Nortel Posts Loss but Says Recovery Is on Track

By
Stephen Lawson, IDG News Service
May 3, 2008, 9:44 PM ET
2 min read

— -- Nortel Networks reported growing revenue for the first quarter of this year and said its recovery plan is on track, even as it posted another loss.

The struggling communications vendor reported revenue of US$2.76 billion, up 11 percent from a year earlier. The result was boosted by a release of deferred revenue related to a contract for the company's joint venture with LG Electronics, Nortel said Friday. Revenue was significantly higher than analysts' estimates of $2.49 billion, reported by Thomson Financial.

Nortel lost $138 million, or $0.28 per share, compared with a net loss of $103 million, or $0.23 per share, a year earlier. Excluding special items, such as restructuring charges and interest expenses, the company lost just $0.05 per share. On that basis, analysts had estimated Nortel would lose $0.14 per share.

The Brampton, Ontario, company is going through a lengthy restructuring after a downturn in telecommunications earlier this decade, compounded by an accounting scandal that led to numerous restatements of results. In carrier equipment, one of its core businesses, vendors now face a shrinking pool of potential customers. In February, after reporting losses for the fourth quarter and full year of 2007, Nortel said it would cut 2,100 jobs.

But Nortel reported a 21 percent gain in carrier revenue, to $1.2 billion, with help from the contract completion by LG-Nortel. Its revenue from CDMA (Code-Division Multiple Access) mobile networks fell slightly from a year earlier, as did sales of legacy carrier switches.

Enterprise networking revenue grew at a slower pace of 7 percent, to $641 million, with higher voice and applications sales offsetting a drop in enterprise data networking in North America and Europe, the Middle East and Africa. Nortel's smaller Global Services business grew 15 percent in revenue, while its metropolitan Ethernet networks unit suffered a 12 percent drop in sales. The company attributed that business' decline to big-contract completions a year earlier.

The company said its margins had improved in the first quarter, and it stuck to its earlier 2008 forecast, saying revenue would grow in the low single digits compared with 2007.

Despite some good news in the report, Nortel's stock on the New York Stock Exchange (NT) fell with the overall market on Friday, down $0.29 at $8.31 in afternoon trading.