Carriers kept their wallets buttoned more tightly than Nortel Networks expected this quarter, the company said on Tuesday, warning investors that its losses would be wider than expected for the first quarter of 2002.
Nortel now expects a pro forma net loss of $US0.14 a share, rather than the $0.13 per share it had indicated in earlier projections. Analysts from First Call/Thomson Financial also expected a $0.14 per share pro forma loss in a consensus estimate. The networking equipment maker expects revenue 16 per cent lower than it received in the fourth quarter of 2001, rather than the 10 per cent decrease it projected in February. Analysts were expecting revenue of $US3.02 billion for the first quarter of 2002.
A charge of $US200 million against earnings is included in the projection for pro forma net losses announced on Tuesday, the company said. The charge stems from removing excess and obsolete inventory from the company's books, Nortel said.
The combination of razor-thin margins, the collapse of the telecommunications market and the general economic malaise have been brutal to major equipment makers, including Nortel. Lucent Technologies, Nortel and other major equipment makers for telecommunications companies have cut jobs, closed plants and taken huge losses.
The equipment maker also announced that it would draw $US1.75 billion in credit from a bank facility due to expire on Wednesday. Nortel could not convince all of the banks providing credit to continue the facility beyond its deadline, so the company chose to borrow the full amount offered under its relatively favourable terms currently offered in order to maintain liquidity, the company said.
Nortel plans to officially announce its first-quarter earnings and market outlook on April 18.