Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (11074)	4/9/2002 5:46:30 PM
From: Bill Harmond	Respond to of 57684

siliconvalley.com

To: Bill Harmond who wrote (11074)	4/9/2002 8:14:41 PM
From: stockman_scott	Respond to of 57684

WSJ - Nortel Warns Of Lower Sales And A Bigger Loss By Mark Heinzl DOW JONES NEWS 04-09-02 BRAMPTON, Ontario -- The problems facing Nortel Networks Corp. spread yesterday as the company warned of lower revenue and a larger-than-expected loss for the first quarter while bankers debated whether to extend the telecommunications-equipment maker's credit line. Nortel said its first-quarter revenue will fall below its previous forecast and its loss will exceed analysts' expectations, as the company cited the continuing drought in spending by telecom carriers. Nortel also said it planned to draw down a US$1.75 billion one-year line of credit that had an exercise deadline of today, after a few banks in a 27-bank syndicate declined to extend the credit line for another year. The planned drawdown shows Nortel remains hungry for cash, as it continues to burn cash at a level above some analysts' expectations. Late yesterday, however, the dissenting banks changed their stance and agreed to renew Nortel's credit line, though the renewed line would carry an interest rate substantially higher than the rate of the original credit line, according to people familiar with the situation. As of late yesterday, it wasn't clear whether Nortel would still draw down the expiring credit line or agree to new terms on an extended line. A Nortel spokesman declined to comment on the situation. In another development, Standard & Poor's slashed its Nortel debt rating to junk status -- double-B-minus from triple-B-minus -- following a similar move by Moody's Investors Service last week. Standard & Poor's cited an expected prolonged slump in telecom-carrier spending. "Customers were showing more resolve than originally anticipated to minimize spending in the near term," said Nortel President and Chief Executive Frank Dunn, explaining the expected revenue shortfall. Nortel said it expects first-quarter revenue of about $2.9 billion and a loss of about 26 cents a share including restructuring costs and a $200 million charge for excess and obsolete inventory. An analysts' consensus estimate provided by Thomson Financial/First Call had expected a first-quarter loss of 13 cents a share. Previously, Nortel had indicated it expected first-quarter revenue of about $3.1 billion, though in February Mr. Dunn said that target would be "challenging." More troubling than the expected loss, however, is the amount of cash that Nortel appears to have consumed in the first quarter, said Alex Henderson, an analyst with Salomon Smith Barney in New York. Mr. Henderson estimated that figure at $1 billion, which is "a lot higher than we expected" and, he added, likely due to restructuring costs. Nortel declined to comment on its first-quarter cash outflow. Nortel forecast in February that it would resume revenue growth starting in the second quarter of this year and return to profitability in the fourth quarter. Given the deteriorating market for telecom equipment and Nortel's cost structure, "it's hard to understand how you get back to break-even," Mr. Henderson said yesterday. The planned credit-line drawdown "highlights for us the continued difficulty management is having with forecasting its business even a quarter out," said Merrill Lynch analyst Tom Astle in a research note. "We would suspect the outlook management sees for the remainder of the year to be worse than previously stated," he said. Nortel said it "does not have immediate need" for the $1.75 billion credit line, and said it has a "substantial cash balance," including $3 billion in cash as of March 31 and a $700 million tax recovery made subsequent to the quarter's end. Nortel's shrunken revenue base and recurring losses paint a picture that contrasts sharply with two years ago, when Nortel's quarterly revenues ran at more than double the current rate and Nortel was the toast of corporate Canada. At that time, Nortel's $230 billion market capitalization commanded more than 35% of the total value of the companies in the Toronto Stock Exchange 300 composite index, making it by far Canada's most valuable company. Now, however, Nortel is a fallen angel and its stock wallows at $3.64 a share, up six cents in 4 p.m. composite trading yesterday on the New York Stock Exchange. That is a tiny fraction of its 2000 high of $89, and gives the company a current market capitalization of about $11.7 billion, 10th place among Canada's top companies and well behind the likes of Royal Bank of Canada and Toronto-Dominion Bank. As lifeless as the telecom-equipment market is, most analysts don't expect Nortel to meet with the same fate that several of its bankrupt former customers in the upstart telecom carrier industry have. Also, analysts don't believe that Nortel is currently a takeover target, despite its low stock price, partly because it has racked up more than $4.5 billion of debt as of Dec. 31. (END) DOW JONES NEWS 04-09-02