NEW YORK (CNN/Money) - Nortel Networks Corp. warned of lower sales and a wider loss in the first quarter Tuesday as the telecommunications equipment provider grapples with sluggish customer demand.

Nortel now expects to post a first-quarter loss of 14 cents a share, wider than the 13 cent loss analysts forecast, according to earnings tracker First Call. The revised estimate includes a $200 million pre-tax writeoff of excess and obsolete inventory.

The company, which expects to report results on April 18, also anticipates quarterly sales of $2.9 billion, below the firm's previous expectations. CEO Frank Dunn said customers' "limited capital expenditures" caused sales to fall 16 percent sequentially in the first quarter, worse than previous guidance for a 10 percent drop.

Including acquisition-related expenses and severance costs, Nortel expects a net first-quarter loss of 26 cents a share.

Nortel (NT: up $0.05 to $3.63, Research, Estimates) shares, which traded at more than $80 in 2000, were about 2 percent higher in Tuesday morning trading.

Telecommunications firms were slammed last year as businesses that spent millions upgrading and expanding information technology (IT) suddenly faced a recession and drastically cut back on capital expenditures.

Separately, Nortel said it intends to draw fully on its $1.8 billion bank facility and plans to exercise its one-year term loan option to improve liquidity.

The move comes a week after Moody's Investors Service cut Nortel's debt rating to "junk" status, citing a weak earnings outlook.

"The company does not have an immediate need for these funds," Dunn said. "However, by taking this action we have taken advantage of the favorable terms in our current facilities rather than seeing this source of liquidity eliminated."

Nortel said it chose to fully draw down its credit line after its creditors failed to unanimously extend the facility, which expires on April 10.

The company also said it expects to report $3 billion in cash for the first quarter, mainly due to tax recoveries.