Former high-flyer Nortel lost a massive $3.41 billion and saw its revenue fall to $2.32 billion for Q3, leading to upcoming layoffs of 1,300 people along with a salary freeze in addition to other recent cost-cutting measures.

The news is much worse than in the second quarter, when Nortel only lost $113 million and had revenue of $2.62 billion. A year ago the company was profitable.

“It is important to note, that despite the business environment, we continued to see important, multi-year customer wins in key areas of our business, validating the value and innovation that Nortel delivers to customers,” CEO Mike Zafirovski said.

The layoffs and other measures should save the company $400 million in 2009, he noted. In the upcoming fourth quarter Nortel expects to see additional from the completion of wireless contracts, the company added.

The total impact of Nortel’s latest moves may not be enough. Its layoffs and restructurings go back a decade, with similar announcements in 2004, 2001 and 1998.