Hi Bill, tg, Ken & all - FWIW, I do agree with Mr Roth
biz.yahoo.com
Friday February 16, 1:29 pm Eastern Time
Nortel well-positioned to ride out storm, says CEO
(UPDATE: All figures in U.S. dollars)
OTTAWA, Feb 16 (Reuters) - As Nortel Networks Corp. (NYSE:NT - news)
(Toronto:NT.TO - news) rides a gut-wrenching 33 percent market decline sparked by its dramatic earnings warning, its
chief executive told Reuters on Friday that the world's No. 1 supplier of fiber-optic network equipment is well-prepared
to weather the storm.
Nortel shocked analysts on Thursday by slashing in half its revenue forecast and cutting its earnings projections by
two-thirds.
The company warned a deeper-than-expected slowdown in the U.S. economy coupled with a tightening supply of capital
for its carrier customers was behind the cutback and forecast of a first-quarter loss.
Despite the warning, Nortel chief executive John Roth told Reuters that the business is poised for recovery. While carriers
are now filling their networks with additional traffic rather than making more space with new equipment, they will
eventually need more gear to handle growing streams of voice, data and video traffic, he said.
``People are basically exhausting excess capacity in the system. And that's good news in a sense because once that's used
up then we'll get back to a business-as-usual kind of basis,'' he said.
``The long-term consumption of bandwidth is not going to stop -- maybe the market got a little bit ahead of itself last year,
and a recession, as I said, this year certainly gives a double whammy.''
Nortel may be buffered from downturns, he added, because it sells a broad base of communications equipment -- from
voice and data switches to wireless equipment.
``Compared to all my competitors, we feel very good about where we're situated. And we're going to use this period to
get even stronger,'' Roth said.
``Some of my competitors I understand can't raise money -- Nortel's not in that situation. We're going to ride this out.
Other people may not be so lucky,'' he said.
Nortel rival Lucent Technologies Inc. (NYSE:LU - news) has been shut out of the commercial paper market after two
leading credit agencies cut its commercial paper ratings to their lowest investment grades.
Roth said that Nortel is not losing deals to Ciena Corp. (NasdaqNM:CIEN - news) and speculation that Ciena is taking
market share is off the mark. Ciena represents a very small competitor and its gains have not come at Nortel's expense.
Ciena, which sells switches and transmission equipment for optical networks, raised its revenue forecast on Thursday as it
signed on new customers.
``Nortel is a broad-based engine -- I guess people are looking at the fiber-optic business, questioning just how far does
that go,'' Roth said.
``Unquestionably, Nortel's got strong leadership in that area and whatever the market will do, Nortel will ride it very well.
But we're also riding the wireless wave and that really is going to start up late this year, early next year...and we're winning
the circuit to packet transition.''
Nortel told analysts it expects the current slowdown to stretch into the fourth quarter, but added that its revenues are
forecast to rise after the first quarter.
The timing of that recovery will depend on the actions of the U.S. Federal Reserve and other market conditions that could
spark a U.S. recovery, Roth added.
best, Bosco |
