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Financial

Nortel's World is Flat

Nortel Networks Corp. (NYSE/Toronto: NT) reported losing roughly $9.34 million a day last quarter, according to the financial results it released on Thursday (see Nortel Reports Q1). The company also said its next quarter is likely to be flat, with revenues neither shrinking nor growing.

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
http://www.lightreading.com
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kephill 12/4/2012 | 10:34:37 PM
re: Nortel's World is Flat NT website release says optical long haul up 5% over prior quarter.
dljvjbsl 12/4/2012 | 10:34:29 PM
re: Nortel's World is Flat
Dunn says hello wireless, good bye optical.
johnjohn 12/4/2012 | 10:34:29 PM
re: Nortel's World is Flat Alrighty then!

kephill must work in the LH group :)
optical_man 12/4/2012 | 10:34:27 PM
re: Nortel's World is Flat Author: kephill Number: 1
Subject: optical long haul up 5% sequentially Date: 4/18/2002 6:32:17 PM
NT website release says optical long haul up 5% over prior quarter. "

As long as we're making up growth numbers, why didn't they state a 25% increase? Would have sounded better.

On another note, apparently (Over and) Dunn has been studying up on wireless stuff while at Nortel. As a bean counter, I'm sure this is the limit of what he wants to learn about technology, so what do you want to bet that Nortel becomes 100% focused on Wireless going forward? (come on, the CEO has to sound at least semi-literate at Executive Roundtables....and if you ask him to learn about Wirlesss you're ok, if you ALSO ask him to bone up on Optical, you're pushing the limits of a CPA's brain). Remember, he has to keep current on the new tax law changes every year. That bit 'o homework coupled with Wireless tutorials is enough. Throw Optical 'anything' in the mix, and he'll melt down.
Remember, a company is only as good as the person leading it.
zweisel 12/4/2012 | 10:34:26 PM
re: Nortel's World is Flat that is not what he said. he said wireless would dominate in the future, not dissapear. as wireless grows, how do you think the cell bases communicate with each other? optical.
kephill 12/4/2012 | 10:34:23 PM
re: Nortel's World is Flat I was surprised to hear Dunn say, in the conference call, their wireless unit made a profit in Qtr 1. He was very upbeat about their position in the core of wireless infrastructure and indicated they "owned" the wireless core.
Kendo 12/4/2012 | 10:34:20 PM
re: Nortel's World is Flat "enough. Throw Optical 'anything' in the mix, and he'll melt down.
Remember, a company is only as good as the person leading it."

Hum, optical_man, what type of CEO should it be then?

Overall, I see three types of CEO background: Technical, Marketing, Accounting backgrounds.
But unfortunately, "technical" type CEO does not usually exist in large US companies.
CSCO, IBM CEOs are marketing.
Ha, Bill Gate, oops, he is Chief Scientist.

Beam counter? I don't like FD personally. But I have no objection for an accounting background to sit in as large company CEO. Especially on a defensive game where P&L is critical for survival.

Did I disagree with you? Hum...

I will think more this way. My ideal large entreprise CEO focus to hire and manage top tier officers to do the jobs, and finish up the talking to investors, Jack Welsh(sp?)?
So, what's FD doing? :) FD.



Kendo 12/4/2012 | 10:34:19 PM
re: Nortel's World is Flat Kephill:
What's wrong with that? :P
BTW, what solution sets do CSCO and others(JNPR+Err) offer for that ILEC and RBOC space?
I would think it being "wireless edge". Wireless is really not a "core" technology. I suppose it don't have any "core" IP stuffs then.
Belzebutt 12/4/2012 | 10:34:14 PM
re: Nortel's World is Flat There's been some FUD spread here about LH 5000 in the past. Looks like it's alive and well, and going strong.
zweisel 12/4/2012 | 10:34:07 PM
re: Nortel's World is Flat True, most of the FUD is being posted by startups because their PPT (PowerPoint) alone is no longer sufficient to obtain REAL customers.
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