Nortel optimistic on full-year targets

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Nortel Networks, the Canadian telecommunications equipment maker, reported a wider first-quarter loss on Thursday, reflecting a series of special charges, but revenues rose and the company said it still expected to meet its full-year targets.

The net loss of $138m, or 28 cents a share, compared with a loss of $103m, or 23 cents a share, a year earlier. The latest loss included restructuring charges of $88m compared with $80m a year earlier, a $12m charge related to a patent lawsuit settlement, and a loss of $19m due to changes in foreign exchange rates.

Revenues increased by 11.1 per cent to $2.76bn, partly reflecting a release of deferred revenue related to the completion of a big contract in Nortel’s joint venture with LG Electronics that was previously expected to happen in the second quarter.

“Nortel had a strong first quarter, driven by the completion of a contract in our LG-Nortel joint venture and continued improvements in gross and operating margins,” said Mike Zafirovski, chief executive. “We expect to achieve our full year guidance and we continue to make solid progress against the strategy to turn around the company.”

Underscoring Nortel’s continuing progress, operating margins expanded for the seventh consecutive quarter year over year, recording a 512 bps improvement to 4.7 per cent.

Mr Zafirovski acknowledged that the telecoms infrastructure market remained tough but said demand for 2G and 3G infrastructure continued and noted that Nortel won key deals with operators around the world, including a $100m contract with India’s BSNL and a five-year contract extension with US Cellular.

Sales of wireless equipment based on CDMA (Code Division Multiple Access) technology was “down 2 only per cent...despite a pretty tough environment in North America,” he told investors during a conference call.

Analysts noted that the results were significantly better than expected and that investors were reassured that the company left its annual outlook unchanged. The shares gained 4.5 per cent to C$9.27 in early trading on the Toronto Stock Exchange, but had slipped back by lunchtime.

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