7/25....NT...Exceeds Expectations -2: Stock Poised To Jump Wed
Nortel Networks Corp.'s (NT) second-quarter revenue was "absolutely
stellar," according to Paul Sagawa, analyst at Sanford C. Bernstein & Co.
Sagawa had estimated Nortel would generate revenue of about $6.9 billion,
with a chance the level could reach up to $7.3 billion, versus the actual
amount of $7.8 billion.
Nortel's stock closed up 3.30 at 120.75 in Toronto Monday, but the stock was
halted in after-hours trading for dissemination of the company's
second-quarter results.
The stock is expected to open Tuesday higher to reflect expectations that
analysts will raise their 2000 earnings and revenue projections following
Nortel's better-than-expected half-year results.
Nortel attributed the strength of its second-quarter results to strong
growth in the sale of optical networking equipment, infrastructure for
wireless networks and high-speed Internet access equipment.
Most analysts say the main driver behind Nortel's growth is its optical
business.
First, it generates the bulk of Nortel's revenue, with optical sales this
year now expected to exceed the company's original expectation of $10
billion, and up from about $5 billion in 1999.
Sanford Bernstein's Sagawa figures Nortel's optical sales will total up to
$13 billion for the year.
In support of this view, the run rate of optical sales in the second quarter
was $10 billion, John Roth, Nortel's chief executive, said in a telephone
interview.
Not only has this business helped Nortel outperform Lucent, it's also the
main reason Nortel is "killing everybody" else in the business, Sagawa said.
Nortel's strength in the sale of optical gear also enables it to be a more
aggressive on pricing to win contracts in other areas, such as selling next
generation of wireless network infrastrure, which the company has targeted
as a major growth area, Sagawa said.
For the second-quarter, Nortel said that wireless infrastructure sales
increased more than 150%. Nortel also reported that it had more than $1
billion worth of in wireless customer announcements, and was selected to
supply equipment to British Telecommunications to build its new
next-generation wireless network.
Despite Nortel's overall strength, the company's sales of equipment used in
corporate networks continues to be sluggish, with revenue down 2% in the
quarter from the year-ago period.
In a conference call with analysts, Nortel chief financial officer Frank
Dunn reiterated company guidance that sales of corporate-network equipment
will rebound in the second half of 2000.
(MORE) DOW JONES NEWS 07-25-00
06:18 PM
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