Nortel reports loss, but enterprise sales rise

Increased third quarter revenues, but a net loss for the period

Nortel Networks increased revenue and narrowed losses in the third quarter compared to last year as sales to enterprises and to the wireless sector grew.

Nortel's unaudited third quarter results include revenue of US$2.96 billion, compared to US$2.52 billion for the same period last year. The company reported a loss of US$99 million for the quarter ended Sept. 30, better than its loss of US$136 million last year but worse than earnings of US$366 million in the second quarter this year.

The loss for the third quarter included a number of special items, such as charges related to changes in Nortel's North American employee benefit plan, shareholder litigation expenses including a settlement, restructuring charges and charges related to re-filing tax returns as a result of financial restatements.

Nortel won a number of contracts to build IP (Internet Protocol) networks for enterprises, including with the New York Times, The Telegraph Group, The Economist Group and Canadian hockey arena the Bell Centre. The deals will help drive revenue growth in the future.

In addition to the enterprise wins, Nortel signed a number of contracts with operators including two for WiMax networks and several for VOIP (voice over IP) services.

Mobility and converged networks revenue for Nortel was US$1.5 billion for the third quarter, compared to US$1.2 billion in the corresponding period last year. Revenue in Nortel's enterprise group was US$609 million, compared to US$534 million last year.

Nortel expects fourth quarter earnings growth to be in the mid to high single digits compared to the last quarter last year. For the full year 2006, Nortel expects to report a similar mid to high digit revenue growth.

Earlier this year, Nortel restated earnings for 2003, 2004 and part of last year due to inappropriately reported revenue and began cutting a total of 1,100 jobs in a restructuring plan. Tough competition in the telecommunications equipment market is putting pressure on companies like Nortel and driving consolidation, including the merger of Alcatel and Lucent Technologies as well as the merger of Nokia's and Siemens's telecommunications units. During the quarter, Nortel itself took part in the consolidation, selling its UMTS (Universal Mobile Telecommunications Service) business to Alcatel.

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