Optical/IP Networks

Nortel Scores in Q4

Nortel Networks Corp. (NYSE/Toronto: NT) appears to have finally recovered from several years of turmoil, as it turned a profit for the year and saw its revenues shoot up 12 percent in one quarter.

Nortel's fourth-quarter revenues were $2.83 billion, compared to $2.53 billion during the year-ago quarter.

The company announced a fourth-quarter profit of $499 million, or 11 cents a diluted share, compared to its net loss of $168 million, or 4 cents a share, during the year-ago quarter.

Nortel's numbers blew the doors off analysts' expectations. Analysts were thinking Nortel would have earnings of 2 cents a share and revenues of $2.44 billion, according to Reuters Research.

The company's earnings included a few exceptional items, including: a $109 million profit from discontinued operations; charges of $14 million for deferred stock option compensation associated with acquisitions; and $9 million in special charges related to restructuring activities. Nortel's numbers also included a net tax benefit of $37 million.

Nortel won't give financial guidance for the first quarter of 2004, except to say that it expects a seasonal decline in revenues.

Compared to last year's results, Nortel's wireless network revenues jumped 33 percent, and its wireline network business climbed nine percent. Its enterprise networks business, however, fell 2 percent, and its optical networks business dropped 18 percent compared to 2002's fourth quarter.

The company was extremely chipper about its VOIP equipment prospects, which makes sense given the recent announcements from Verizon Communications Inc. (NYSE: VZ). "When you look at VOIP... people are going to deploy this technology in 2004," CEO Frank Dunn said on the conference call.

Nortel also ended the quarter with a strong cash balance. It had $4 billion in cash and investments, up from $3.6 billion at the end of the third quarter of 2003.

For the full year 2003, Nortel earned $732 million, or 17 cents a diluted share on revenues of $9.81 billion. In 2002, Nortel reported a net loss of $3.27 billion, or 85 cents a share, on revenues of $10.57 billion.

— Phil Harvey, Senior Editor, Light Reading

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