DJ Nortel Shows Leadership Over Lucent With 1Q Results >NT
Dow Jones News Service ~ April 25, 2000 ~ 5:03 pm EST
By Ben Dummett
TORONTO (Dow Jones)--Nortel Network Corp.'s (NT) strong earnings for the first quarter indicate that it is easily beating out its long-time rival Lucent Technologies Inc. (LU) in selling network equipment to help customers take advantage of the growth in Internet traffic.
After the market close, Nortel, the big Canadian network-equipment vendor, reported a 64% jump in operating earnings in the first quarter from a year earlier, to 23 cents a share, significantly outpacing analysts' expectations of 18 cents a share, according to the mean consensus of analyst estimates compiled by Thomson Financial/First Call.
In addition, revenue jumped 48% year-over-year in the quarter to $6.3 billion, compared to analysts' estimates of around $5.2 billion.
"All of our growth numbers absolutely blow out any competitor," John Roth, Nortel's president and chief executive, said in a brief telephone interview following the release of the results.
An exaggeration? Not when the results are compared with the latest numbers posted by Lucent of Murray Hill, N.J. Last week, Lucent announced a 35% increase in year-over-year earnings per share for its fiscal second quarter, and a 17% jump in revenue over the same period. This revenue increase included sales from units the company plans to spinout later this year.
Furthermore, Nortel's outlook for the rest of the year is more bullish. Nortel, as reported, now expects revenue for this year to rise by up to 35%, instead of around 21% as originally projected. In contrast, Lucent projects revenue, excluding sales from units to be spun out later this year, to to reach a growth rate of around 17% by year-end.
Meanwhile, Nortel projects earnings-per-share growth for this year of around 30%, compared with the 17% that Lucent is projecting earnings to increase for its fiscal 2000.
(MORE) DOW JONES NEWS 04-25-00
05:03 PM DJ Nortel/1Q Outlook -2: Lucent Results Pale - Analyst
Analysts also believe Nortel Networks Corp.'s (NT) latest results demontrate its lead over Lucent Technologies Inc. (LU).
"Nortel's results make Lucent look pale in comparison," said Michael Urlocker, technology analyst at Scotia Capital.
To back up this view, he highlighted Nortel's success in selling equipment to phone companies in the fast growing U.S. market and Lucent's backyard.
"Nortel reported US telco sales growth of 75% year-over-year, compared to 15% for Lucent; Nortel is cleaning Lucent's clock in the core business of selling equipment to U.S. telcos," Urlocker said.
Nortel's earnings and revenue growth was led by strong sales of its fiber- optical network equipment, which were up 150% in the quarter from the year-ago period.
Moreover, John Roth, Nortel's president and chief executive, said the value of orders in the quarter for optical equipment exceeded the value of actual sales.
Roth wouldn't say how much actual revenue the firm generated from sales of optical gear in the first quarter. But he said the results give him greater confidence of Nortel's ability to meet its stated goal of achieving $10 billion in sales of optical gear for the year.
Optical-network equipment is in strong demand because carriers need it to expand the transmission capacity of their networks in response to the growth in Internet traffic.
On a subsequent conference call with analysts, Roth also said Nortel has yet to see any competition from Lucent in selling 10-gigabit optical transmission systems. Nortel has dominated this market, but Lucent earlier this year started selling a 10-gigabit system.
At the same time, Roth said that the sales of wireless network gear and equipment for high-speed Internet access were also big drivers fueling the company's growth.
"We are doing very well across the wide range of service provider products," Roth said. "This is a broadbased growth for Nortel."
For Urlocker at Scotia Capital, the strength of Nortel's sales of wireless equipment supports Roth's view.
"Everybody knows Nortel is very strong optical markets, but where Nortel was not yet recognized as a leader was wireless infrastructure," Urlocker said. But with wireless sales up 45% in the first quarter, Urlocker reasoned, Nortel is " stealing market share, likely from Sweden's L.M. Ericsson Telephone Co. (ERICY) ."
Selling network equipment to corporate customers, however, continued to be Nortel's only weak spot from last year. The company reported a slight increase in revenue of 5%, partly because it included revenue from certain joint ventures. Excluding this revenue, Nortel saw a slight decline in the group's revenue, Frank Dunn, Nortel's chief financial officer, said during the conference call.
-Ben Dummett, Dow Jones Newswires; 416-306-2024;
ben.dummett@dowjones.com
(END) DOW JONES NEWS 04-25-00
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