It is not clear how the cuts will affect Nortel's R&D budget, which totalled nearly $1.9 billion in 2005, representing about 18 percent of all revenues. A spokeswoman said Zafirovski has not stated the R&D spending goal for 2006, although the changes he described would cut about $10 million in that category.

In his presentation to analysts on Tuesday, Zafirovski also said he is trying to reduce $1.5 billion in spending over three years, with more than $600 million of that total derived from services, enterprise and R&D efforts. Those funds will be a "significant driver for targeted operating margin expansion," he said.

In general, Zafirovski said he is focusing on product areas that can bring Nortel to 20 percent market share within three years, which he said means the products need to be "truly relevant" and can make Nortel first or second in the market with some exceptions. Nortel will be emphasizing software and services, with less emphasis on hardware and products, he said.

Nortel will report its first-quarter 2006 financials on June 5, but expects revenues to be flat to slightly down, with the rest of 2006 resulting in high single-digit growth compared with 2005, he said. In response to a question, Zafirovski also said the remainder of the year will yield "good performance" in sales of optical networking gear, with "continued strong performance in enterprise, particularly on the voice side."

The harshest criticism of the company came from analysts. "What he says sounds good, but Nortel has announced things that sounded good in the past and they are still digging out," said Jeff Kagan, an independent analyst in Atlanta. "So at this point, we'll have to wait and then reward them after they are successful."