Momentum continued to build on the Light Reading Index as it closed up for the second week in a row, following some healthy earnings reports. For the week, the Index closed up 69.81 (9.46%) to 807.37.

Nortel Networks Corp. (NYSE/Toronto: NT), one of the sector bellwethers, reported healthy earnings yesterday after market close (see Nortel Logs Good Quarter, Great Year), soothing some nerves on the Street. The company reported revenues for the fourth quarter of $8.8 billion, up 34 percent from $7 billion a year ago. One highlight was that Nortel beat its own optical revenue target of $10 billion for the year. Optical sales were $10.1 billion, more than double its sales the previous year. Today Nortel closed up 3.31 (9.03%) to 40.00.

Not everything was sunny, however. ADC Telecommunications Inc. (Nasdaq: ADCT), announced today that it was lowering earning expectations to $800 million or 6 cents per share, from 12 cents per share. ADC makes equipment for the access market, including hybrid fiber coax products and optical gear for cable TV systems. Its stock was downgraded by several analysts, including SG Cowen and Robertson Stephens. ADC closed down 5.75 (26.98%) to 15.563.

Redback Networks Inc. (Nasdaq: RBAK) on Thursday reported it had met its earnings estimates, but investors were disappointed by their decreasing margins, which went from 76.3 percent to 54.3 percent (see Why Redback Got Whacked). Redback’s management also announced it will no longer break down its earnings statement by product line. On Friday Redback lost another 0.94, (2.29%) to 39.94 after falling 16 percent on Thursday. The stock is down 15 percent on the week.

Earlier in the week Juniper Networks Inc. (Nasdaq: JNPR) and Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) both reported strong earnings (see Juniper Crushes Estimates in Q4) that helped fuel a technology rally. Extreme Networks Inc. (Nasdaq: EXTR) met estimates, while Xilinx Inc. (Nasdaq: XLNX) fell short.

-- Matt Malina, research associate, Light Reading http://www.lightreading.com