Nortel Reports 2Q Loss, Predicts Profitability By June 2003

Nortel Networks

The company expects limitations on its customers' spending to continue well into 2003 but has seen business activity begin to stabilize, said Frank Dunn, president and CEO of Nortel, based here.

"By June of next year I expect to turn profitable, and we'll be managing our cost structure and our investment portfolio to match the activity and what we see in the market on a real interactive basis," Dunn said.

The company expects to break even when it reaches $3.2 billion in quarterly revenue, a figure it could potentially revise, Dunn said.

Dunn said potential areas for growth among Nortel's enterprise business include managed services, VPN, security and voice-over-IP.

In May the company announced plans to cut 3,500 employees, the latest in a series of layoffs that has dropped its head count to around 42,000, down from 92,000 at the beginning of 2001.

For the quarter ended June 30, Nortel reported a loss of $697 million, or 20 cents per share, compared with a loss of $19.4 billion, or $6.08 per share, in the same quarter a year ago.

The company reported a pro forma loss of $323 million, or 9 cents per share, compared with a pro forma loss of $1.55 billion, or 48 cents per share, in the year-ago quarter.

Revenue for the quarter dropped 40 percent to $2.77 billion, down from $4.61 billion in the 2001 quarter.

Wall Street analysts expected the company to report a loss of 9 cents per share on revenue of $2.8 billion, according to First Call/Thomson Financial research.

Nortel ended the quarter with a cash balance of $4.9 billion, including almost $1.5 billion from recent equity offerings, and said it expects to continue to cut selling, general and administrative expenses through the rest of 2002.

The company expects revenue for the third quarter to be essentially flat with the second quarter, Dunn said.

Shares of Nortel Thursday closed down 4 cents at $1.31 prior to the earnings report.