Nortel earnings slide 75 percent

03-05-2005

by Deirdre McArdle

Troubled telecom equipment maker Nortel has posted a 75 percent drop in profit in its fourth quarter results.

The Canadian-based company's delayed fourth quarter earnings come as it gradually gets its books back in order after an accounting scandal that led to several restated results, a regulatory investigation and the firing of a number of executives.

Revenues were USD2.62 billion for the fourth quarter of 2004, compared to USD3.27 billion for the fourth quarter of 2003. Net profit fell significantly from USD133 million, or USD0.03 per diluted share, down from USD528 million, or USD0.12 per share, a year earlier -- a drop of 75 percent. Revenue and per share earnings for the quarter were above Wall Street analysts' estimates of USD2.51 billion and USD0.01 respectively.

Revenues dropped in all of Nortel's segments, including its wireless division, which saw earnings drop 11 percent year-on-year to USD1.28 billion. Wireline networks revenues fell 19 percent to USD461 million. Similarly, enterprise networks revenues totalled USD651 million, down 31 percent from the year-ago quarter, while earning in the optical networks division dropped 28 percent to USD226 million.

Despite the poor results, Nortel's was pleased that the accounting issues of the past quarters had been resolved and was bullish about the future. "I am proud of the progress we made during the past year, delivering solid performance in our core businesses through extremely unique and challenging circumstances," said Bill Owens, vice-chairman and chief executive officer of Nortel. "Our message is clear: Nortel is playing to win. In the past year, we've stabilised the business and laid the groundwork to move forward with velocity."

The company also posted its delayed 2004 audited results on Monday. For the year 2004 Nortel reported a loss of USD51 million, or USD0.01 per share, compared to a profit of USD434 million, or USD0.10 per share in 2003. Revenues were also down in 2004 to USD9.83 billion compared to USD10.19 billion for the year 2003.

"We remain focused on our core businesses and positioning Nortel to grow our revenues by leveraging our leading portfolio of next-generation solutions, capitalising on high growth markets in Asia and new opportunities in federal systems, security and services," said Owen. "Specifically we expect strong growth in our voice over packet, third-generation wireless, metro optical, wireless LAN and converged network solutions, coupled with new customer builds and network expansions. We continue to expect the demand for our mature solutions will decline."

With the fourth-quarter and 2004 audited financial results filed with regulators, Nortel is almost up to date on its filings and, if all goes to plan, it will become current with regulators in Canada and the US when it files its 2005 first-quarter results towards the end of May.