Nortel Q2 revenue down, Avici’s up

Equipment vendors Nortel and Avici Systems this week announced second quarter financial results in line with and exceeding analyst expectations, respectively.

Nortel posted a net loss of $14 million, or $0.00 per share, on revenue of $2.33 billion. Revenue was down 3% from the first quarter of 2003, while earnings were down 1 cent per share sequentially.

For the second quarter of 2002, Nortel recorded a net loss of $697 million, or 20 cents per common share, on sales of $2.77 billion.

Nortel officials said the results were due to continued cautious and deferred spending from service provider and enterprise customers.

On a business unit level, Nortel’s Wireless Networks revenue increased 4%, Enterprise Networks revenue decreased 11%, Wireline Networks revenue decreased 12% and Optical Networks revenue increased 10% compared to the first quarter of 2003. Compared to the second quarter of 2002, Wireless Networks revenue decreased 12%, Enterprise Networks revenue decreased 14%, Wireline Networks revenue decreased 16% and Optical Networks revenue decreased 27%.

“Enterprise was clearly disappointing,” said Nortel CEO Frank Dunn in a conference call with financial analysts this week. He said sales of telephony gear to small and midsize businesses had slowed, and that Nortel’s channel was not aggressive enough in creating demand.

“Wireline and Enterprise were very weak,” noted investment firm UBS Warburg in a bulletin on Nortel’s results. “The weakness in Enterprise was particularly discouraging in our view given much stronger relative performance from competitors.  Wireline declined due to a pause in the VoIP market.”

For the first half of 2003, revenue from continuing operations was $4.73 billion compared to $5.69 billion for the same period in 2002. Nortel recorded net earnings of $40 million, or 1 cent per share, for the first half of 2003, compared to a net loss of $1.54 billion, or 46 cents per share, in the first six months of 2002.

Nortel did not provide revenue or earnings guidance for the third quarter.

Avici said it narrowed its second quarter loss on revenue that was up 29% sequentially and 5% from the second quarter of 2002.

For the period ended June 30, 2003, Avici recorded a net loss of $11.3 million, or 92 cents per share, on gross revenue of $9.8 million. This compares to a net loss of $15.0 million, or $1.21 per share in the prior year’s second quarter.

Gross revenue for the six months of fiscal 2003 was $17.4 million, compared with $18.6 million for the six months ended June 30, 2002. Net loss for the six months ended June 30, 2003, was $24.0 million, or $1.95 per share, compared to $32.7 million, or $2.63 per share, for the same period a year ago.

“We are pleased with our revenue growth and our bottom line improvements this quarter,” Avici President and CEO Steve Kaufman said. “We continued to execute on broadening our product line and our channel relationships to fuel future growth.”

Avici says it expanded its presence in the AT&T backbone this quarter, installing three new POPs in Seattle, Houston and Detroit. In total, Avici’s routers are in 13 cities in the AT&T IP network.

Other customers include Qwest, Wiltel, and Huawei, which is reselling Avici’s routers in China.