Nortel losses continued in 4th quarter

Telecommunication equipment maker Nortel Networks Corp. on Thursday reported a pro forma net loss from continuing operations of US$506 million, or $0.16 per diluted share, for the fourth quarter of 2001, meeting the expectations it had created for the period but continuing a long string of quarterly losses.

Its revenue for the quarter was $3.46 billion, the company said in a statement, roughly matching the projection it offered in late December. The quarter ended Dec. 31.

Looking forward, Nortel expects revenue to fall 10 percent sequentially in the first quarter and then rebound in the second quarter, though customers will remain cautious about their spending, executives said in a conference call Thursday.

The pro forma loss excludes an after-tax charge of about $700 million for acquisitions and write-downs of the value of certain assets, as well as a charge of $605 million for previously announced layoffs and cutbacks at facilities, according to a Nortel statement.

Including those charges, using generally accepted accounting principles, the company had a net loss of $1.8 billion or $0.57 per share.

Revenue in the quarter was less than half that of a year earlier, when Nortel brought in about $8.2 billion for a pro forma net income of $0.29 per diluted share. Even in that quarter, however, under standard accounting rules, the company lost $0.46 per diluted share.

Nortel projected last month that it would post a pro forma net loss of $0.16 per share on revenue of $3.4 billion. Prior to Thursday's announcement, a consensus of analysts polled by Thomson Financial/First Call had projected the same per-share loss and revenue of $3.37 billion. Including the special charges, Nortel had projected a loss of $0.63 per share.

Weak spending in the telecommunications sector continued to hurt Nortel's results, the company said in a statement. Most notably, revenue from the optical long-haul business, which makes equipment for long-distance optical carrier networks, was down 89 percent from a year ago and down 39 percent sequentially from the third quarter.

Revenue was weak in all regions, with a slight upturn from the third quarter in Latin America but flat performance in North America and declines in Europe and Asia-Pacific, officials said. China, where full-year 2001 revenue showed a 60 percent increase over 2000, was a notable exception. In addition, Nortel's enterprise equipment business, which serves corporations rather than service providers, saw a 15 percent uptick in worldwide revenue from the third quarter.

A long restructuring will be completed this year that will reduce Nortel's workforce to 48,000 and its costs to a level at which it can break even on just $4 billion of quarterly revenue, executives said. They added that they expect the company to return to profitability in the fourth quarter of 2002.

With the restructuring almost complete, Nortel now is returning its focus outside the company, the executives said.

For the full 2001 fiscal year, Nortel posted a pro forma net loss from continuing operations of $4.5 billion or $1.41 per share, on revenue of $17.5 billion. For 2000, the company reported revenue of $27.9 billion and pro forma net income of $2.5 billion or $0.80 per diluted share.

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