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Nortel loses another $507 million

By Sean Michael Kerner on May 11, 2009 9:50 AM

From the 'how much money can one company loose?' files:

Nortel Networks issued its first quarter 2009 financial report this morning and it's not a pretty sight. The company is still losing money -- lots of money -- though there are (surprisingly) a few bright spots.

Nortel reported that it lost $507 million ($1.02 per share) for the first quarter of 2009, up dramatically from the loss of $138 million for the first quarter of 2008. Revenues were reported to be $1.73 billion, which is a 37 percent decline on a year over year basis.

The once high flying Nortel entered into creditor protection in the US and in Canada in January. It has been trying to restructure its business ever since. While Nortel is still losing on the net income and revenue sides of its balance sheet it actually grew its cash balance to $2.48 billion up from $2.4 billion at year end 2008.

Nortel is also claiming growth for its carrier networking initiativies, in particular its 40G equipment. In its earnings release Nortel claimed that it had a record quarter for 40G shipments with over 500 40G line ports shipped. Nortel is also contining to make its play in the emerging 100G space as well.

In order to further boost its Carrier networking efforts, Nortel is planning on giving that business unit a bit more autonomy. The place is to 'decentralize' the Carrier Sales and Global Operations functions over the coming weeks. The idea being that it will help this growing unit at Nortel to better serve customers and be more responsive.

Normally when I write about a company's earnings there is a conference call -- but that's not the case with Nortel. They've decided against having a call and potentially facing questions from analysts (and others) that perhaps they would rather not answer.

In his published statement on the Nortel earnings, Nortel President and Chief Executive Officer Mike Zafirovski took an upbeat tone.

"First quarter results showed a decline in revenue and margins as expected due to the severe economic downturn and our filings for creditor protection," Zafirovski stated. "However, despite the declines we saw this quarter, revenue has stabilized and our cash balance is stable from year-end 2008."

Talk about trying to be an optimist in face of dire adversity. I'm not sure how you can claim revenue has stabilized when it is down by 37 percent. Then again the economy is down, all networking vendors are down and having $1.73 billion in revenue for a quarter is no small feat.

"We accomplished our initial objectives of maintaining our customer commitments and strengthening our operational performance," Zafirovski stated. "Network performance and customer service levels are at multi-year highs and customers are expressing their support of Nortel."

We still have yet to see any large divestiture from Nortel. I had expected that Nortel would begin some selloffs of its key assets. To date, the only asset that I've seen them sell is are its Alteon assets. That particular divestiture resulted in an $18 million sale for Nortel. That's just not enough in my view.

Nortel is still pushing it's enteprise business too. In fact they've got some kind of new coming up the week of May 18th at Interop. It'll be interesting to see if in addition to holding on to cash, whether or not Nortel for Q2 2009 will actually be able to stop the bleeding.

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