Nortel narrows loss on lower revenues

Nortel Networks Thursday reported second-quarter 2002 earnings in line with previous guidance and analyst expectations. Revenues were $2.77 billion, compared to $4.61 billion in the same period in 2001.

Nortel posted a net loss in the second quarter of 2002 of $697 million, or $0.20 per share, compared to a net loss of $19.4 billion, or $6.08 per share, in the second quarter of 2001.

"I'm pleased with the progress we have made amidst the challenging industry contraction," said Frank Dunn, Nortel president and CEO, in a statement. "We continued to make significant progress in repositioning our business model and addressing our priorities to return to profitability in the near term."

Dunn said he expects revenues in the third quarter of 2002 to be essentially flat with the second quarter, and ongoing sequential improvement in Nortel's bottom line in both the third and fourth quarters of 2002.

Revenues reflect Nortel's realignment of the metro optical portion of its Metro and Enterprise Networks business segment into the Optical Long Haul Networks segment, which is now called Optical Networks.

Compared to the first quarter of 2002, Metro and Enterprise Networks segment revenues decreased 10%, reflecting a "considerable" decrease in the packet switching and routing portion of the segment in Europe, and a modest decrease in the U.S., partially offset by a significant increase in Asia. Revenues for the circuit-to-packet portion of the segment also decreased, due to lower legacy circuit sales, reflecting a "considerable" decline in Latin America and modest decreases in the U.S. and Europe, which were partially offset by a considerable increase in Asia.

Overall Wireless Networks segment revenues decreased 1%, with a "significant" increase in the U.S., which was offset by a "considerable" decline in Asia and a modest decrease in Europe. Optical Networks segment revenues were flat, with "considerable" increases in the U.S. and Canada, and a modest increase in Asia, offset by "substantial" declines in Europe and Latin America.

Compared to the second quarter of 2001, Metro and Enterprise Networks segment revenues decreased 39%, Wireless Networks segment revenues decreased 31% and Optical Networks segment revenues decreased 46%, each reflecting significant declines across all major regions, Nortel says. Other revenues declined 91%, primarily reflecting the impact of divested businesses.

Geographic revenues for the second quarter of 2002 compared to first quarter of 2002 increased 6% in the U.S., decreased 16% outside the U.S. and Canada, and decreased 8% in Canada. Compared to the second quarter of 2001, revenues decreased 32% in the U.S., 50% outside of the U.S. and Canada, and 16% in Canada.

For the first half of 2002, revenues were $5.68 billion, compared to $10.36 billion for the same period in 2001. Nortel posted a net loss for the first six months of 2002 of $1.54 billion, or $0.46 per share, compared to $22.0 billion, or $6.94 per share, in the first six months of 2001.

Pro forma net loss for the first half of 2002 was $786 million, or $0.24 per share, compared to $1.82 billion, or $0.58 per share, for the same period in 2001.

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