Nortel Q2 Loss Increases to $113 Million

Nortel Networks has reported a higher second-quarter net loss of US$113 million compared with a year-ago loss of $37 million. The company noted that its revenue was up two percent from a year earlier at $2.62 billion, and up seven percent on a year-to-date basis. The latest quarters reults included $67 million in restructuring charges and $21 million in mark-to-market losses on interest rate swaps, partly offset by a foreign-exchange gain of $34 million.

Nortel says that it faces a challenging business environment with increasing risk due to general macro-economic weakness, continuing competitive pressures and potential of further reduced capex spending by key North American CDMA customers.

"Nortel's financial performance in the first half of 2008 has been consistent and disciplined. We have achieved our objectives and are on track to meet our targets for the year," said Nortel president and CEO Mike Zafirovski. "In the second quarter, the company focused on the work at hand and improved productivity, stepped-up cost reduction activities and enhanced margin performance. We delivered gross margin of 43.1%, the seventh consecutive quarter of year-over-year improvement, and management operating margin of 4.3%, the eighth consecutive quarter of year-over-year improvement."

"We continue to see strong customer momentum in key growth areas of our business. In recent months, we've signed a comprehensive global managed services telepresence agreement with Deloitte, have secured approximately 20 wins for our innovative 40G offering, and earlier this week signed on as the official network infrastructure partner for the London 2012 Olympic and Paralympic Games," said Zafirovski. "In the second half, faced with a challenging business environment, we will continue our focus on execution and on delivering accelerated growth in key segments in order to achieve our financial objectives for the year."

R&D expenses were US$441 million in the second quarter of 2008, compared to US$423 million for the second quarter of 2007 and US$420 million for the first quarter of 2008. Compared to the second quarter of 2007, R&D was impacted by negative foreign exchange impacts of US$15 million and investments in new technologies, partially offset by savings from previously announced restructuring programs.

The company said that accelerated growth in Nortel's Enterprise and Metro Ethernet businesses in the second half and the expected completion of wireless contracts in the fourth quarter, representing approximately $350 million of previously deferred revenue, are key to the company achieving its financial objectives for this year.

Posted to the site on 1st August 2008