Nortel revenue, earnings jump in Q4

In what the company called a turning point, Nortel Networks on Thursday reported net income for 2003's fourth quarter of US$499 million, or $0.11 per share, soundly surpassing analyst estimates of $0.02 per share.

Revenue for the telecommunications and enterprise network vendor was $2.83 billion, up from $2.53 billion in the previous year's fourth quarter, when Nortel lost $168 million, or $0.04 per share. Revenue grew even more sequentially, from $2.27 billion in the third quarter of 2003, according to a company statement.

Analysts polled by First Call/Thomson Financial had forecast Nortel would earn $0.02 in the fourth quarter on revenue of $2.45 billion, according to a First Call representative.

For the full year, Nortel reported net income of $732 million, or $0.17 per share, as opposed to a loss of $3.27 billion, or $0.85 per share, in 2002. The stronger results came on less revenue, with $9.81 billion in revenue for 2003 compared with $10.57 billion in 2002.

"This is truly a watershed time. ... We had a remarkable quarter and a great year," President and Chief Executive Officer Frank Dunn said during a conference call following the announcement. It was the company's first yearly profit in six years, he said.

Nortel is bullish on the emergence of VOIP (voice over IP) technology in both enterprise and carrier networks, as well as on high-speed wireless data networks, Dunn said.

"People are going to deploy this technology in 2004 and people will deploy and offer networks of Wideband CDMA (code division multiple access) in 2004," Dunn said.

In addition, Nortel is working with the Massachusetts Institute of Technology on a trial of a public wireless LAN technology that could significantly cut service providers' cost of network deployment, he said.

Dunn declined to offer a forecast for Nortel's upcoming financial results.

Wireless network sales dominated the company's quarterly revenue gains from a year earlier, with growth of 33 percent in that segment. Wireline networks revenue increased 9 percent, while enterprise networks fell 2 percent and optical network revenue declined 18 percent.

Revenue grew from the previous year's fourth quarter in the U.S., with a 26 percent gain, Canada, with 48 percent, and the Caribbean and Latin America, with 27 percent. It fell 5 percent in Europe, the Middle East and Africa and 25 percent in the Asia-Pacific region.

Dunn said he expects the Asia-Pacific market to rebound this year. While the overall market for enterprise networks should grow as much as 5 percent in 2004, the carrier equipment industry is likely to grow slightly more than 5 percent, Dunn said. He expects Nortel to grow faster than the overall market.

The company hopes an expanded partnership now being negotiated with Flextronics International will let Nortel scale up its production capacity and gain economies of scale to lower costs. The global contract manufacturer is better equipped to boost production when orders for a product grow rapidly, Dunn said.

"We can't build factories quickly enough," he said.

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