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Nortel: Losses and Layoffs, Eh?

Nortel Networks Corp. (NYSE/Toronto: NT) lived up to lowered expectations with its earnings announcement today (see Nortel Issues Mediocre Q1 Results).

In an interesting twist, Nortel, which late last year badly missed its projected earnings and revenue numbers, is now declining to give investors any guidance for their financial performance in 2001.

Nortel's revenues for its first fiscal quarter of 2001 were $6.18 billion, a 2.2 percent decrease from the year-ago period's $6.32 billion, but in line with the warning the company issued three weeks ago. The company's net loss for the quarter was $385 million, or 12 cents a share, in line with analysts' expectations. During the year-ago quarter, Nortel earned $347 million, a profit of 12 cents a share.

In March, Nortel said it expected revenues in the range of $6.1 billion to $6.2 billion and a loss from operations in the range of 10 to 12 cents a share for the quarter. Only a month earlier, Nortel had thought it was going to see $6.3 billion in revenues and a loss of 4 cents a share (see Nortel Warns of Shortfall, More Layoffs and Nortel's Nasty Surprise).

Nortel CEO John Roth again declined to give any guidance going forward for the quarter or the remainder of the year 2001.

Compared to its first quarter of 2000, Nortel's network infrastructure segment saw a 2 percent decrease in revenues, and its components business saw its revenues fall by 22 percent. Also comparing Q1 2001 to Q1 2000, Nortel said its revenues outside North America grew 38 percent, while its revenues for the U.S. and Canada dropped 23 percent. Nortel executives noted on the conference call that business in its Metro Optical group doubled from year-ago levels.

The company also said it would be laying off 5,000 more workers than previously announced, bringing its total job cuts to around 20,000 by the middle of this year. From its headcount of about 94,500 in December 2000, Nortel's most recent layoff total indicates that it will have cut some 21 percent of its staff in less than six months. CFO Frank Dunn said the cuts are expected to save a total of $2 billion in annualized costs.

A hint of optimism came when Roth said on the conference call that demand for long-haul optical capacity would pick up before the end of the year. He believes that the top carriers are currently operating at 70 percent to 80 percent capacity, and that they would start to max out that capacity in "three to four months."

"Some of these networks will be nearing capacity in the coming months," said Roth.

In after-hours trading on the Island ECN, Nortel's stock sat at $17.55, down slightly from Thursday's close of 17.80.

-- Phil Harvey, Senior Editor, and R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com
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prefer_to_lurk 12/4/2012 | 8:32:33 PM
re: Nortel: Losses and Layoffs, Eh?
Could you possibly enlighted me on when the last "woeful earnings announcement" was ?

I think you've confused press releases with official earnings releases. The Q400 results were fantastic, and Q300 merely fell a little shy of overly optimistic revenue expectations, so I don't know how you figure NT has announced a disappointment two quarters in a row...

Instead of focusing on colorful analogies, maybe you should spend more time on research.

ptl
Scott Raynovich 12/4/2012 | 8:32:32 PM
re: Nortel: Losses and Layoffs, Eh? Hmmm, maybe your glasses are rosier than ours.

Nortel's now infamous Q3 2000 quarterly results, in which the company beat profit estimates but shocked the market by showing a sequential decline in revenue, sparked a massive selloff in Nasdaq and was one of the first signs what became a long-term bear market in the optical sector. In retrospect, that announcement was actually the first real harbinger of the grand carrier spending slowdown that is now common knowledge

http://www.lightreading.com/do...

Then, after a revenue shortfall, Nortel did something quite strange in Nov. of 2000. It projected "strong growth" for 2001.

http://www.lightreading.com/do...

Then Nortel warned about Q1.

http://www.lightreading.com/do...

Then before Q1 2000 ended, Nortel warned AGAIN that it would shrink more than the previous warning, showing revenues of $6.1 to $6.2 billion, below 2000's levels of $6.3 billion.

http://www.lightreading.com/do...

