Customers were showing more resolve than originally anticipated to minimise spending in the near term

Frank Dunn Nortel president and CEO

The company also said it was planning to use all of a $1.75bn bank loan which has been on stand-by since it was agreed a year ago - although it does not need the money right away.

At the same time, New York-based phone company Verizon announced its own profits would be hit by an extra charge, to adjust for new accounting rules and the fall in value of businesses it owns in Latin America.

The news came just 24 hours after a profit warning from computing giant IBM triggered a slide in technology shares.

Hard times

The three companies are the first big names in the tech sector to disclose how the first quarter of the year treated them.

The hope was that the beginning of this year would not only improve on the generally poor performance in the previous three months, but would also make up some of the ground lost last year.

Nortel has been struggling to adjust to the downturn in demand which has hit other major firms in the telecoms sector.

During last year it cut about 50,000 jobs, or half its workforce, and outsourced much of its production to save costs.

Undershoot

Nortel noted its results did improve on those recorded between October and December 2001.

But it said its losses for the January-March quarter would be about 14 cents a share, worse than the consensus estimate of 13 cents.

Customers were even more wary of spending that the company had expected, admitted president and chief executive Frank Dunn.

Sales were down 16% on the previous three months. The company had hoped to limit the slide to 10%.

"Customers were showing more resolve than originally anticipated to minimise spending in the near term," he said in a statement.

The bad news for Nortel follows IBM's admission on Monday that first quarter revenue would fall 35% to about $18.5bn (�12.9bn) from $21bn a year ago, sending its share price 11% or $11 lower to $86.20 at one point.

The warning was IBM's first since 1991.