Nortel adds revenue, cuts loss in Q1

Nortel Networks Corp. increased its revenue and trimmed its losses in the first quarter of 2007 versus the same period last year, reporting strong growth in enterprise networks and in CDMA (Code-Division Multiple Access) mobile networks.

After years of battling an accounting scandal and restating financial results, the Brampton, Ont. network vendor is becoming a normal company again, President and CEO Mike Zafirovski said on a conference call following the release of the results this month. He said the company was now focused on next-generation mobile technologies such as WiMax and on fixed-mobile convergence, as well as on transforming enterprise networks. It also wants to gain a significant foothold in the global services business.

Nortel still lost US$103 million or $0.23 per share on revenue of $2.48 billion in the quarter ended March 31. But by contrast, in the first quarter of 2006, the company lost $180 million or $0.39 per share on revenue of $2.39 billion.

“We are very pleased with Q1,” Zafirovski said on the conference call, while acknowledging the company still has work to do. The CEO has carried out major changes since he took the helm in 2005, including selling off Nortel’s UMTS (Universal Mobile Telecommunications System) unit last year. The company’s year-over-year revenue gain of four per cent translated to 12 per cent. Nortel’s enterprise network revenue grew 31 per cent from a year earlier, driven by both data and voice products, it said. The company believes it gained market share in this sector, though it is still dwarfed by Cisco Systems Inc.

Another strong growth area was the Metro Ethernet Networks division, where revenue rose 27 per cent from a year earlier. Nortel plans to shift more of its research and development spending away from older product categories and toward totally new areas, Zafirovski said.

Despite gains, Nortel faces formidable competitors everywhere it turns, said analyst Frank Dzubeck of Communication Network Architects Inc. “They basically have taken over the entire world with respect to IP (Internet Protocol),” Dzubeck said. “Everyone else is second-tier.” 078372

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