Nortel's World is Flat
Nortel reported revenues of $2.91 billion for the quarter, down from $5.75 billion in the year-ago quarter. The company's revenues were down across all product segments and across all regions compared to last year.
The numbers did not come as a surprise, as the company issued a earnings warning little more than a week ago (see Nortel Issues Damage Report).
"There are days when this is nothing short of an endurance test," said Nortel president and CEO Frank Dunn in the company's conference call.
Dunn wasn't all drab, though. He spent a good deal of his spiel highlighting opportunities the company sees in CDMA and VOIP gear. He also noted that Nortel's Optera Connect HDX optical switch will soon be turned on in several networks and that customer feedback is positive (see Nortel's HDX is Here).
"Nortel will become more and more a wireless company, but we're not backing away from optical," he says. Regarding the carrier-spending situation, Dunn says carriers are "very thoughtful... and they're not spending money."
The company's pro forma net loss was $463 million, or 14 cents a share, for the quarter, versus a pro forma net loss of $277 million, or 9 cents a share, during 1Q01. This included an incremental charge of about $200 million for "excess and obsolete inventory."
With all charges added in, Nortel's actual net loss was $841 million, or 26 cents a share, for the quarter. A year earlier, its actual net loss was a stunning $2.58 billion, or 82 cents a share. Nortel says its cash balance at the end of 1Q02 was about $3.1 billion, down from $3.5 billion at the end of the 4Q01.
"We expect our customers to continue to limit capital expenditures, and therefore it is difficult to predict how spending patterns will unfold in 2002," said Dunn, in a statement. "We do not expect a significant downturn or a significant upturn in our revenues for the second quarter compared to the first quarter of 2002."
With continued cost cutting, Dunn says Nortel expects to break even with quarterly revenues of $3.5 billion by 4Q02. (That doesn't include costs related to acquisitions, nor any other special charges.)
Nortel's headcount stands at about 47,000, but it is still aiming to cut another 3,000 people from their ranks in the coming months. Nortel's remaining employees still shake their heads in amazement when reminded that their company employed some 94,500 -- 53 percent more than their current total -- in December 2000. [They have the same reaction, only more violent, when John Roth's salary is mentioned (see Nortel's Roth Rakes It In)].
The bright spot for Nortel continues to be the pedigree of its customers. Though the world's largest phone companies continue to hoard their capex dollars, they freely admit that buying from large equipment vendors such as Nortel is their safest bet. Dunn also pointed out that cost-conscious carriers want fewer, larger vendors in their network, not more, smaller vendors.
The company's stock closed down $0.12 (2.8%) to $4.04 on Thursday. Nortel shares traded at $17.45 a year ago.
— Phil Harvey, Senior Editor, Light Reading