Nortel: Nortel Reports Financial Results for the First Quarter 2008 MAY 02, 2008
03.05.2008 20:38 VoIP World News - Source: tmcnet.com
(M2 PressWIRE Via Acquire Media NewsEdge)
RDATE:02052008
* Revenue up 11 percent, benefiting from the completion of an LG-Nortel
joint venture contract
* Gross margin at 41.6 percent, up 120 bps from prior year period
* Operating margin at 4.7 percent, up 512 bps from prior year period
* Reiterates full year guidance
Nortel Reports Results for the First Quarter 2008 TORONTO - Nortel*
Networks Corporation [NYSE/TSX: NT] announced its results for first
quarter 2008, which demonstrated continued progress against the
Company's turnaround strategy. Strong operational progress in margins
combined with steady revenue growth kept Nortel on track to meet full
year goals. Results were prepared in accordance with United States
generally accepted accounting principles (GAAP) in U.S. dollars.
"Nortel had a strong first quarter, driven by the completion of a
contract in our LG-Nortel joint venture and continued improvements in
gross and operating margins. Nortel's operating margin, a critical
measure of our plan's traction, expanded for the seventh consecutive
quarter year over year, recording a 512 bps improvement to 4.7
percent," said Mike Zafirovski, Nortel president and chief executive
officer. "We expect to achieve our full year guidance and we continue
to make solid progress against the strategy to turn around the company.
Our relentless focus on execution and our determination to deliver
value to customers is strengthening the foundation upon which to build
our performance over the balance of 2008 and beyond."
2008 Financial Highlights
* Revenue in the first quarter of $2.76 billion, up by 11 percent year
over year, which included a release of deferred revenue associated with
the completion of a significant contract in the LG-Nortel joint venture
that was previously expected to occur in the second quarter.
* Gross margin in the first quarter of 41.6 percent, up 120 basis
points year over year.
* Operating margin in the first quarter of 4.7 percent, up 512 basis
points year over year.
* Cash balance, as at March 31, 2008 of $3.22 billion, included a
seasonal outflow of cash from operations in the quarter of $260
million, in-line with the 2008 target.
Business Highlights
* Nortel launched the industry's first 40/100G solution - a significant
technology milestone enabling four times the network throughput
immediately, while providing the foundation to simply and affordably
increase capacity tenfold, as required. This equips carriers to keep
pace with dramatically increasing demand from high bandwidth
applications. Also, Nortel won two related contracts with Neos and TDC;
and in a technology first, conducted a live 100G network trial with
Comcast.
* Customers such as CTM in Macau, Intercontinental in San Francisco and
RMIT University in Australia came to Nortel for unified communications
solutions that will help them streamline communication and enhance
business processes.
* Nortel won a 4G contract with Charles Street Partners to bring
wireless broadband to rural citizens of Florida and Arizona, and
secured a trial agreement with Loxley of Thailand to demonstrate mobile
VoIP, high-definition video and other interactive applications. In
addition, Nortel achieved several technology milestones, including,
with LG Electronics, the world's first demo of mobile LTE while
traveling in a vehicle at 110 kilometers per hour with data rates of up
to 50 Mbps, fast enough to support mobile multimedia applications.
* Market demand for 2G and 3G infrastructure continued and Nortel won
key deals with operators around the world, including a $100 million
contract with India's BSNL and a five-year contract extension with US
Cellular.
* Nortel also announced a telepresence and video conferencing resale
agreement with TANDBERG, further enabling the delivery of a
fully-managed telepresence solution with an open-architecture, a key
competitive differentiator, to help businesses decrease their travel
costs, increase their productivity and significantly reduce their
carbon footprint.
Revenue
Revenue was $2.76 billion for the first quarter of 2008 compared to
$2.48 billion for the first quarter of 2007 and $3.20 billion for the
fourth quarter of 2007. In the first quarter of 2008, revenue increased
by 11 percent compared with the year ago quarter and decreased by 14
percent compared to the fourth quarter of 2007. The first quarter of
2008 included the release of deferred revenue associated with the
completion of a large contract in the LG-Nortel joint venture.
Revenue B/(W)
Q1 2008 YoY
QoQ
Carrier Networks
$1,218 21%
(10%)
Enterprise Solutions
$ 641 7%
(16%)
Global Services
$ 516 15%
(15%)
Metro Ethernet Networks
$ 327 (12%) (24%)
Other
$
56 0%
0%
Total
$2,758 11%
(14%)
Carrier Networks (CN) revenue in the first quarter of 2008 was $1,218
million, an increase of 21 percent compared with the year ago quarter
and a decrease of 10 percent sequentially.
