Nortel Loss Shrinks - Outlook Stable

Nortel Networks reported a lower fourth-quarter loss last Friday as revenues jumped by ten percent. Net loss was US$80 million for the fourth quarter, compared to a loss of US$2.3 billion in the same quarter a year earlier. That loss was boosted though by a US$2.47 billion lawsuit settlement. Revenues in the quarter rose to US$3.32 billion.

"A relentless focus on execution in 2006 delivered solid progress on our Business Transformation plan and laid the foundations upon which Nortel will build its future. I am particularly pleased with the progress made in the fourth quarter as we grew revenues by 10 percent, grew our backlog, and improved operating margin and operating cash flow performance. In fact, the fourth quarter operating margin, was the highest in eight quarters and the operating cash flow performance for 2006 was the best since 1998," said Mike Zafirovski, Nortel president and CEO.

The fourth quarter of 2006 operating margin was impacted by two items, higher accruals for commissions and incentive plans, largely offset by increased profitability of the LG-Nortel joint venture resulting from the recognition of previously deferred revenue. Although Nortel says that it expects improved annual performance from the LG-Nortel joint venture in 2007, the strong performance in the fourth quarter of 2006 is not expected to be repeated to the same extent in quarters throughout 2007.

In the fourth quarter, the strong pace of CDMA growth was offset by declines in the GSM business, primarily due to a contract in Asia not repeated in 2006 and a decrease in North American GSM revenues.

For the year 2006, revenues were US$11.42 billion compared to US$10.51 billion for the year 2005. The Company reported net earnings for the year 2006 of US$28 million, compared to a net loss of US$2,6 billion for the year 2005."

Posted to the site on 19th March 2007