TORONTO—Nortel Networks Ltd. narrowed its overall loss for the third quarter to $99 million and said that it would go ahead with a plan to consolidate its shares on a 1-for-10 basis.
Nortel had reported a $136 million loss at this time last year, and a gain of $366 million during 2006’s second quarter. The company said that its third quarter losses included $38 million in shareholder litigation expenses, $25 million in special charges for restructuring, a $43 million benefit from changes to North American employee benefit plans and $16 million gained from the sale of assets.
The company’s revenues were up 17 percent year-over-year, from $2.52 billion in the third quarter of 2005 to $2.96 billion last quarter. Nortel’s reporting segments as of the third quarter were Mobility and Converged Core Networks, Metro Ethernet Networks, Enterprise Solutions and Global Services, due to organizational changes.
MCCN revenues were $1.5 billion, up 23 percent from last year. The enterprise segment saw a 14-percent year-over-year increase in revenues to $609 million. Metro Ethernet Networks revenues were $430 million, up 18 percent from the third quarter of 2005. The Global Services segment had a revenue increase of 4 percent to $316 million.
Nortel reported that order input for the quarter was flat year-over-year and down sequentially, due to a higher-than-normal volume of CDMA orders during the second quarter of 2006.
Effective Dec. 1, Nortel said it will consolidate its shares at a rate of one consolidated share for every 10 pre-consolidated shares. Peter Currie, Nortel’s executive vice president and chief financial officer, said that the move will help “create a better foundation on which to build.”
Mike Zafirovski, president and chief executive officer of Nortel, said that he was pleased with the company’s revenue growth, margin improvement and its areas of focus.
“However, we should and will be moving faster,” he added. “Pricing pressures and the speed at which our revenues are shifting to next generation, early cycle products is increasing our challenge to drive profitability improvements. The management team and I are resolute in achieving a globally competitive cost structure. I believe recent steps of establishing the Microsoft alliance, divesting our UMTS access business, and increasingly shifting resources to lower cost centers are indicative of our resolve.”
Investors seemed less than enthusiastic about the news; Nortel’s stock was down almost 10 percent to $2.16 per share following its earnings announcement.
