Nortel revenues rebound

Stuart Corner
Tuesday, 11 August 2009 03:42

IT Industry - Strategy

Nortel has released its second quarter financial results and while all units show significant year on year revenue declines, all but one have posted sequential increases over Q1 with commentators suggesting Enterprise Solutions' results could see potential buyer Avaya facing competition.

Carrier Networks was up 25 percent QoQ to $US920m, Enterprise Solutions up 18 percent to $US465m, the LG-Nortel joint venture up six percent to $US199m and Metro Ethernet Networks down 8 percent to $US333m. Total revenue was up 14 percent QoQ to $US1.972b, but down 25 percent from Q2 2008. The company also managed to finish the quarter with more cash in the bank, $US2.45m up from $2.48m at 31 March, primarily as a result of favourable currency fluctuations.

Nortel reported a net loss in the second quarter of 2009 of $US274 million compared to net loss of $US113 million the second quarter of 2008. The Q2 2009 loss included reorganisation costs of $US130 million.

President and CEO, Mike Zafirovski said: "While we continue to be impacted by the economic environment and the Creditor Protection Proceedings, we have successfully stabilised the business since filing for creditor protection. Despite these challenges, our revenue is up quarter over quarter by 14 percent overall while our corresponding operating costs are down 15 percent resulting in strong margins. At the same time, our customer service levels remain strong. These operating and customer results are a real tribute to the professionalism and dedication of the Nortel employees and the outstanding support from our customers, partners and suppliers for which I'm deeply appreciative."

Eric Krapf, editor and lead blogger for the TechWeb's 'No Jitter' blog site commented: "The quarter-over-quarter improvements suggest that there's still life left in Nortel, and they set the stage for what should be a very interesting auction of the Enterprise Solutions business on September 11. 'Stalking horse' buyer Avaya may find itself having to up its bid if it wants to hang onto Enterprise Solutions."

However another TechWeb blogger, Allan Sulkin, president and founder of TEQConsult Group, commented "Nortel could likely have sold its enterprise business unit two years ago for several times the price it will receive as part of the bankruptcy auction. From the time Zafirovski came to Nortel, its enterprise business slowed down in terms of significant product innovation and design compared to the competition and lost sizable market share, especially in the large enterprise systems segment. By virtually no competitive measure is its large enterprise business better today than it was four years ago, although it has retained its position as a leading small system supplier.