Nortel: Still Shrinking
Nortel Networks Corp. (NYSE/Toronto: NT) today said in its quarterly earnings release that its revenues will continue to drop for at least three more months, but the company also expects to turn a profit by the end of 2002 (see Nortel Reports on Q4).
Nortel reported that on a pro forma basis it lost $506 million, or 16 cents a share, on revenues of $3.46 billion for the fourth quarter of 2001, which was right in line with both its earlier warning and analysts' expectations (see Nortel: The Bad News is Good).
During the year-ago period, Nortel earned $929 million, or 29 cents a share, on revenues of $8.2 billion. Excluding all one-time charges, Nortel had a net loss of $1.83 billion or 57 cents a share.
The telecom giant hinted that some carrier spending relief would be necessary if it is to become profitable after at least one quarter of declining sales.
In a statement released Thursday, Nortel CEO Frank Dunn said the company expects that revenues for its first quarter of 2002 will be about $3.11 billion, or 10 percent lower than its revenues from the fourth quarter of 2001.
"For the year 2002, we expect a gradual growth in revenues beginning in the second quarter," he says. Dunn also said he expects that Nortel will return to profitability in the fourth quarter of 2002.
"I think Nortel is a little better poised to turn a profit this year than Lucent, but I'm not saying I completely believe they can do it," says Joy Mukherjee, an analyst at A.G. Edwards.
"I think [carrier] capex is unlikely to pick up until we see an improvement in the general economy. If we did see a substantial pickup in capex, it would be closer to the end of the year."
The annual results clearly reflected what a grim year it was in the telecom business. For the year 2001, Nortel reported pro forma revenues of $17.51 billion versus revenues of $27.95 billion for the previous year. It turned in a pro forma net loss of $4.51 billion, or $1.41 a share, compared to a pro forma net profit of $2.5 billion, or 80 cents a share, in 2000.
Excluding one-time charges, Nortel reported a net loss of $27.3 billion, or $8.56 a share in 2001.
Segment by segment, Nortel's businesses took quite a wallop in the face of decreased spending in the telecom market. Its metro and enterprise business revenues dropped 53 percent between the fourth quarter of 2001 and the fourth quarter of 2000. Revenues for its optical long-haul segment dropped 89 percent in the fourth quarter of 2001 compared to the year-ago quarter.
The company says it had about $3.5 billion in cash at the end of the fiscal year.
After apologizing for the company's difficulties and layoffs in 2001, Dunn expressed optimism that 2002 would be a good year, but not a cakewalk, in Thursday's conference call: "This year will not be a cinch for any company in our industry."
— Phil Harvey, Senior Editor, Light Reading