Nortel Losses Widen, But Outlook Brightens

Weakness continued in the telecom equipment market as Nortel Networks widened its first-quarter losses. But there was good news for the Toronto-based company that made its outlook brighter than competitor Alcatel-Lucent – sales were up over a year ago, with most of the revenue coming from the carrier networks division.

Nortel stocks rose 29 cents, to $9 on the New York Stock Exchange, in early trading on Friday.

Nortel did lose $138 million, or 28 cents per share in the first quarter of 2007, compared to losses of $103 million, or 23 cents per share a year earlier. Its revenue, however, jumped to $2.76 billion from $2.48 billion.

President and CEO Mike Zafirovski said Nortel is making headway with carrier Ethernet and unified communications products. The carrier networks unit contributed 21 percent more revenue than a year ago, bringing the total to $1.22 billion. That mostly was because Nortel completed its joint venture contract with LG Electronics Inc., executives said.

Sales from the enterprise solution division increased 7.4 percent to $641 million, while global services revenue grew 15.2 percent to hit $516 million.

Nortel reported $88 million in restructuring charges, $8 million more than a year ago; it also, like Alcatel-Lucent, lost money from the weakening American dollar. Nortel suffered a $19 million loss from currency exchange.

Still, the company expects sales growth throughout 2008. It even has added 100 salespeople to its rosters.

From here, Nortel strategy will emphasize 4G, FMC, applications and IP transport, said Zafirovski.

Investment bank UBS left its Nortel rating at neutral.

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