09/29 15:34 Reuters, Toronto -Nortel warns earnings will not meet forecasts
By Lydia Zajc
TORONTO, Sept 29 (Reuters) - Canadian telecommunications equipment
maker Northern Telecom Ltd. <NTL.TO> told analysts in New York on
Tuesday that third-quarter earnings would fail to meet analysts' forecasts.
The news sent Nortel shares plunging in Toronto and New York.
The Brampton, Ontario-based company, which snapped up California-based
Bay Networks for US$9 billion in a deal that closed last month, said quarterly
earnings would be "lower than expectations and they're going to try and
maintain their level of profitability, however you want to measure that," said
Kearns Capital analyst Rob MacLellan, who attended the analysts' meeting with
Nortel. Nortel <NT.N> officials were not immediately available for comment.
"They didn't give any details, and people just headed for their cellphones and
the downgrades have already started," MacLellan told Reuters from New
York.
According to First Call research, analysts on average had predicted Nortel
earnings would rise to $0.38 a share from last year's $0.30 a share, after a
two-for-one stock split in December. Estimates from 18 analysts ranged from a
low of $0.33 to a high of $0.41.
The stock dived after the news broke. "It's heading south with a lead weight
around its neck," MacLellan said.
Nortel shares, which had been trading briskly in Toronto at a level only a bit
lower than their opening price of C$62, plunged nearly 12 percent shortly
before 1300 EDT/1700 GMT. Shares tumbled C$7.40 to C$54.30, breaching
their 52-week low of C$56.80.
Trading was then halted in Toronto and New York, pending news. In New
York, the stock was halted after a fall of $5.25 to $35.50.
"They just said that and just vanished off the podium," MacLellan added.
The stock's swift sell-off pulled the stock of Nortel's majority shareholder, BCE
Inc. <BCE.TO>, and the overall Toronto stock market lower. The Toronto
Stock Exchange's bellwether 300 Composite Index, already weak, lost further
ground and was down 2.56 percent at 1455 EDT/1855 GMT.
Shares of BCE Inc., a telecommunications and telephone giant, which is
Canada's largest publicly traded company, dropped C$4.10 or 8.6 percent to
C$43.60.
Analysts had feared a profit warning was in the offing after French
telecommunications maker Alcatel <ALA.N> <CGEP.PA> warned in
mid-September that its operating income, and those of its competitors, would
suffer in part from the financial crises in Asia and Russia. Nortel's third and last
quarters are traditionally vital to its overall profit for the year.
The company's stock has sunk steadily since it announced its buyout of data
communications firm Bay Networks in June. Shares now stand at nearly half
their 52-week high of C$100.25.
The share price was also taken down by news earlier in September that the
company said it would chop up to 4 percent of its 80,000-member world-wide
workforce.
($1 = $1.50 Canadian) |
