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To: reg who wrote (1405)	10/25/1999 7:57:00 PM
From: Boplicity	Read Replies (1) \| Respond to of 24042

Optic sales strength likely to propel Nortel By Susan Taylor TORONTO, Oct 25 (Reuters) - Growing sales of fiber-optic network gear are expected to help Nortel Networks Corp. <NT.TO><NT.N> better profit projections when it reports third-quarter results on Tuesday. Analysts said that whisper estimates for the Canadian telecommunications equipment maker are 2-3 cents higher than consensus estimates of 26 cents per share posted by forecast services. The market reflected that optimism on Monday as Nortel stock hit C$84.90 before slipping to close at C$83.70 on the Toronto Stock Exchange, a gain of C$2.40. On New York, the issue gained $1-1/2 to $56-3/4. The Brampton, Ont.-based firm's strength in the red-hot optical equipment market is expected to buoy weaker sales in other divisions, analysts said. "The optics business is extremely important to Nortel, this year and next. It has been, if you do the math, basically carrying the top line this year and the bulk of the earnings," said Rob MacLellan, analyst at CT Securities in Toronto. There is a growing demand for optical networks, which transports data, video and voice traffic at high speeds. Nortel has told analysts it expects the technology to represent about $5 billion in sales this year, a 75 percent increase over the previous year. "Optics is the single fastest growing segment of the telecommunications equipment industry," said Patrick Houghton, analyst at Sutro & Co. in San Francisco. "Any upside, I think, is going to be in optical." The quarter may also benefit from a surge as customers bump up purchase plans in advance of Year 2000. "I kind of assume that Y2K was going to stimulate some advance of sales -- that people would buy some equipment ahead of time, ahead of the fourth quarter," said Michael Urlocker, analyst at Scotia Capital Markets in Toronto. Some analysts caution, however, that investor expectations may surpass results for the quarter, which straddles a sluggish summer sales period and is one of Nortel's weakest. "I get the sense people are expecting them to beat the number by a considerable margin. I'm just not certain. It's not a quarter they've ever beaten by a considerable margin before," said Paul Sagawa, analyst at Sanford Bernstein & Co. in New York. Strength in the optical division could overshadow some weaker divisions, analysts said. "Even though that business has been growing at high double digits, maybe even hitting triple digit status percent-wise, the total revenue expectations for the company haven't gone up," MacLellan said. "What you've got is basically very, very strong optical sales offset by, at best, a lackluster performance from what used to be Bay." Bay Networks, which Nortel purchased for $9.1 billion last year, develops technology that moves data traffic over wires. Supply shortfalls may also have hindered Nortel's ability to manufacture and ship optical network products. "I continue to hear word that there were mild constraints to availability, particularly of 10 Gigabit-per-second lasers," Sagawa said. "That meant that even though they shipped a lot and billed a lot of revenue they could have billed more that they didn't."