Now John Roth is not issuing guidance. Is the picture any clearer?

gladysnight 12/4/2012 | 8:32:31 PM
re: Nortel: Losses and Layoffs, Eh? Like the mobile operators Nortel is showing the downside of a market share rather than profit focussed strategy.

Sooner or later, you have to show profits, and given no substantive changes in your underlying costs, you do this by raising prices, ie by sacrificing the market share you've effectively been buying up to that point. Under these circumstances you can expect revenue to decline. What Roth is not saying is that he has no idea wether his customers will pay higher prices in a downturn, but he suspects not.

The most worrying thing I see about Nortel is this "no guidance is possible" line that Roth has been peddling. It reminds me of a guy I once saw who complained that he didn't know how he felt about his wife, in response to which the question was asked of him "Well, then who SHOULD we ask?"

Well Roth: Who SHOULD we ask for guidance on Nortel? A palm-reader? Elvis?

Get Real.
lighthearted 12/4/2012 | 8:32:30 PM
re: Nortel: Losses and Layoffs, Eh? dump the rest because they are going down again. just wait for europe to fall.
calsurf23 12/4/2012 | 8:32:30 PM
re: Nortel: Losses and Layoffs, Eh? In light of recent market behaviors towards entities that even REDUCE guidance, it'll be interesting to see how the market reacts to a CEO that refuses to offer ANY guidance...
Doesn't matter much to me anymore, anyhow, I dumped my NT shares a few days ago, taking a HUGE haircut in my 401(k), but have recouped it nicely, but not fully thanks to FNSR, AVNX, OCPI, EXTR and LR...
Thanks for the news, guys!
kcufde 12/4/2012 | 8:32:28 PM
re: Nortel: Losses and Layoffs, Eh? what i really can't make out is , to show the profit why they have to layoff people. First of all why did they hire so many people ???
i think the government should take strict action on companies

Is it Nortel networks or Non-sense networks, i can't understand !!!!
laserboss 12/4/2012 | 8:32:26 PM
re: Nortel: Losses and Layoffs, Eh? I can't believe either--20000 by Nortel and 15000 by CSCO.....what's wrong!! How the hell they hire so many in first place....they give 4 months packages..is it enough if only one spouse works...i guess that is America...i feel sorry for a young couple who buy a house, new car and with kid......god that is scary......
gladysnight 12/4/2012 | 8:32:25 PM
re: Nortel: Losses and Layoffs, Eh? laserboss wrote "...i feel sorry for a young couple who buy a house, new car and with kid......god that is scary......"

Me too, but NOT cos one of them lost their job.

Because they've been taught that its sensible to undertake such credit risks at such an age and without any solid asset backing.

US savings rate has gone from 8% to minus .8% during the 90's. In anybodies book, this is BAD NEWS.

Serious defaults and bankruptcies will hammer the entire market for years to come. Check out Japan and see. And if you think America is different, you're right, Americas financials are a LOT WORSE than Japans.
Belzebutt 12/4/2012 | 8:32:24 PM
re: Nortel: Losses and Layoffs, Eh? "In an interesting twist, Nortel, which late last year badly missed its projected earnings and revenue numbers"

As I reacall, last year's numbers were 17 cents/share instead of 18 cents/share. This is the same as Cisco's numbers, and it's by no means "badly missing". When optical grew 90% instead of the projected 110% by "analysts", and then stock drops by 30%, it really seems more like investors are picking on Nortel and not Nortel doing something wrong. Cisco stock dropped only 15% or so after missing by the exact same numbers.

Belzebutt 12/4/2012 | 8:32:24 PM
re: Nortel: Losses and Layoffs, Eh? "Well Roth: Who SHOULD we ask for guidance on Nortel? A palm-reader? Elvis?"

If he says he can't say, would you rather have him give you meaningless guidance, or no guidance at all?
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