Record Second Quarter Results Reported by Nortel Networks
- Revenues Up 30% to US$5.41 Billion
- Net Earnings from Operations up 74% to US$368 Million
- EPS From Operations Up 37% to US$0.55
BRAMPTON, ON, July 27 /PRNewswire/ - Nortel Networks(x) (NYSE/TSE: NT)
today reported results for the second quarter and first six months of 1999.
Revenues increased 30 percent to US$5.41 billion for the second quarter
of 1999 from US$4.16 billion for the same period in 1998. Net earnings from
operations applicable to common shares (a) for the quarter were
US$368 million, or US$0.55 per share, compared to US$212 million, or US$0.40
per share, for the same period in 1998, an increase in EPS from operations of
37 percent. Including Acquisition Related Costs (a) and one-time gains and
charges, Nortel Networks recorded a net loss applicable to common shares in
the second quarter of 1999 of US$145 million or US$0.21 per share.
I am pleased with our strong growth in the quarter across our Carrier
segment in North America, Europe and Asia Pacific'', said John Roth,
vice-chairman and chief executive officer, Nortel Networks. ''Our first mover
strategy and focus on delivering a new era of networking has translated into
strong market momentum and overall solid financial performance for the
quarter. Highlights included:
- Continued strong demand from existing and new carriers and service
providers for our optical, access and Internet Protocol (IP) networking
capabilities. Announcements during the past 90 days included the
selection of Nortel Networks by Telstra to provide the IP networking
portion of its next generation network; Qwest Communications extending
its alliance with Nortel Networks, becoming the first company in North
America to deploy the OPTera(x) portfolio of Optical Internet technology;
and a contract with NTT in Japan to provide Internet access solutions.
- Recovery of momentum in the sales of mobility systems in the second
quarter with wins in the United States, China, Taiwan, Canada, and
Australia. We announced awards for mobility systems in the first six
months valued in excess of US$3.0 billion. We continued to build our
Succession(x) solution capabilities to support wireline/wireless
integration to enable a Wireless Internet.
- Interest in Succession, the first non-proprietary solution to enable
carriers to transition from circuit to packet networks, remained strong.
MCI WorldCom was added to the list of customers trialing Succession for
the continued evolution of its network from narrowband to broadband.
Other customers trialing Succession include AT&T, France Telecom, and
SBC.
- Several new products were released during the quarter providing a good
foundation for future growth. These included the launch of the
Passport(x) 15000, the Versalar(x) Switch Router 25000 (a carrier grade
high-speed routing switch), and the second-generation Contivity(x)
extranet switches. Nortel Networks Internet Telephony strategy for
enterprises was also introduced, which is founded on our Internet
Communications Architecture (Inca(x)), an IP architecture based on open
standards that unifies telephony and data. This introduction included
several new products and enhancements to Symposium(x), CallPilot(x),
Meridian1(x)/SL-100(x) and Passport Multi-Service solutions.''
Looking forward, these highlights, strong customer acceptance and a
market leading portfolio, which is well positioned in emerging high growth
segments, is positioning our customers to meet their network requirements into
the next millennium'', said Roth.
Revenue Breakdown
-----------------
Segment revenues for the second quarter increased 21 percent for the
Carrier segment and 74 percent for the Enterprise segment over the same period
in 1998. Revenues in the ''Other'' segment declined in the quarter compared to
the second quarter of 1998 primarily due to the impact of dispositions.
Carrier segment revenues reflected continued strong increases in optical
networks and our broad access solutions portfolio across the United States,
Europe and Asia Pacific. Sales of mobility systems increased significantly
with higher revenues in Asia Pacific more than offsetting a decline in Latin
America. Overall, the Carrier segment experienced significant growth in the
United States, Europe and Asia Pacific.
Enterprise segment revenues increased substantially in the quarter,
primarily driven by the increase in enterprise data revenues due to the Bay
Networks merger. Sales of enterprise applications also increased in the United
States and Europe more than offsetting a decline in Canada. Overall, the
Enterprise segment experienced substantial growth in the United States, Europe
and Asia Pacific.
Geographic revenues for the second quarter of 1999 increased 28 percent
in the United States and 40 percent in Canada over the second quarter of 1998.
The 32 percent growth outside Canada and the United States was driven by
significant increases in both Europe and Asia Pacific, partially offset by a
decline in CALA.
The overall increase in net earnings from operations for the quarter was
driven by revenue growth, higher gross margins and a decrease in the effective
tax rate.
The second quarter 1999 loss specifically included one-time pre-tax gains
of US$57 million (primarily related to the disposition of the investment in
Juniper Networks), one-time pre-tax charges of US$62 million (primarily
related to the realignment and resizing of certain of Nortel Networks
operations) and Acquisition Related Costs of US$509 million (primarily related
to the Bay Networks intangible assets).
Six-Month Results
-----------------
For the first half of 1999, revenues increased 28 percent to
US$9.83 billion from US$7.67 billion for the same period in 1998. Net earnings
from operations applicable to common shares (a) for the first half were
US$590 million, or US$0.88 per share, compared to US$352 million or US$0.67
per share, for the same period in 1998, an increase in EPS from operations of
31 percent. Including Acquisition Related Costs and one-time gains and
charges, Nortel Networks recorded a net loss of US$615 million, or US$0.92 per
share, for the first half of 1999.
Expenses
--------
Selling, general and administrative expenses (''SG&A'') in the quarter
were US$1.04 billion, or 19.2 percent of revenue, compared with
US$723 million, or 17.4 percent of revenue, in the second quarter of 1998. For
the first half of 1999, SG&A expenses were US$1.89 billion, or 19.3 percent of
revenue, compared with US$1.34 billion, or 17.4 percent of revenues, in the
first half of 1998. The increased SG&A expenses primarily reflected the higher
SG&A expenses associated with Enterprise operations that have traditionally
higher spending levels, increased levels of customer financing activity and
investments to support Nortel Networks enhanced global marketing programs.
Research and development expenses (''R&D'') were US$701 million, or 13.0
percent of revenue, in the quarter, compared with US$610 million, or 14.7
percent of revenue, in the second quarter of 1998. For the first half of 1999,
R&D expenses were US$1.37 billion, or 13.9 percent of revenues, compared with
US$1.19 billion, or 15.5 percent of revenue, in the first half of 1998. The
increased R&D investments reflected planned increases in the Carrier and
Enterprise businesses focused on data networking and IP technologies. |
