Nortel Monday reported a net loss of US$3.4 billion for the third quarter, and also announced plans to cut 1,300 jobs in a bid to lower costs.

A year ago, Nortel had a net profit of $27 million. Revenue in the third quarter was $2.32 billion, a 14 percent decrease compared to a year ago. Nortel blames a challenging economic environment, competitive pressures and reduced spending by key carrier customers, especially in North America, for the drop, according to a statement.

The results for the quarter included a $2.07 billion charge for deferred taxes and a $1.14 billion goodwill write-off, related to its enterprise and metro Ethernet networks business segments.

The bad news doesn't end there; the company also lowered its guidance for the full year. Nortel now expects revenue to decline by around 4 percent compared to 2007. It previously stated that it expected a drop between 2 percent and 4 percent. Deteriorating economic conditions were also blamed for the weaker forecast. The unfavorable impact of foreign exchange will also take its toll, the company said.

Besides the plan to cut 1,300 jobs, Nortel also put in place a number of other measurements to reduce its corporate structure and lower costs, including freezing salaries, extending its existing hiring freeze through 2009 and making deeper cuts in discretionary spending.

Adding to that, the company will do a comprehensive re-evaluation of all real estate holdings, according to a statement.

In the end, CEO Mike Zafirovski wants to end up with "a simpler and leaner company," to be able to better compete, according to a statement.