Nortel earnings hit by restructuring
- 03 November, 2005 08:17
Nortel Networks reported Wednesday an increase in revenue for the third quarter but an overall loss, citing restructuring costs and a penalty stemming from a refiling of the company's tax returns.
Nortel said revenue was up 22 percent year-over-year at US$2.66 billion, compared to US$2.18 billion for the year-earlier period. Analysts polled by Thomson First Call had expected revenue of US$2.63 billion.
The company reported a US$105 million loss, or a loss of US$0.02 per diluted share, compared with a loss of US$259 million, or US$0.06 per share, in the third quarter of 2004.
The company expects revenue growth in the range of 13 percent over 2004 this year, buoyed by improving markets and its wireless services portfolios, said Peter Currie, executive vice president and chief financial officer, in a conference call.
The company spent US$37 million in restructuring costs and US$20 million for a tax penalty, among other costs that contributed to the loss, Currie said. An inquiry has found that the company will not likely have to restate its finances again, said Bill Owens, vice chairman and chief executive officer (CEO).
Owens, who ended his tenure Wednesday as CEO, said the results were expected as the company continues to focus on its cash costs. He cited the reduction of 3,250 employees, the cutting of research and development facilities by half and the reduction of software programs from more than 100 to less than 50, a number he said will go lower.
Nortel has also put in place a new leadership team and structure that is focusing on customers and driving regional profits, he said.
"This phase of the journey was about stabilization," he said.
Mike Zafirovski, who took over Wednesday for Owens, said in the conference call that he is aware Nortel is in a "break even" position plus or minus a few percentage points but cautioned about profitability.
"I'm not going to put a time frame on this," Zafirovski said.
Owens is responsible for Nortel's recovery but the future of the company will depend on Zafirovski, wrote Jeff Kagan, a telecom and wireless industry analyst, in an e-mail commentary. Nortel came off a turbulent period where executives were fired and the company had to fix its accounting figures, Kagan wrote.
"I did not expect the numbers to be this good this quick," he wrote. "They had strong sales and less losses than was expected. This is the kind of news the company needed to put out."