UPDATE 6-Nortel says will meet targets despite loss
(Updates with stock reversing direction; figures in U.S. dollars unless noted)
TORONTO, May 2 (Reuters) - Nortel Networks Corp (NT.TO)NT.N posted a bigger first-quarter loss on Friday as a series of charges weighed on results, but the telecommunications equipment maker reassured investors that it still expects to meet its full-year targets.
Nortel reported a loss of $138 million, or 28 cents a share, compared with a loss of $103 million, or 23 cents a share, a year earlier.
The latest results included a number of one-time items, including special charges of $88 million for restructuring, a charge of $12 million related to a patent lawsuit settlement, and a loss of $19 million due to changes in foreign exchange rates.
Revenue was $2.76 billion, up 11.1 percent. The boost included a release of deferred revenue related to the completion of a big contract in Nortel's joint venture with South Korea's LG Electronics that was previously expected to happen in the second quarter, the company said.
"The financials were very much better than people expected," said Edward Snyder, principal analyst at Charter Equity Research.
Nortel's shares surged by about 5 percent early on Friday morning on the Toronto Stock Exchange. However, they soon reversed direction to drop 45 Canadian cents, or 5 percent, to C$8.42.
About a year ago, the shares were trading at C$28.62.
Lehman Brothers analyst Inder Singh also called the Toronto-based company's results "solid," adding "most importantly, Nortel kept its annual outlook unchanged."
Chief Executive Mike Zafirovski told analysts during a conference call that revenue from CDMA wireless technology was "down only 2 percent ... despite a pretty tough environment in North America."
In an interview, he added that the performance of Nortel's CDMA businesses in Eastern Europe as well as Vietnam and Indonesia was strong.
"High revenues in those countries have offset some of the declines in North America," he said.
Demand for the wireless technology products that Nortel makes has been tepid as carriers have remained reluctant to spend big on large-scale upgrades or expansions for now.
"For as far out as we can see, it's definitely going to stay that way," Snyder said. "You're not going to see a big increase in spending with carriers, for a bunch of fundamental reasons -- they're not making much more money, so they're not going to spend much more money."
The tight hold that carriers are keeping on their purse strings and stiff competition from low-cost Asian vendors have been among the key reasons behind Nortel's difficulties. Continued...
