Nortel hits profit and stock rallies on outlook
TORONTO (Reuters) - Nortel Networks Corp (NT.TO) NT.N swung to a third-quarter profit and predicted a "very solid" fourth quarter on Tuesday, sending its shares higher, but revenue fell slightly short of expectations as the company ran into problems filling some orders.
Nortel, North America's biggest maker of telephone equipment, said it earned $27 million, or 5 cents a share, in the quarter ended September 30, compared with a year-earlier loss of $63 million, or 14 cents a share.
Investors were pleased with Nortel's results and outlook, driving the shares up C$1.93, or 12.7 percent, to C$17.16 on Tuesday morning on the Toronto Stock Exchange.
The stock is still far from its year high of C$37.35, set in February. It hit a year low of C$14.56 earlier this month.
Nortel continues to be challenged in the markets in which it operates, Chief Executive Mike Zafirovski told analysts during a conference call. Some telecoms companies for example, have chosen to cut their network spending.
"I think it's safe to say that this environment has become tougher," he said. "I think in totality, we are positioned well for modest growth in 2008."
In an interview, Zafirovski characterized the prospect of modest growth next year as the "worst case."
Nortel's outlook came after competitor Alcatel-Lucent (ALU.N) (ALUA.PA) last month said it would cut an additional 4,000 jobs by 2009 and trimmed its full-year revenue growth expectations again after seeing fresh signs of a slowdown.
Nortel reported a 7.8 percent dip in third-quarter revenue due in part to difficulty in filling some customer orders, which led to the deferral of $45 million in revenue. Revenue for the quarter was $2.70 billion, down from $2.93 billion a year earlier.
Excluding the sale of the company's UMTS access unit announced last year, revenue declined by only 2 percent.
Zafirovski said the difficulty in filling orders resulted from "some issues" with a CDMA wireless technology manufacturing center.
Such problems will occur from time to time, but are not expected to plague the company regularly, he added.
Analysts expected Nortel to earn 12 cents a share before one-time items on revenue of $2.78 billion, according to Reuters Estimates
Nortel booked $56 million in restructuring charges during the quarter, compared with $22 million a year earlier.
The company has gone through a number of painful restructurings in the wake of the tech bubble's collapse at the start of the decade. It has also struggled with an accounting scandal, which led it to purge its corner office. Continued...
