According to RBC Capital Markets, strong interest in 40G products with 20 wins by Nortel Networks was the only good news in Nortel's Carrier Networks business which experienced the sharpest decline in orders during the 2008 2nd Quarter.
RBC Capital Markets Managing Director - Mark Sue commented to yours truly:
 "Nortel's 2Q08 revenues of $2.62B (+2.3% YoY) were better than the consensus of $2.50B due to higher LG and Services contributions." |
"Non-GAAP results (excluding charges) were a loss of ($0.08) vs. the consensus of a loss of ($0.04)."
"For the full year Nortel is sticking to its revenue guidance of low single digit revenue growth."
"Overall book to bill was 0.82."
"Considering the sequential decline in orders ($2.53B to $2.15B) and the sequential decline in deferred revenues ($2.52B to $2.21B), the consensus 3Q08 revenue of $2.74B may have to move lower closer to our estimate of $2.65B."
"So a better 2Q may mean a subsequent flatter 3Q.
"A potential rebound in CDMA spending late this year, stronger Metro Ethernet, and a spending flush for the Enterprise segment may help Nortel to see a sharp sequential rebound in the fourth quarter nonetheless."
"We're staying on the conservative side and estimating just 1% top line growth in CY08 or $11.03B and approx."
"5% top line growth in CY09 to our estimate of $11.65B."
"The challenges at Sprint were evident in Nortel's US business which declined 4% sequentially and -11% YoY to $1.04B."
"EMEA was healthy growing to 24% of revenues, up +7% QoQ."
"Asia Pacific continued to show good growth from the benefits of the LG venture."
"Carrier Networks remain challenged, -15% QoQ and -2% YoY and represents the sharpest decline in orders."
"Nortel nonetheless is seeing strong interest for its 40G products with 20 wins."
"Global services at 20% grew +4% QoQ and a healthy +9% YoY."
"Enterprise trends showed modest YoY growth at +3% with the bulk of the growth coming from circuit and packet voice solutions."
"Gross margins were better at 43.1% showing steady and continued improvements."
"Mix had some impact on gross margins and we're calculating flattish margin trends moving forward."
"OMs were 4.3%, down sequentially from 4.7% yet still above from a year ago period."
"Nortel has total cash of $3.1B and used $152M despite working capital generating $154M."
"Total debt was $4.5B."
"Nortel's revamped management team is doing a commendable job given the macro challenges and the limited internal resources."
"Maintain Sector Perform."
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