TORONTO – Nortel Networks Corp lived up to an earlier warning on Thursday, delivering a stinging second-quarter loss of $19.4 billion as revenues declined, and while no forecasts were given, the company said its financial health has improved.
``Visibility still remains clouded so there is no forecast at this time...we are pleased with our cash position and liquidity of the corporation,'' said John Roth, Nortel's chief executive, in a conference call with investors.
Roth said demand is still weak as phone company engineers employ creative methods to squeeze more capacity out of existing equipment and companies continue to digest gear they have already purchased.
The world's No. 1 maker of telecommunications equipment said the net loss in the second quarter, including charges, was $19.4 billion, or $6.08 a share, in line with its June 15 warning. It is one of the largest corporate losses in history.
Losses from continuing operations for the second quarter were $1.55 billion, or 48 cents a share, compared with net earnings of $637 million, or 21 cents a share on a diluted basis, for the corresponding period in 2000.
Revenues in the quarter dropped to $4.61 billion, from $7.21 billion, but remained above analyst estimates of $4.47 billion.
Analysts said the news dimmed hopes of an early rebound in the troubled telecoms sector, where stock prices boomed last year only to beat an ignominious retreat.
``This puts the kibosh on a second-half recovery in the telecom equipment industry, because they are saying there is no visibility in the second half for this year and they don't expect meaningful growth and meaningful revenue until the second half of 2002,'' said Anthony Scilipoti, an analyst at Veritas Investment Research.
Nortel assuaged fears that it is facing a cash crunch, noting it has increased available resources to over $5 billion, including a $200 million increase in cash on hand to $1.9 billion, and an untapped credit facility of $2 billion.
Furthermore, the company has reduced its unfunded vendor financing commitments by $600 million to $2 billion, with total commitments at $3.1 billion. Nortel said total commitments should fall to $2 billion by the end of the year, as customers and Nortel decide on reduced levels of equipment purchases.
The overall loss included charges in line with the earlier warning, comprising $2.8 billion for the discontinuation of the company's Access Solutions division, $833 million for job cuts and $12.3 billion for the writedown of intangible assets and acquisitions.
Nortel said it has already reduced its workforce by 23,000 employees, and expects to eliminate another 7,000 jobs within 8 weeks. When all the cuts are complete, total payroll costs will have dropped by about 30 percent.
The company said network infrastructure revenues decreased 39 percent in the second quarter. Wireless sales grew ''substantially'' in Asia and the United States but declined in Latin America and Europe.
``Wireless is the one bright spot in Nortel in this quarter with 20 percent growth in the quarter,'' added Roth.
The optical components division saw a 78 percent decrease in sales from the same period of 2000, with intercity optical sales experiencing the brunt of the decline.
Gross margins took a hit, falling to 9 percent, mainly because of the $750 million in inventory-related charges.
Shares of Nortel closed up 30 Canadian cents at C$11.90 in Toronto on Thursday and are now less than one-tenth of their 52-week high. In New York the shares closed up 17 cents at $7.75. The shares have underperformed their peers since their September high, with Cisco Systems down 72 percent and Lucent Technologies off 85 percent in the same time frame.