NORTEL Networks Corp, North America's biggest maker of phone equipment, cut its forecasts for sales and profit margins, saying customers are curbing spending amid an economic slump.

Sales will fall 2 percent to 4 percent in 2008, compared with an earlier target of growth in the low single-digit percentages, the Toronto-based Nortel said yesterday in a statement. Third-quarter revenue will be about US$2.3 billion, short of the US$2.66 billion average of estimates compiled by Bloomberg.

Phone companies have trimmed budgets more than expected and some corporate clients are delaying investments because of the "sustained and expanding economic downturn," Nortel said.

Chief Executive Officer Mike Zafirovski is cutting payrolls and moving jobs to lower-cost labor markets to reduce operating expenses.