Nortel Gets Lift From Strong Quarterly Report

NEW YORK (Dow Jones) -- Shares of Nortel Networks surged in early action on Monday after the Canadian communications equipment company's strong 10% revenue increase in its fiscal second quarter bested Wall Street expectations.

The company also said its gross margin for the period was near the top of its projected range.

The stock (NT) rose 20 cents, or 8%, to $2.85 on volume of almost 12 million, making it the most active issue on the New York Stock Exchange in the early going.

Before the opening bell, Nortel reported second-quarter earnings of $45 million, or a penny a share, up from a year-ago profit of $16 million, or break-even on a per share basis.

The latest results included charges of $90 million related to restructuring activities, $39 million in costs from the sale of businesses and assets, a gain of $21 million from the sale of an investment, a gain of $17 million on a contract settlement and interest income of $15 million.

Revenue rose in the latest three months to $2.86 billion from $2.59 billion in the same period a year earlier. Nortel saw sharp growth in enterprise networks business, which logged an increase of 26% and its code-division-multiple-access products operations, where revenue jumped 17% year-over-year.

Gross margin came in at 43% for the quarter, in the upper end of its outlook of 40% to 44%.

The average estimate of analysts polled by Thomson First Call was for a profit of a penny per share in the June period on revenue of $2.69 billion.

"This quarter's improved financial performance and positive momentum is proof that Nortel is strong, our business is building and our results are heading in the right direction," said Bill Owens, the company's vice chairman and CEO.

Looking ahead, Nortel forecast revenue growth of 10% in 2005 with gross margins within a range of 40 to 44%.

(END) Dow Jones Newswires"

Posted to the site on 8th August 2005