Compared to the year ago quarter, CN revenue benefited from the
LG-Nortel joint venture contract completion, partially offset by a
slight decline in CDMA and lower legacy switching sales.
Enterprise Solutions (ES) revenue in the first quarter of 2008 was $641
million, an increase of 7 percent compared with the year ago quarter
and a decrease of 16 percent sequentially.
Compared to the year ago quarter, ES revenues were positively impacted
by higher voice and applications revenues, primarily from customer
migration to unified communications, partially offset by a decline in
the data networking business primarily from lower sales in the North
American and EMEA regions and significant contract completions in the
first quarter of 2007, not repeated to the same extent in the first
quarter of 2008.
Global Services (GS) revenue in the first quarter of 2008 was $516
million, an increase of 15 percent compared with the year ago quarter
and a decrease of 15 percent sequentially. The first quarter showed
strong growth in network implementation services and managed services,
partially offset by a decline in network support services. Compared to
the year ago quarter, GS revenue benefited from the LG-Nortel joint
venture contract completion and other growth in implementation services
primarily in the Asia region.
Metro Ethernet Networks (MEN) revenue in the first quarter of 2008 was
$327 million, a decrease of 12 percent compared with the year ago
quarter and a decrease of 24 percent sequentially. The year over year
decrease in revenue was primarily due to decreases in optical and data
revenue resulting from the completion of large contracts in the first
quarter of 2007 not repeated to the same extent in the first quarter of
2008.
Deferred Revenue
Deferred revenue balances decreased by $266 million during the first
quarter of 2008 compared to an increase of $32 million in the first
quarter of 2007.
Gross margin
Gross margin was 41.6 percent of revenue in the first quarter of 2008.
This compared to gross margin of 40.4 percent for the first quarter of
2007 and 43.7 percent for the fourth quarter of 2007. Compared to the
first quarter of 2007, gross margins benefited primarily from
productivity improvements partially offset by unfavourable product mix
and lower margin deferred revenue releases.
Operating Expenses
Operating Expenses B/(W)
Q1 2008 YoY
QoQ
SG&A
$ 597 1%
12%
R&D
$ 420 (3%)
12%
Total Operating Expenses $1,017 0%
12%
% of Revenue
36.9%
394 bps (82 bps)
Operating expenses were $1,017 million in the first quarter of 2008.
This compares to operating expenses of $1,013 million for the first
quarter of 2007 and $1,153 million for the fourth quarter of 2007.
Selling, general and administrative (SG&A) expenses were $597 million
in the first quarter of 2008, compared to $604 million for the first
quarter of 2007, and $678 million for the fourth quarter of 2007.
Compared to the first quarter of 2007, SG&A was favourably impacted
primarily by savings from previously announced restructuring programs,
partially offset by investments in sales and marketing and negative
foreign exchange impacts.
Research and development (R&D) expenses were $420 million in the first
quarter of 2008, compared to $409 million for the first quarter of 2007
and $475 million for the fourth quarter of 2007. Compared to the first
quarter of 2007, R&D was favourably impacted primarily by savings from
previously announced restructuring programs, partially offset by
negative foreign exchange impacts and investments in new technologies.
Operating Margin
Operating margin was 4.7 percent in the first quarter of 2008, compared
to (0.4) percent for the first quarter of 2007 and 7.6 percent for the
fourth quarter of 2007. The first quarter of 2008 operating margin
increased by 512 basis points compared to the year ago quarter, marking
the seventh consecutive quarter of year over year improvement. The
improvement was driven by higher gross margin and lower operating
expense to revenue.
Other
Special charges in the first quarter of 2008 of $88 million related to
costs associated with previously announced restructuring plans.
If you don’t have a telecommuting program, how much revenue is your business losing? Learn more, download free white paper.Discover how Unified Communications can help you gain the competitive edge, with more efficient internal operations, increased productivity and improved customer service. Learn more, download free white paper.Discover the top 10 reasons to throw out your old PBX and replace it with a new software based IP PBX. Learn about a new end-to-end billing and network management solution for independent Internet Service Providers.Learn about front office and back office systems which are less and less dependent on the underlying technology and more and more agile. Learn how to maintain seamless business continuity while migrating from traditional voice mail, to unified communications.
