Nortel shows slight 3Q revenue gain

Nortel Networks continues to struggle, posting a slight increase in its latest quarterly revenues over the previous quarter, but a small drop compared to the same period a year ago.

The company said Tuesday that revenue was $2.70 billion for the third quarter of 2007, up from $2.56 billion for the second quarter. However, it was a drop from the $2.93 billion it made in the third quarter of 2006.

In the third quarter, as a result of a transition of a CDMA manufacturing centre, the company said it encountered some difficulty in fulfilling certain customer orders resulting in the deferral of approximately $45 million in revenue.

Carrier networks (CN) revenue in the third quarter of 2007 was $1..080 million, a decrease of 19 percent compared with the year-ago quarter and an increase of 2 percent sequentially. In the third quarter, CN revenue was impacted by the UMTS Access divestiture, the transition of the CDMA manufacturing centre and decreases in legacy products. Revenues were partially offset by what Nortel called a significant contribution from the LG Nortel joint venture.

On the other hand enterprise solutions (ES) revenue in the third quarter of 2007 was $671 million, an increase of 18 percent compared with the year-ago quarter and an increase of 14 percent sequentially. ES recorded the fifth consecutive quarter of year over year growth, driven by contract completions in the quarter across all portfolios and strong double digit growth in the data and applications businesses.

Metro Ethernet Networks revenue in the third quarter of 2007 was $360 million, a decrease of 13 percent compared with the year-ago quarter and a decrease of 1 percent sequentially. Nortel said the year-over-year decrease was primarily due to decreases in long-haul optical revenue resulting from revenue recognized in the third quarter of 2006 and not repeated to the same extent in the third quarter of 2007, as well as decreases in legacy data, partially offset by increases in metro optical and carrier ethernet revenue.

“Nortel achieved solid results this quarter in a challenging business environment,” president and CEO Mike Zafirovski said in a release. “We delivered operating margin of 5 per cent, the highest since 2004, driven by the highest gross margin in nine quarters. I am also encouraged by the top-line activity. Adjusted for the UMTS sale, orders in the third quarter were up 9 percent and up 5 percent year to date, which demonstrates Nortel’s increasing relevance in the marketplace. With an ongoing focus on customers and execution, we expect to continue to deliver operational and financial improvements in the fourth quarter and beyond.”

Global services (GS) revenue in the third quarter of 2007 was $540 million, essentially flat compared with the year-ago quarter and an increase of 9 percent sequentially, the company said. A decrease in network implementation services, primarily due to the UMTS Access divestiture and lower GSM services revenue, was offset by growth in support services. Excluding the impact of the UMTS Access divestiture, GS revenue increased by 6 percent in the third quarter of 2007 compared with the same quarter a year ago.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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