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Nortel Q1 in line with lowered forecasts; more job cuts to come

By Jim Duffy
The Edge, 04/18/02

Nortel Networks reported a net loss of $841 million, or $0.26 per share, on revenue of $2.91 billion for the first quarter of 2002.

For the same period a year ago, Nortel posted revenue of $5.75 billion and a loss of $2.58 billion, or $0.82 per share. For the fourth quarter of 2001, Nortel recorded revenue of $3.46 billion and a loss of $1.83 billion, or $0.57 per common share.

On a sequential basis, Nortel's first quarter revenue was in line with lowered expectations of a 16% decline.

Nortel also said it plans to shed 3,000 jobs. At the conclusion of the first quarter, the company employed 47,000 people; following the completion of remaining reductions and anticipated non-core business divestitures, Nortel expects to pare that down to 44,000.

"We expect our customers to continue to limit capital expenditures and, therefore, it is difficult to predict how spending patterns will unfold in 2002," said Nortel CEO Frank Dunn in a statement. "That being said, we do not expect a significant downturn or a significant upturn in our revenues for the second quarter compared to the first quarter of 2002. We continue to expect ongoing improvements in our bottom line results as we move through 2002. As we do this, we will be working towards a cost structure, which we expect to be in place by the fourth quarter of 2002, that would drive break even at quarterly revenues of approximately $3.5 billion."

Compared to the first quarter of 2001, business was down in all three of Nortel's core markets: Wireless Networks, Metro and Enterprise Networks, and Optical Long-Haul.

Wireless Networks revenue decreased 26%, Metro and Enterprise Networks decreased 47% and Optical Long-Haul Networks decreased 77%. "Other" revenue declined 92%, primarily reflecting the impact of reduced ownership in certain joint ventures and divested businesses.

On a sequential basis, only Optical Long-Haul was up, by 5%. Wireless Networks revenues decreased 6%, while Metro and Enterprise Networks revenues decreased 23%.

Geographic revenue for the first quarter of 2002 compared to the same period in 2001 decreased 50% in the U.S., 50% outside the U.S. and Canada, and 38% in Canada.

Separately, Dunn said Nortel expects to have a new CFO by the end of the second quarter, which ends in June. The company has been without a CFO since Terry Hungle resigned due to inappropriate personal investment transactions.