Other income (expense) - net was $37 million of income for the first
quarter of 2008, compared to income of $66 million in the first quarter
of 2007 and income of $93 million in the fourth quarter of 2007. Other
income included interest and dividend income of $38 million, a foreign
exchange loss of $19 million and a $16 million gain on an interest rate
swap.
Minority interest was an expense of $78 million in the first quarter of
2008, compared to an expense of $22 million for the first quarter of
2007 and an expense of $39 million for the fourth quarter of 2007.
Minority interest expense included an expense of $11 million related to
the ongoing payment of preferred shares dividends, but was primarily
driven by the profitability of the LG-Nortel joint venture.
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.
Interest expense was $80 million in the first quarter of 2008, compared
to $96 million for the first quarter of 2007 and $80 million for the
fourth quarter of 2007.
Income tax expense was $36 million in the first quarter of 2008,
compared to an expense of $13 million for the first quarter of 2007 and
an expense of $1,040 million for the fourth quarter of 2007 which
included an increase to the valuation allowance against the deferred
tax asset of $1,043 million.
Earnings
The Company reported a net loss in the first quarter of 2008 of $138
million, or $0.28 per common share on a basic and diluted basis,
compared to net loss of $103 million, or $0.23 per common share on a
basic and diluted basis, in the first quarter of 2007 and net loss of
$844 million, or $1.70 per common share on a diluted basis, in the
fourth quarter of 2007.
Significant Impact Items and Tax Impact
Q1 2008 Q1 2007 Q4 2007
Net Earnings / (Loss)
($138) ($103) ($844)
Restructuring Charges
$88
$80
$38
Litigation Settlement Mark to Market
($54)
Loss (Gain) on Sale
($2)
($1)
($23)
Currency Exchange Loss (Gain)
$19
($40)
Income Tax - Adjustment to Deferred Tax Asset
$1,043
Investment Impairment
$8
Patent Litigation Settlement
$12
Other Income - Loss (Gain) from Swap
($16)
($15)
Total Tax Impact of above items
($6)
($1)
($5)
The net loss in the first quarter of 2008 of $138 million included
special charges of $88 million for restructurings, a loss of $19
million due to changes in foreign exchange rates, a charge of $12
million related to a patent lawsuit settlement and a gain of $16
million primarily from mark-to-market gains on interest rate swaps. The
net loss in the first quarter of 2007 of $103 million included a
shareholder litigation gain of $54 million reflecting a mark-to-market
adjustment of the share portion of the class action settlement and
special charges of $80 million for restructuring. The net loss in the
fourth quarter of 2007 of $844 million included a reduction of the
deferred tax asset of $1,043 million, special charges of $38 million
for restructurings, a gain of $23 million on the sale of assets, a gain
of $40 million due to favourable effects of changes in foreign exchange
rates and a gain due to a market value adjustment of $15 million on an
interest rate swap.
Cash balance at the end of the first quarter of 2008 was $3.22 billion,
down from $3.53 billion at the end of the fourthquarter of 2007. The
decrease in cash was primarily driven by a cash outflow from operating
activities of $260 million, cash used in investing activities of $44
million and cash used in financing activities of $14 million. The cash
outflow from operating activities of $260 million included a net loss
of $138 million and outflows of $264 million primarily related to the
payment of 2007 bonuses and fourth quarter sales compensation, $121
million related to pension funding, $51 million cash payments related
to our previously announced restructuring plans, partially offset by
net cash inflows of $99 million of working capital and non-cash
additions including $82 million of amortization and depreciation and
$78 million of minority interest primarily related to profitability of
the LG-Nortel joint venture.
Outlook(a)
Nortel reiterates its financial outlook for the full year 2008, and
continues to expect:
* Revenue to grow in the low single digits compared to 2007
* Gross Margin to be about the business model target of 43 percent of
revenue
* Operating Margin as a percentage of revenue to increase by about 300
basis points compared to 2007
(a) The Company's financial outlook contains forward-looking
information and as such, is based on certain assumptions, and is
subject to important risk factors and uncertainties (which are
summarized in italics at the end of this press release) that could
cause actual results or events to differ materially from this outlook.
About Nortel
Nortel is a recognized leader in delivering communications capabilities
that make the promise of Business Made Simple a reality for our
customers. Our next-generation technologies, for both service provider
and enterprise networks, support multimedia and business-critical
applications. Nortel's technologies are designed to help eliminate
today's barriers to efficiency, speed and performance by simplifying
networks and connecting people to the information they need, when they
need it. Nortel does business in more than 150 countries around the
world. For more information, visit Nortel on the Web at www.nortel.com.
