Nortel: Back in the black, barely

Nortel would love to have some time to rest on its laurels, but the company has been too busy trying to remake itself after a number of tumultuous years.

How bad has it been? "2006 marks the first year with positive operating cash flow since 1998," the company says in its annual report.

Sales grew in 2005 for the first time in five years, and the company kept up the momentum in 2006, as revenue increased 8 percent to US$11.4 billion. That gain, the company says, was driven primarily by results from LG-Nortel, the joint venture Nortel created in late 2005 with LG Electronics of Korea to sell enterprise and carrier network gear in Asia.

Profits, however, are still hard to come by, as the company barely made it into the black last year, with net income of US$28 million.

But under the leadership of CEO Mike Zafirovski, who has been on the job for a year and a half, Nortel is making significant bets. Most notable among them: a four-year strategic alliance with Microsoft to jointly develop, market and sell unified communications products. In other news of note, Nortel got back in the routing game by acquiring Tasman Networks and sold off its Universal Mobile Telecommunications System assets to Alcatel-Lucent for US$320 million to focus its cellular efforts on Code Division Multiple Access technology.

Nortel also sees big opportunity in WiMAX, one of three core areas the company is focusing on for growth. The other two are IP Multimedia Subsystem and IPTV.

3Com: The worst may be over

3Com is another troubled network infrastructure player that is beginning to see light at the end of the tunnel.

The company ended fiscal 2006 a year ago this month and reported good news: "In 2006, 3Com's overall business grew for the first time in seven years." Revenue increased 22 percent to US$795 million, growth the company attributed to sales of security products and gains at H3C, 3Com's data-network joint venture with Huawei Technologies in China.

But 3Com still posted a US$100 million loss in fiscal 2006, its sixth consecutive year of running in the red. Over the course of that period, the company spent US$9.5 billion to sell US$7.2 billion worth of goods and services, resulting in a net loss of US$2.3 billion.

If you disregard the company's fiscal year and examine the quarters that occurred in calendar '06, the picture looks brighter: Viewed this way, revenue is more than US$1 billion for the first time in five years, and the company musters a profit of US$364 million.

3Com recently finished the acquisition of the outstanding shares of H3C from Huawei and in 3Com's most recent quarter (third quarter of 2007), the H3C segment accounted for 60 percent of the company's US$323 million in sales.

It is ironic to see the enterprise switch/router business, which 3Com exited in 2000, bring the company back from the brink.

Juniper: Sticking to its knitting

Juniper, founded in 1996, never turned its back on that market and is reaping the rewards. It finished 2006 with revenue of US$2.3 billion, an increase of 9 percent.

Juniper did, however, post a whopping US$997 million loss for the year as it wrote off goodwill amassed on its balance sheet from the acquisition of security vendor NetScreen. If that one-time event is overlooked, the company would have finished the year with a profit of US$439 million.

All told, the 9 companies profiled here generated more than a half a trillion dollars in revenue in 2006, more than the gross domestic product of the Netherlands and US$72 billion in profits.

But there is no rest for the weary. The lesson from 2006 is that this is a business requiring constant reevaluation. The spin of the wheel in 2007 could reorder the ranks yet again.