Struggling Canadian networking giant Nortel Networks Corp. (Quote) narrowed its fourth quarter pro-forma and net losses, as compared to the prior quarter. Company officials also said they expect a return to profitability by the end of this year.
Nortel's pro-forma loss from continuing operations in the fourth quarter was $506 million or $0.16 per common share, matching the consensus of Wall Street analysts had expected to see from the company, according to Thomson Financial/First Call.
The company's net loss fell from the shocking $8.8 billion in the third quarter to $1.83 billion in this most recent quarter. In the year-ago fourth quarter, Nortel's net profit totaled $1.4 billion.
In the third quarter, Nortel's pro-forma loss hit $909 million or $0.27 per share, and in the year-ago fourth quarter, Nortel saw pro-forma net earnings of $929 million or $0.29 per common share.
Revenues from continuing operations in the quarter totaled $3.46 billion, down from this year's third quarter loss of $5.2 billion and from last year's fourth-quarter $8.2 billion.
"Revenues for the fourth quarter of 2001 reflected the reduced levels of spending in the global telecom industry which impacted all of our businesses," said Frank Dunn, president and chief executive officer, Nortel Networks, in a statement. "Our bottom line results, compared to third quarter of 2001, were driven by a lower cost structure due to the impact of our re-sizing efforts and improved gross margin, reflecting our focus on our high value portfolio."
Terry Hungle, Nortel's chief financial officer said that fourth-quarter revenues were in-line with the company's expectations while its reported bottom line results were better than expected due to gains on sales of businesses which closed late in the quarter.
Nortel's cash balance, however, increased to $3.5 billion. "Our cash management focus resulted in a strong cash balance which increased from the third quarter," Hungle also said.
Dunn also said he expects the company to "return to profitability" in the fourth quarter of 2002, as its bottom line steadily improves from its Q4 2001 figures.
"We currently expect our revenues in the first quarter of 2002 will be lower than the fourth quarter of 2001 by approximately 10 percent," Dunn also said. "For the year 2002, we expect a gradual growth in revenues beginning in the second quarter."
However, "we expect customers to move cautiously in the near term while maintaining the flexibility to increase spending in the future," Dunn added.
In after-hours trading today, Nortel shares were off $0.29 or 3.75 percent at $7.45 apiece.
Sector Breakdown
Nortel's Metro and Enterprise Networks segment revenues decreased 53% in the fourth quarter of 2001 compared to the fourth quarter of 2000, reflecting "substantial declines in the circuit switching, packet networking and services, and metro optical portions of this segment, across all major regions," officials said. Metro and Enterprise Networks revenues increased 8% compared to the third quarter of 2001, reflecting "considerable increases in metro optical and circuit to packet and a significant increase in packet networking and services, which more than offset a slight decline in circuit switching."
Optical Long-Haul Networks segment revenues decreased 89% in the fourth quarter of 2001 compared to the year-ago period, with "considerable declines across all regions." Compared to the third quarter of 2001, Optical Long-Haul revenues declined 39%, with substantial decreases in the U.S. and Europe and a significant decrease in Asia.
Wireless Networks segment revenues decreased 21% year-over-year, with considerable decreases in Europe and Latin America, and a significant decrease in the U.S., partially offset by an increase in Asia, Nortel said. Compared to the third quarter of 2001, Wireless Networks revenues decreased 11 percent, with increases in the U.S., Canada and Latin America, a slight decrease in Europe, and a considerable decrease in Asia.
Other revenues declined 74 percent in the fourth quarter of 2001 compared to the same period last year, primarily because of the impact of reduced ownership in certain joint ventures and divested businesses, Nortel said.
Geographic revenues for the fourth quarter of 2001 compared to the same period in 2000 decreased 64% in the U.S., 49% in Canada and 48% outside of the U.S. and Canada.
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