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An update from Bloomberg.
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Nortel Has 4th-Qtr Profit as Sales Rise; Plans Split (Update2)
Nortel Has 4th-Qtr Profit as Sales Rise; Plans Split (Update2)
(Adds analyst comment in 11th paragraph, details on taxes
and U.S. accounting rules starting in sixth paragraph.)
Brampton, Ontario, Jan. 25 (Bloomberg) -- Nortel Networks
Corp., North America's No. 2 phone-equipment maker, reported a
fourth-quarter profit as customers bought more of its fiber-optic
gear. The company also set a 2-for-1 stock split.
Net income was $423 million, or 30 cents a share, compared
with a loss of $332 million, or 26 cents, a year earlier.
Excluding costs for acquisitions, charges and gains, Nortel said
it had a profit of $761 million, or 55 cents a share, up from
$486 million, or 36 cents. Sales rose 21 percent to
$6.99 billion from $5.77 billion.
Companies that run data networks are speeding up plans to
boost capacity with the fastest optical gear as traffic doubles
every six to nine months. That's benefiting Nortel, the biggest
seller of fiber-optic equipment, at the expense of rival Lucent
Technologies Inc., which failed to ship a comparable product in
the recent quarter.
``Lucent said competitors had a chance to make hay of its
product delays,' said Patrick Houghton, a Sutro & Co. analyst
who rates Nortel a ``buy.' ``Nortel did exactly that.'
Nortel reported its profit of 55 cents a share under
Canadian accounting rules. It was expected to earn 45 cents on
that basis, excluding costs for acquisitions, the average
estimate of analysts in a First Call/Thomson Financial poll.
Chief Financial Officer Frank Dunn said on a conference call
with analysts that 5 cents of the reported profit came as the
result of favorable taxes on stock options under the Canadian
rules. Per-share amounts reflect the payment of preferred
dividends.
Nortel also said it plans to seek approval from shareholders
and regulators to split its stock two for one. It's the second
2-for-1 split declared in the past six months and third in two
years.
Closer to Expectations
Under U.S. accounting rules, earnings at the Brampton,
Ontario-based company were closer to expectations. The company
reported profit excluding costs for acquisitions of 43 cents a
diluted share, compared with a First Call estimate of 41 cents.
On that basis, profit in the year-ago period was 32 cents a
share. Revenue in the recent quarter climbed 19 percent to
$6.57 billion under U.S. rules.
Nortel shares rose 2 3/16 to 102 5/8 on the New York Stock
Exchange before the release. They climbed as high as 109 after
the report. The stock has more than tripled in the past year.
Based on that price, Nortel is trading at 86.5 times its
expected 2000 earnings of $1.26 a share. Lucent, by comparison,
is trading at 40 times its fiscal 2000 forecasts.
``We're concerned that Nortel may have a hard time living up
to those expectations,' Sanford C. Bernstein & Co. analyst Paul
Sagawa said. ``There's no margin for error at 85 times.'
Roth predicted that sales of fiber-optic equipment, the gear
used to beam information down glass fibers in telecommunications
networks, will drive growth in 2000 and reach $10 billion. They
climbed 80 percent in the recent quarter, with half of that
revenue coming from OC-192 systems, the product that Lucent
doesn't yet have.
``Some of those orders may have been at the expense of our
competitors,' Roth said in an interview. ``We're the only ones
who can deliver a working system.'
Capacity Constrained
The company didn't have enough production capacity to meet
demand for its optical products. Roth expects those constraints
to persist through the end of the second quarter, when Nortel
once again will be able to fill orders in eight weeks or less.
Unlike some of its competitors, Nortel includes sales of
some components, such as fiber amplifiers, in optical products
along with transmission gear and equipment used to boost
capacity.
Largely on the strength of its optical business, Nortel took
in $134 in orders for every $100 it shipped in the quarter,
giving it a book-to-bill ratio of 1.34. It ended the quarter with
an $11.2 billion backlog of unshipped orders, up 56 percent from
a year ago, Dunn said on the call.
Sales of wireless gear rose 32 percent, rebounding from the
fourth quarter of 1999, when they dropped 8 percent.
``The turnaround in wireless infrastructure is a pleasant
surprise,' said TD Securities Inc. analyst Mark Lucey, who rates
Nortel a ``buy.'
Sales of traditional voice switches, the biggest single
product line at Nortel, fell slightly as established U.S. phone
companies bought less. Optical gear will supplant traditional
switches as the biggest line of products in 2000, Roth said.
Revenue from service providers, the companies that run voice
or data networks, rose 31 percent, with North American sales
rising even faster.
Enterprise Remains Weak
Corporate and government agency, or enterprise, sales are
still a weak point for Nortel. They slumped 5 percent from a year
earlier. That contrasts with Lucent, whose enterprise sales in
the recent quarter rose 4 percent.
``The only area we need to do better in is enterprise,'
Roth said on the conference call.
Sales of access products, the equipment phone companies use
to set up high-speed connections to businesses and homes, more
than doubled and totaled more than $1 billion.
NYSE/AMEX delayed 20 min. NASDAQ delayed 15 |
