on. John Roese was wonderful for Ottawa and telling the world how important Ottawa was in the work being done here," said Jeffrey Dale.

Roese was not available for comment Monday morning.

No word on cuts in Ottawa

The company also said there is no news about the sale of its Metro Ethernet Networks division, which employs 500 people in Ottawa.

Although Fuller could not say how many jobs might be cut in the capital, she told CTV Ottawa one quarter of the new cuts will be done before year's end.

Many employees in the capital said the mood following the announcement was somber, yet many are hoping things will work out in the long run.

Zafirovski has now cut 18 per cent of the workforce since taking over in 2005.

"I hope the new measures will help with employee motivation," he said during a conference call Monday.

Although he would not offer formal guidance on what the next quarter will bring, he warned more actions might be necessary if the downturn deepens.

The 1,300 job cuts are on top of 1,200 announced earlier this year. Nortel employs just over 4,000 people in Ottawa.

With a report from CTV Ottawa's Paul Brent and files from The Canadian Press