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Nortel 3Q Loss Narrows [Business Week]

Summary: Nortel reported that its loss in the 3rd quarter was less than last year, but commented on fierce competition and pressure to produce cutting-edge, less profitable products as challenges facing the telecom equipment producer. The Toronto-based company lost $99 million, or 2 cents a share, between July and September 2006 compared to $136 million, or 3 cents a share loss in the same period last year. Revenue growth increased 17% from $2.52 to $2.96 billion and Nortel predicts continued growth at around 5 to 9%. While CEO Mike Zafirovski was pleased with the increase in earnings, he complained about Nortel Chart 9 11 06the amount of revenue going to "next-generation, early-cycle products" which pose "a challenge to our goal of significantly increasing profitability." Shareholders were disappointed with the results, and Nortel's shares fell 17 Canadian cents, or 6.3 percent, to C$2.53, on the Toronto Stock Exchange. The stock lost 14 cents, almost 6 percent, to $2.25 in New York. Nortel is planning to consolidate its shares 1 for 10 beginning in December, a move which will lower transaction fees and may attract investment funds.
Related links: Earnings conference call transcript: Nortel 3Q 2006. Press release: Nortel Declares Preferred Share Dividends
Potentially impacted stocks and ETFs: Nortel Networks (NT) • Competitors: Alcatel (ALA), Cisco Systems (CSCO), Lucent Technologies (LU)

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Source: Nortel Reports Smaller Loss; Shares Fall 6%