Meets the street
Nortel Networks Reports Record First Quarter Results
- Revenues Up 26% to US$4.4 Billion
- EPS From Operations Up 22% to US$0.33
BRAMPTON, ON, April 27 /PRNewswire/ - Nortel Networks(x) (NYSE: NT/TSE:
NTL) today reported results for the first quarter of 1999.
Revenues increased 26 percent to US$4.42 billion for the first quarter of
1999 from US$3.51 billion for the same period in 1998. Net earnings from
operations applicable to common shares(a) for the quarter was US$222 million,
or US$0.33 per share, compared to US$140 million, or US$0.27 per share, for
the same period in 1998. Including Acquisition Related Costs(a) of
US$692 million (primarily related to the amortization of the Bay Networks,
Inc. (''Bay Networks'') intangible assets), Nortel Networks recorded a net
loss applicable to common shares in the first quarter of 1999 of US$470
million, or US$0.71 per share, as compared to a loss of US$32 million, or
US$0.06 per share, in the first quarter of 1998.
We are pleased with our solid financial performance for the first
quarter and especially pleased with the growing business momentum we are
seeing,'' said John Roth, vice chairman and chief executive officer, Nortel
Networks. ''We are particularly pleased with the more than US$4 billion worth
of carrier contracts we announced in the last 100 days. These contracts, and
our overall momentum with major new customers, have increased our leadership
in optical networking and packet solutions. Highlights included:
- Demand by carriers and service providers for our data and Optical
Networks solutions has accelerated. We announced a US$1.0 billion
dollar contract which included our high-speed access technology
solutions. We are particularly pleased that AT&T, through TCI, has
selected Arris Interactive, our 81% owned joint venture, to provide
cable telephony networks with more than US$100 million in equipment
orders to date.
- We introduced Succession Networks, the first non-proprietary solution
to enable carriers to transition from circuit to packet networks, and
established lead customer trials. This transition will leverage the
trillion dollar infrastructure investment network operators have made
in their networks. This creates new strategic customer opportunities by
providing Internet Telephony solutions.
- In the past quarter, our CVX remote dial-access portfolio shipped over
120,000 ports. On April 16, 1999, we completed the acquisition of
Shasta Networks that will position us to realize new revenue streams by
enabling carriers and service providers to deliver Intranet Services
such as virtual private networks and firewalls.
- Symposium, CallPilot and our Internet Voice button technology are
driving demand for new voice, data and Internet services that enhance
the value of the Internet. We also announced an initiative with HP,
Intel and Microsoft to integrate voice technology into open
architecture computing solutions.
- Contract announcements for wireless systems in the past 100 days
exceeded US$1.8 billion. We expect continued momentum in this category
as our Succession Networks technology is adopted as a standard for
wireline/wireless integration, evolving our Wireless Internet
capabilities even further.''
These highlights, coupled with strong order input in the quarter
resulting in a positive book-to-bill of 1.06, reinforces our confidence that
we will achieve our 1999 revenue and earnings growth targets. We expect 1999
revenues to be in the range of US$21.5 billion to US$22.0 billion and growth
in EPS from operations in the 20% range,'' said Roth.
Revenue Breakdown
-----------------
Segment revenues for the first quarter increased 15 percent for the
Carrier segment and 83 percent for the Enterprise segment over the same period
in 1998. Revenues in the ''Other'' segment declined in the quarter compared to
the first quarter of 1998 primarily due to the impact of dispositions.
Carrier segment revenues reflected substantial increases in optical
network systems sales in the United States, Europe and Asia Pacific. There
were also significant increases in carrier data revenues across all our
geographic regions. Increases in the United States and Europe drove core
switching revenues higher. Mobility revenues declined driven by a substantial
decrease in Caribbean and Latin America (''CALA''). Overall, the Carrier
segment experienced substantial growth in the United States and Asia Pacific
and a substantial decline in CALA.
Enterprise segment revenues increased substantially, primarily driven by
the increase in enterprise data revenues due to the merger of Bay Networks and
continuing strong growth in Local Area Network switching. Revenues from
enterprise voice applications grew significantly year-over-year. Overall, the
Enterprise segment experienced substantial growth in the United States, Europe
and Asia Pacific.
Geographic revenues for the first quarter of 1999 increased 37 percent in
the United States and 3 percent in Canada over the first quarter of 1998. The
15 percent growth outside Canada and the United States was driven by
significant increases in both Asia Pacific and Europe partially offset by a
substantial decline in CALA largely due to the Brazil economic climate.
Expenses
--------
Selling, general and administrative expenses in the quarter were
US$856 million, or 19.4 percent of revenue, compared with US$613 million, or
17.5 percent of revenue, in the first quarter of 1998. The increased SG&A
expenses reflected the higher SG&A expenses associated with the Enterprise
segment and reflected investments to support Nortel Networks' enhanced global
marketing programs.
Research and development expenses were US$666 million, or 15.1 percent of
revenue, in the quarter, compared with US$575 million, or 16.4 percent of
revenue, in the first quarter of 1998. The increased R&D expenditures
reflected planned increases in the carrier data and enterprise data businesses
in combination with the effective utilization of common technology platforms
across our businesses. |
