Nortel Loss Narrows

Nortel Networks Ltd. said losses narrowed in the first quarter due to strong sales, higher margins, and continued cost savings throughout its business. (See Nortel Reports Q1.)

For the quarter, Nortel reported a net loss of $103 million, or 23 cents per share, on revenues of $2.48 billion. That compares to a loss of $171 million, or $0.39 per share, on revenues of $2.39 billion for the year-ago period.

The lighter loss includes a one-time shareholder litigation gain of $54 million related to an adjustment of the share portion of the company's class-action settlement, as well as a special $80 million restructuring charge.

The prior year's first-quarter loss included an income tax expense of $25 million, a shareholder litigation loss of $19 million, and a $39 million benefit related to the sale of company assets.

Driven by strong enterprise, CDMA, and metro Ethernet sales, revenues for the quarter were 4 percent higher than in the same quarter last year, despite the sale of the Nortel's UMTS access business to Alcatel-Lucent (NYSE: ALU) in 2006. Ignoring that sale, revenues would have risen 12 percent. (See Nortel Puts UMTS On a Limb, Alcatel to Buy Nortel's UMTS, Alcatel Snags Nortel 3G Unit, and Analysts: Alcatel Got a Bargain.)

Carrier network revenues fell 6 percent from the year-ago quarter, to $1.01 billion, partly because of the UMTS divestiture. Excluding the UMTS unit (which recorded $660 million in revenues last year), sales would have risen 5 percent.

Enterprise revenues rose to $597 million, up 31 percent year-over-year. Nortel said growth in this segment was driven by voice and data sales.

Services revenues fell 11 percent to $448 million, again due in part to the UMTS access sale. Excluding the impact of that business, sales would have risen 1 percent.

Metro Ethernet revenues were $373 million, up 27 percent over the year-ago quarter. Sales rose primarily due to the completion of large optical and data center contracts, and strong MSO orders.

Gross margins came in at 40.4 percent, the strongest figure in seven quarters. Strong margins were due in part to positive product mix, including higher CDMA sales, as well as the absence of the lower-margin UMTS business. The company expects margins for the year to remain in the low 40s as a percentage of revenue.

Nortel reported cost savings from the UMTS divestiture, as well as lower corporate and employee-related costs. As part of its capital-letter-worthy Business Transformation Plan, the company reports it has saved $100 million in costs during the first quarter and hopes to save up to $1.5 billion by 2008.

Nortel didn't change its full fiscal-year forecast, expecting revenues to be flat or down a bit compared to 2006, due in part (let's all say it together) to the divestiture of its UMTS access business.

— Ryan Lawler, Reporter, Light Reading

materialgirl 12/5/2012 | 3:09:12 PM
re: Nortel Loss Narrows The 31% reported Enterprise and 27% reported metro growth numbers are fantastic. JNPR grew service layer product revenues 12% in the same period, and metro routers very little aside from the $50M deferral from VZ. Are there any one-times in there or what is NT doing right?
Sign In