Nortel posts Q2 profit

Nortel this week posted a second quarter profit of US$366 million on revenue of US$2.74 billion.

Sales were up from the US$2.62 billion for the second quarter of 2005, and US$2.38 billion for the first quarter of 2006. Nortel recorded losses of US$33 million and US$167 million for those periods, respectively.

Net earnings in the second quarter of 2006 included a shareholder litigation recovery of US$510 million, special charges of US$45 million for restructuring and a loss of US$10 million on the sale of assets.

"Our second quarter performance underscores both the challenges and good progress we are making with Nortel's transformation," Nortel President and CEO Mile Zafirovski said in a statement. "On the plus side we saw strong order growth of 22 percent and increased sales momentum but gross margin was up only modestly and not at the 40 percent target we have set for ourselves."

Mobility and Converged Core Networks revenue was US$1.59 billion, an increase of 7 percent compared with the year-ago quarter and an increase of 12 percent sequentially. Enterprise Solutions and Packet Networks revenue was US$1.07 billion, a decrease of 1 percent compared with the year-ago quarter and an increase of 23 percent sequentially.

Nortel expects high single digit growth for the full year 2006 compared to 2005. For the third quarter, the company expects revenue growth in excess of 10 percent compared to the third quarter of 2005.

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