For the latest Nortel news, visit www.nortel.com/news..
Nortel will host a teleconference/audio webcast to discuss First
Quarter 2008 Results:
Date: Friday, May 2, 2008 Time: 8:30 a.m. ET
To take part in the audio Webcast, please visit:
www.nortel.com/q1earnings2008
To participate in the audio teleconference and Q&A, please call:
* North America 1-866-225-6564
* International 1-416-641-6139
*** Please dial in at least 15 minutes prior to the start of the event
***
Replay: A replay of the audio teleconference will be available at 11:00
a.m. ET at:
* North America 1-800-408-3053 Passcode: 3256865#
* International 1-416-695-5800 Passcode: 3256865#
Audio webcast replay: www.nortel.com/q1earnings2008
CONTACT: Media Jay Barta, Nortel
Tel: +1 972 685 2381
e-mail: jbarta@nortel.com
Mohammed Nakhooda, Nortel
Tel: +1 905 863 7407
e-mail: mohammna@nortel.com
Investors
Tel: +1 888 901 7286
Tel: +1 905 863 6049
e-mail: investor@nortel.com
WWW: http://www.nortel.com
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provided within M2 PressWIRE. Data supplied by named party/parties.
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Copyright ? 2008 M2 Communications Ltd.
RDATE:02052008
* Revenue up 11 percent, benefiting from the completion of an LG-Nortel
joint venture contract
* Gross margin at 41.6 percent, up 120 bps from prior year period
* Operating margin at 4.7 percent, up 512 bps from prior year period
* Reiterates full year guidance
Nortel Reports Results for the First Quarter 2008 TORONTO - Nortel*
Networks Corporation [NYSE/TSX: NT] announced its results for first
quarter 2008, which demonstrated continued progress against the
Company's turnaround strategy. Strong operational progress in margins
combined with steady revenue growth kept Nortel on track to meet full
year goals. Results were prepared in accordance with United States
generally accepted accounting principles (GAAP) in U.S. dollars.
"Nortel had a strong first quarter, driven by the completion of a
contract in our LG-Nortel joint venture and continued improvements in
gross and operating margins. Nortel's operating margin, a critical
measure of our plan's traction, expanded for the seventh consecutive
quarter year over year, recording a 512 bps improvement to 4.7
percent," said Mike Zafirovski, Nortel president and chief executive
officer. "We expect to achieve our full year guidance and we continue
to make solid progress against the strategy to turn around the company.
Our relentless focus on execution and our determination to deliver
value to customers is strengthening the foundation upon which to build
our performance over the balance of 2008 and beyond."
2008 Financial Highlights
* Revenue in the first quarter of $2.76 billion, up by 11 percent year
over year, which included a release of deferred revenue associated with
the completion of a significant contract in the LG-Nortel joint venture
that was previously expected to occur in the second quarter.
* Gross margin in the first quarter of 41.6 percent, up 120 basis
points year over year.
* Operating margin in the first quarter of 4.7 percent, up 512 basis
points year over year.
* Cash balance, as at March 31, 2008 of $3.22 billion, included a
seasonal outflow of cash from operations in the quarter of $260
million, in-line with the 2008 target.
Business Highlights
* Nortel launched the industry's first 40/100G solution - a significant
technology milestone enabling four times the network throughput
immediately, while providing the foundation to simply and affordably
increase capacity tenfold, as required. This equips carriers to keep
pace with dramatically increasing demand from high bandwidth
applications. Also, Nortel won two related contracts with Neos and TDC;
and in a technology first, conducted a live 100G network trial with
Comcast.
* Customers such as CTM in Macau, Intercontinental in San Francisco and
RMIT University in Australia came to Nortel for unified communications
solutions that will help them streamline communication and enhance
business processes.
* Nortel won a 4G contract with Charles Street Partners to bring
wireless broadband to rural citizens of Florida and Arizona, and
secured a trial agreement with Loxley of Thailand to demonstrate mobile
VoIP, high-definition video and other interactive applications. In
addition, Nortel achieved several technology milestones, including,
with LG Electronics, the world's first demo of mobile LTE while
traveling in a vehicle at 110 kilometers per hour with data rates of up
to 50 Mbps, fast enough to support mobile multimedia applications.
* Market demand for 2G and 3G infrastructure continued and Nortel won
key deals with operators around the world, including a $100 million
contract with India's BSNL and a five-year contract extension with US
Cellular.
