Nortel seen matching estimates
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Northern Telecom seen matching earnings
estimates
04:41 p.m Apr 26, 1999 Eastern
By Lydia Zajc
TORONTO, April 26 (Reuters) - Northern Telecom Ltd. (NTL.TO) (NT.N) will likely measure up to street estimates when it posts its first-quarter profit on Tuesday, analysts said on Monday.
''We're expecting to see the firm make the numbers,'' said analyst Rob MacLellan at CT Securities. Nortel is one of the world leaders in telecom equipment manufacturing and data
networks.
''If they don't, it'll be a surprise,'' added analyst Robert Wilkes of brokerage Brown Brothers Harriman.
Analysts polled by research house First Call forecast that on average, Brampton, Ontario-based Nortel will unveil profit of $0.33 a share. That average was last revised on April 21 from $0.35 a share.
In the same period of last year, Nortel earned $0.27 a share excluding a one-time research and development expense associated with the purchase of Broadband Networks Inc.
Nortel, which bought California-based data expert Bay Networks for $9.1 billion last summer, is expected to change its current method of reporting results where it has broken out
results for it varying sectors, such as wireless communications,
broadband networks, and data communications.
Starting on Tuesday, it is expected to divide the results into two groups, the carrier side -- encompassing all telecommunications -- and the enterprise sector -- which is made up of Bay Networks and Nortel's technology to move data over wires,
MacLellan said.
If each area could be examined individually, Nortel might have shown weakness in its wireless communications and enterprise areas, which will be balanced by strength in broadband and its latest round of cost-cutting measures, analysts said.
''Wireless is going to be a bit of a stretch for them,'' said SG Cowen analyst Jim Kedersha, given that U.S. rival Lucent Technologies Inc. (LU.N) grabbed an AT&T Corp.(T.N)
wireless phone contract that some analysts had expected Nortel to win.
Wilkes noted that competitor Lucent had unveiled positive results in its second quarter posted April 22. It had bettered Wall Street expectations, with income of $0.16 a share, by one cent.
However Lucent's enterprise, or data communications, area was relatively weak, Wilkes added. ''That could be something that could spill over into Nortel; that's one of the worries about the quarter,'' he said.
On the other hand, ''Nortel's going to probably do well in the non-enterprise portion of the business,'' Wilkes said.
MacLellan added that the company's reorganization could contribute to its bottom line this quarter. In early January Nortel unveiled a three-year restructuring that could see the layoff or transfer of up to 8,000 workers or 10 percent of its staff. ''We expect costs to be somewhat lower because of the cost-cutting from the layoffs,'' he said.
On Tuesday Nortel's stock rose C$3.50 to C$109.85 on the Toronto Stock Exchange, creeping toward its 12-month peak of C$114. In New York shares increased $2.25 to $74.38.
($1-$1.48 Canadian)
((Lydia Zajc, Reuters Toronto Bureau (416) 941-8109, or e-mail lydia.zajc+reuters.com))
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