Nortel Posts 2Q Loss, Revenue Decline

"The underlying demand continues to reflect cautious spending and an extended sales cycle," said Frank Dunn, president and CEO of Nortel, Brampton, Ontario, during a conference call.

Revenue from Nortel's enterprise networks business declined 14 percent year-over-year and 11 percent compared with the first quarter.

The results were "clearly disappointing," Dunn said.

"What we saw was that in the small and midsize business, in telephony ... that business slowed down for us," he said.

Nortel's channel partners did not go after that SMB telephony business as aggressively as the vendor had hoped, he said.

"We continue to work very aggressively in channel development efforts which should drive and will drive momentum going forward," Dunn said.

The company has placed more emphasis on its enterprise business this year, bolstering both its channel programs and enterprise product lines.

Nortel's three service provider business segments--wireless networks, wireline networks and optical networks--also declined compared with the previous year.

For the second quarter, ended June 30, the company reported a loss of $14 million, breaking even on a per-share basis, compared with a loss of $697 million, or 20 cents per share, the same quarter a year ago.

Revenue for the quarter dropped to $2.33 billion, down approximately 16 percent from $2.77 billion the same quarter last year.

Financial analysts expected the network equipment company to report a profit of 1 cent per share, according to Thomson Financial/First Call.

The company did not provide revenue or earnings guidance for the third quarter.

Shares of Nortel Thursday closed up eight cents at $3.05 prior to the announcement.