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Back In The Black: Nortel Posts $366M Profit In Second Quarter

Posted August 3, 2006

— Nortel Networks

(NYSE: NT) returned to profitability in the second quarter, but the $366 million came in large part due to a one-time gain of $510 million as part of a legal settlement.

Revenues did increase for the telecom gear manufacturer to $2.74 billion, up $12 million from a year ago and $36 million from the first quarter of this year. Earnings were 8 cents a share.

Thomson Financial had projected a profit of 1 cent per share on revenues of $2.78 billion.

Nortel employs some 2,100 people in Research Triangle Park.

"Our second quarter performance underscores both the challenges and good progress we are making with Nortel's transformation," said Chief Executive Officer Mike Zafirovsaki, who took over in November. "On the plus side we saw strong order growth of 22 percent and increased sales momentum but gross margin was up only modestly and not at the 40 percent target we have set for ourselves"

Gross margin was 39 percent.

Revenues for mobility and converged "core" network products rose 7 percent from one year ago to $1.59 billion. However, enterprise solutions and packet network revenues dropped 1 percent to $1.07 billion.

Profits were hurt by $43 million in restructuring costs linked to the 1,900 job reductions Nortel recently announced.

Nortel also forecast 10 percent growth in third-quarter revenues over one year ago and full-year revenues to increase in "high single" digits.


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