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Earnings reports

Nortel Earnings Are Upbeat

Nortel Networks Corp. (NYSE/Toronto: NT) had its first upbeat report in months, after markets closed today (see Nortel Reports Q4 ).

While it's too soon to call an uptick, the news lines up with analysts' modestly optimistic expectations for Nortel, as previously reported in Light Reading (see Nortel’s Quarter Perking Up?).

The vendor reported sequential quarterly revenue growth of US$2.52 billion for the quarter, about 7 percent more than the $2.36 billion reported last quarter (see Tarifica Touts Billing Asia 2002). Net loss for the quarter was $248 million, or $0.06 per common share, in line with analysts' expectations.

Cash decreased, closing at $4.1 billion, compared to $4.59 billion last quarter, but operating cash flow was positive, Nortel reported.

"Overall, we are pleased with the results," said CFO Doug Beatty on a conference call with analysts. "The bulk of our restructuring actions are complete." CEO Frank Dunn continued in this vein, adding: "We're going to move away from... restructuring mode... into driving earnings above breakeven level to [achieve] reasonable returns.... We can now focus on moving forward."

As to the outlook, Nortel anticipates that revenues for the present first quarter of 2003 will be lower than the quarter just reported. Still, the company hopes to "achieve pro forma profitability by the second quarter of 2003."

Nortel's planning around anticipations of a "single digit" reduction in carrier capital spending in 2003, Dunn said. The company thinks enterprise spending will be "flat to marginally up." The "wild card," Dunn says, is the "geopolitical situation around the globe."

Growth was up in all segments and across all regions sequentially, although not year over year:

  • Wireless Networks: Quarterly sales were US$1.01 billion, up 8 percent, thanks to business in Europe, the Middle East, and Africa (EMEA); Asia; and the U.S., offset by a decrease in Canada, Nortel reported. Compared to the fourth-quarter 2001, sales were down 16 percent.
  • Enterprise Networks: Quarterly sales were $654 million, up 6 percent, thanks to business in EMEA, Latin America, and Canada, and flat performance in the U.S., offset by a decrease in Asia. Year over year, sales in this segment were down 18 percent.
  • Wireline Networks: Quarterly sales of $506 million were up 5 percent, reflecting sales in the U.S., Asia, and EMEA, offset by "considerable decreases" in Canada and Latin America. Year over year, revenues decreased 45 percent.
  • Optical Networks: Quarterly sales of $344 million were up 11 percent, reflecting increases in Canada, Asia, and the U.S., although sales decreased in EMEA. Year over year, the segment decreased 26 percent.


In his comments, Dunn touted Nortel's position in wireless, where he says the company continues to increase its market share and expects further business to emerge worldwide, including on the wireless LAN front. He also mentioned hopes for continuing success in the enterprise segment, with voice over IP, voice portals, enterprise data networking, and other gear. VPNs and networked storage will continue to be key to the company's strategy.

— Mary Jander, Senior Editor, Light Reading
B2Itried 12/5/2012 | 12:49:16 AM
re: Nortel Earnings Are Upbeat Numbers are low( so are the people). Mr Dunn mentions; "The "wild card," Dunn says, is the "geopolitical situation around the globe."

Well Sir it is you who choose to relocate half your R&D to India (most sencitive nuke captial in the world today).

Secondly I don't see any positives sounds like your reports seem similar and job cuts still coming.

Nortel can't restructure anylonger cause nobody is there.

B2
Machavelli 12/5/2012 | 12:49:14 AM
re: Nortel Earnings Are Upbeat Frank Dunn might think things are upbeat, but reality is that: 2003 is a flat year at best.

Nortel's principal customers are going to take full advantage of Nortel (i.e Frank Dunn's) desparation to keep Nortel's head above water.
Carriers like SBC and Verizon are notorious for negotiating supply agreements with razor thin margins.

The other thing Nortel keeps bragging about is its new contracts in India and China. Anyone familiar with these regions of the world will tell the decision makers there expect much compensation to swing any business you way. I think the bookkeepers call this practice "facilation payments".

Time will tell, but I predict the optical division will be sold in 2003 or early 2004.
I also think another 5000 heads will roll this year.

M
Reindeer 12/5/2012 | 12:49:02 AM
re: Nortel Earnings Are Upbeat [email protected] - "Well Sir it is you who choose to relocate half your R&D to India (most sencitive nuke captial in the world today). Secondly I don't see any positives sounds like your reports seem similar and job cuts still coming. Nortel can't restructure anylonger cause nobody is there."

ARe you for real or just a disgruntled ex-employee? You comment about India is just pure racist based. If a nuke goes off in India, the entire planet's economy would collapse not just Nortels. Do you think that only Nortel is doing R&D in India? ALso, he did say the restructuring is nealry complete and there is still tens of thousands on people working there which is still more than most of its competitors.

futureisbright 12/5/2012 | 12:49:01 AM
re: Nortel Earnings Are Upbeat - revenue @ $B2.5 compared to LU @ $B2

- proforma loss of $62M, spitting distance to breakeven

- strong rumors of hiring authorized

- barring any further disaster, NT is looking at its first profitable year in a long time

- Most likely potential disasters
- carrier voip spending doesn't come
- umts revenue won't rise to support the expenses
- gsm continues to slide

- Any of these potentials could result in another write off, although no longer of the magnitude of recent history


Best of luck NT!
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