Nortel Networks offered few surprises in its Q3 results released Thursday, meeting targets for revenues and pro forma earnings.
The telecom equipment maker posted a loss of $1.8 billion, or 42 cents a share, in the September quarter, compared to a loss of $3.47 billion, or $1.08 a share, in the same period a year ago (all figures in U.S. dollars).
Both quarters were impacted by sizable charges for job cuts and plant closures. This year's Q3 saw charges of $599 million.
On a pro-forma basis, which excludes many one time charges, the company posted a loss of $420 million, or 10 cents a share, compared to $2.18 billion, or 68 cents a share, a year earlier.
The consensus call of analysts polled by Thomson First Call was for a pro forma loss of 11 cents a share.
In a surprising move, the company finally revealed the extent of its job cuts in Ottawa. The local workforce now stands at about 6,000, including the jobs being cut or transferred as part of last week's deal with the U.K.'s Bookham Technologies.
That leaves the workforce only one-third the size it was during the height of the tech boom two years ago when the figure was near 18,000.
However, Ottawa, with a strong focus on R&D, still remains the largest Canadian operation for Nortel. Spokeswoman Tina Warren confirmed Calgary's workforce at 1,400, Montreal at 1,700 and the head office operations in Brampton and the Toronto area at 1,000.
Revenues fell to $2.36 billion from $3.69 billion in last year's Q3, in line with company guidance. However, the sales forecast was cut twice during the quarter.
"It is still an appallingly rotten, awful, miserable environment to be out there in. But within that context Nortel seems to be doing at least relatively well," Duncan Stewart, a partner and portfolio manager with Tera Capital Corp., told Reuters.
"I'm not rushing out and buying any more shares on this, but, given the environment, this is about as good as it gets."
Nortel said its cash balance at the end of the third quarter was $4.59 billion. It expects to end the year with more than $3 billion in cash and said it will make a debt repayment of about $200 million due in 2003.
"We will continue to focus on cash management and expect we have more than sufficient cash to fund our current business model, manage our investments and meet our customer commitments,?CFO Doug Beatty said.
The company will allow its unused $1.5 billion in credit facilities, set to mature in mid-December, to expire. The line of credit depended on Nortel keeping its pro forma losses below $700 million in the first nine months of the year. The company was widely expected to miss the mark.
The breakeven target is now set at $2.4 billion in quarterly revenue with 35,000 staff. Nortel already announced in August another 7,000 cuts to push its headcount to that level, suggesting the mass layoffs may finally be over.
CEO Frank Dunn reiterated his goal to post a profit by the second quarter of 2003.
"My top priority remains returning to profitability. Performance for the quarter reinforces the progress we are making...I expect to see sequential improvements in the pro forma bottom line results in the fourth-quarter," Dunn told analysts in a conference call.
The company said it expects to take a $600 million to $700 million charge to shareholder equity at Dec. 31 to offset the effect of weaker markets on its pension plans. Nortel said it has made all required cash contributions to its registered pension plans in 2002.
The telecom equipment maker posted a loss of $1.8 billion, or 42 cents a share, in the September quarter, compared to a loss of $3.47 billion, or $1.08 a share, in the same period a year ago (all figures in U.S. dollars).
Both quarters were impacted by sizable charges for job cuts and plant closures. This year's Q3 saw charges of $599 million.
On a pro-forma basis, which excludes many one time charges, the company posted a loss of $420 million, or 10 cents a share, compared to $2.18 billion, or 68 cents a share, a year earlier.
The consensus call of analysts polled by Thomson First Call was for a pro forma loss of 11 cents a share.
In a surprising move, the company finally revealed the extent of its job cuts in Ottawa. The local workforce now stands at about 6,000, including the jobs being cut or transferred as part of last week's deal with the U.K.'s Bookham Technologies.
That leaves the workforce only one-third the size it was during the height of the tech boom two years ago when the figure was near 18,000.
However, Ottawa, with a strong focus on R&D, still remains the largest Canadian operation for Nortel. Spokeswoman Tina Warren confirmed Calgary's workforce at 1,400, Montreal at 1,700 and the head office operations in Brampton and the Toronto area at 1,000.
Revenues fell to $2.36 billion from $3.69 billion in last year's Q3, in line with company guidance. However, the sales forecast was cut twice during the quarter.
"It is still an appallingly rotten, awful, miserable environment to be out there in. But within that context Nortel seems to be doing at least relatively well," Duncan Stewart, a partner and portfolio manager with Tera Capital Corp., told Reuters.
"I'm not rushing out and buying any more shares on this, but, given the environment, this is about as good as it gets."
Nortel said its cash balance at the end of the third quarter was $4.59 billion. It expects to end the year with more than $3 billion in cash and said it will make a debt repayment of about $200 million due in 2003.
"We will continue to focus on cash management and expect we have more than sufficient cash to fund our current business model, manage our investments and meet our customer commitments,?CFO Doug Beatty said.
The company will allow its unused $1.5 billion in credit facilities, set to mature in mid-December, to expire. The line of credit depended on Nortel keeping its pro forma losses below $700 million in the first nine months of the year. The company was widely expected to miss the mark.
The breakeven target is now set at $2.4 billion in quarterly revenue with 35,000 staff. Nortel already announced in August another 7,000 cuts to push its headcount to that level, suggesting the mass layoffs may finally be over.
CEO Frank Dunn reiterated his goal to post a profit by the second quarter of 2003.
"My top priority remains returning to profitability. Performance for the quarter reinforces the progress we are making...I expect to see sequential improvements in the pro forma bottom line results in the fourth-quarter," Dunn told analysts in a conference call.
The company said it expects to take a $600 million to $700 million charge to shareholder equity at Dec. 31 to offset the effect of weaker markets on its pension plans. Nortel said it has made all required cash contributions to its registered pension plans in 2002.
