Nortel Meets Guidance but Sales Will slide

TORONTO – Nortel Networks Corp. reported fourth-quarter sales Thursday that were slightly higher than it forecast, but predicted its revenues would slide 10 percent in the next quarter.

The company, one of the world's biggest telecoms equipment makers, said the economic downturn is still weighing on its customers' spending plans and that will result in a 10 percent drop in sales in the first quarter from the fourth quarter. Analysts had expected sales to be flat.

"At this time market visibility remains limited given the uncertainty of the economic downturn and its impact on our customers' businesses and spending plans," said Frank Dunn, Nortel's chief executive.

"Our bottom-line results, compared to third quarter of 2001, were driven by a lower cost structure," he added.

Brampton, Ontario-based Nortel said its pro forma loss for the fourth quarter was $506 million, or 16 cents a share, compared with a profit of $830 million, or 26 cents a share, in the year-ago period. The net loss, including acquisition and restructuring costs, was $1.8 billion, or 57 cents a share, or 6 cents better than the company forecast.

The net loss was smaller than expected because the company sold off some of its businesses late in the quarter, Nortel said.

Sales in the quarter were slightly higher than company guidance at $3.46 billion, but 60 percent below the $8.8 billion in sales posted for the fourth quarter of 2000, when demand for telecoms equipment was at its peak.

Weakness was felt in all product areas on a year-over-year basis, although short-haul or metro optical equipment sales increased 8 percent over third-quarter levels. Wireless equipment, seen as the bright star in Nortel's portfolio, slipped 21 percent year over year, and 11 percent from the third quarter.

Nortel told investors in mid December to expect revenues of $3.4 billion, and a 16 cent per share pro forma loss, or a 63 cent per share loss including all restructuring and acquisition costs.

For the full year ended Dec. 31, sales were $17.1 billion, with a total loss of $27.3 billion, or $8.56 a share, compared with revenues of $27.9 billion and a loss of $3.5 billion, or $1.17 a share, in 2000.

Shares of Nortel closed up 61 Canadian cents at C$12.34 on the Toronto Stock Exchange Thursday. They have risen about 18 percent since the company released better-than-expected fourth-quarter guidance Dec. 21. This compares to a 14 percent gain in the shares of competitor Lucent Technologies in the same period.

Nortel's cash reserves also improved, rising to $3.5 billion, up from $3.35 billion at the end of September, while total liabilities eased to $16.2 billion from $17.2 billion at the end of September.

($1=$1.61 Canadian)