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Nortel Posts Q1 Loss

Nortel Networks Ltd. (NYSE/Toronto: NT) dipped into the red in the three months ended March 31, 2005, but recorded higher revenues than a year earlier and at last appears to be catching up with its financial reporting requirements.

The company filed its quarterly results with the Securities and Exchange Commission (SEC) late on Tuesday and has issued a news release today to spell out its first-quarter performance (see Nortel Reports Q1 Loss).

The SEC filing showed first-quarter revenues of $2.54 billion, slightly ahead of an average of analysts' estimates, and a net loss of $49 million, or 1 cent per share. Analysts had expected the vendor to break even on revenues of $2.52 billion.

Those figures compare to year-ago revenues of $2.44 billion and a net profit of $59 million, or 1 cent per share, and fourth-quarter revenues of $2.62 billion, and a net profit of $133 million, or 3 cents per share (see Nortel Reports Q4).

Wireless infrastructure sales account for the majority of Nortel's revenues. CDMA equipment revenues were $535 million, and GSM/UMTS network gear sales totaled $788 million, for a total of $1.323 billion, or 52 percent of all revenues.

The vendor's Carrier Packet Networks business recorded revenues of $664 million, and Enterprise Networks sales amounted to $547 million, with "other" revenues making up the remaining $2 million.

Gross margins in the first quarter were 41.7 percent, down from 43.1 percent a year earlier. Nortel expects its gross margins to remain in the range of 40 to 44 percent for the remainder of 2005, while it expects "continued growth in revenues compared to 2004."

The company noted a number of industry trends affecting the remainder of this year, though. Nortel expects carrier consolidation in North America to "result in a net reduction in customer spending as these service providers focus on improving the efficiency of their combined networks rather than network expansion."

It also noted the growing influence of Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). "Competition in the industry remains strong and our traditional large competitors, newer competitors, particularly from China, and certain smaller niche competitors continue to increase their market share and create pricing and margin pressures," Nortel stated in its filing.

But the vendor also noted specific growth opportunities in "emerging markets such as China and India," citing its wireless infrastructure contract with Indian operator Bharat Sanchar Nigam Ltd. (BSNL) as an example (see BSNL Selects Nortel).

Nortel has suffered an accounting nightmare in the past year and a half, but it now seems close to sorting its internal issues and putting a new reporting structure in place. (See Nortel Rattles Nerves, Nortel CFO Out , Nortel Fires CEO, SEC Pops In on Nortel, and Dunn's Done With Nortel .)

Nortel's share price closed Tuesday at $2.59.

— Ray Le Maistre, International News Editor, Light Reading

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