Nortel 1Q Revenue, Earnings To Miss Expectations

Nortel Networks

For the quarter ended March 31, Nortel said it expects to report revenue of $2.9 billion. Wall Street analysts expected revenue of $3.01 billion, according to First Call/Thomson Financial.

The telecommunications equipment vendor expects a pro forma loss for the quarter of 14 cents per share, a penny worse than analysts' predictions of a loss of 13 cents per share. The loss includes a charge of $200 million for excess and obsolete inventory.

Including acquisition-related costs and charges primarily for workforce reductions, the company expects to report a loss of 26 cents per share.

"Customers were showing more resolve than originally anticipated to minimize spending in the near term. We saw limited capital expenditures by customers," said Frank Dunn, president and CEO of Nortel, in a statement.

Tighter spending resulted in a sequential decline in revenue of about 16 percent compared with previous guidance of about 10 percent, Dunn said.

Nortel plans to report complete first-quarter results on April 18.

Along with the rest of the telecom sector, Nortel has been struggling, cutting nearly 43,000 of its 92,000 employees throughout 2001.

Despite the slump, customers have only lately begun to question their faith in Nortel's long-term viability, said one solution provider.

"It's only been recently, believe it or not, that we've started to have people concerned that Nortel might not be around to support their products," said Mike Mahoney, president of Cardinal Communications, a Nortel solution provider partner based in Edmonton, Alberta.

The company could become an acquisition target once its performance begins to recover, Mahoney said.

"They'll be vulnerable when they start to come out of it. Nobody wants them right now," he said.

Nortel Tuesday also said it will fully draw on a $1.75 billion bank facility and plans to exercise its one-year loan option to obtain an additional year of liquidity. The bank facility would otherwise expire on April 10.

Last week, Moody's Investors Service downgraded Nortel's debt rating to junk status, sending the vendor's stock price to its lowest levels since 1995.

Shares of Nortel Tuesday morning traded up 7 cents to $3.65 on the New York Stock Exchange.