* Nortel also announced a telepresence and video conferencing resale
agreement with TANDBERG, further enabling the delivery of a
fully-managed telepresence solution with an open-architecture, a key
competitive differentiator, to help businesses decrease their travel
costs, increase their productivity and significantly reduce their
carbon footprint.
Revenue
Revenue was $2.76 billion for the first quarter of 2008 compared to
$2.48 billion for the first quarter of 2007 and $3.20 billion for the
fourth quarter of 2007. In the first quarter of 2008, revenue increased
by 11 percent compared with the year ago quarter and decreased by 14
percent compared to the fourth quarter of 2007. The first quarter of
2008 included the release of deferred revenue associated with the
completion of a large contract in the LG-Nortel joint venture.
Revenue B/(W)
Q1 2008 YoY
QoQ
Carrier Networks
$1,218 21%
(10%)
Enterprise Solutions
$ 641 7%
(16%)
Global Services
$ 516 15%
(15%)
Metro Ethernet Networks
$ 327 (12%) (24%)
Other
$
56 0%
0%
Total
$2,758 11%
(14%)
Carrier Networks (CN) revenue in the first quarter of 2008 was $1,218
million, an increase of 21 percent compared with the year ago quarter
and a decrease of 10 percent sequentially.
Compared to the year ago quarter, CN revenue benefited from the
LG-Nortel joint venture contract completion, partially offset by a
slight decline in CDMA and lower legacy switching sales.
Enterprise Solutions (ES) revenue in the first quarter of 2008 was $641
million, an increase of 7 percent compared with the year ago quarter
and a decrease of 16 percent sequentially.
Compared to the year ago quarter, ES revenues were positively impacted
by higher voice and applications revenues, primarily from customer
migration to unified communications, partially offset by a decline in
the data networking business primarily from lower sales in the North
American and EMEA regions and significant contract completions in the
first quarter of 2007, not repeated to the same extent in the first
quarter of 2008.
Global Services (GS) revenue in the first quarter of 2008 was $516
million, an increase of 15 percent compared with the year ago quarter
and a decrease of 15 percent sequentially. The first quarter showed
strong growth in network implementation services and managed services,
partially offset by a decline in network support services. Compared to
the year ago quarter, GS revenue benefited from the LG-Nortel joint
venture contract completion and other growth in implementation services
primarily in the Asia region.
Metro Ethernet Networks (MEN) revenue in the first quarter of 2008 was
$327 million, a decrease of 12 percent compared with the year ago
quarter and a decrease of 24 percent sequentially. The year over year
decrease in revenue was primarily due to decreases in optical and data
revenue resulting from the completion of large contracts in the first
quarter of 2007 not repeated to the same extent in the first quarter of
2008.
Deferred Revenue
Deferred revenue balances decreased by $266 million during the first
quarter of 2008 compared to an increase of $32 million in the first
quarter of 2007.
Gross margin
Gross margin was 41.6 percent of revenue in the first quarter of 2008.
This compared to gross margin of 40.4 percent for the first quarter of
2007 and 43.7 percent for the fourth quarter of 2007. Compared to the
first quarter of 2007, gross margins benefited primarily from
productivity improvements partially offset by unfavourable product mix
and lower margin deferred revenue releases.
Operating Expenses
Operating Expenses B/(W)
Q1 2008 YoY
QoQ
SG&A
$ 597 1%
12%
R&D
$ 420 (3%)
12%
Total Operating Expenses $1,017 0%
12%
% of Revenue
36.9%
394 bps (82 bps)
Operating expenses were $1,017 million in the first quarter of 2008.
This compares to operating expenses of $1,013 million for the first
quarter of 2007 and $1,153 million for the fourth quarter of 2007.
Selling, general and administrative (SG&A) expenses were $597 million
in the first quarter of 2008, compared to $604 million for the first
quarter of 2007, and $678 million for the fourth quarter of 2007.
Compared to the first quarter of 2007, SG&A was favourably impacted
primarily by savings from previously announced restructuring programs,
partially offset by investments in sales and marketing and negative
foreign exchange impacts.
Research and development (R&D) expenses were $420 million in the first
quarter of 2008, compared to $409 million for the first quarter of 2007
and $475 million for the fourth quarter of 2007. Compared to the first
quarter of 2007, R&D was favourably impacted primarily by savings from
previously announced restructuring programs, partially offset by
negative foreign exchange impacts and investments in new technologies.
Operating Margin
Operating margin was 4.7 percent in the first quarter of 2008, compared
to (0.4) percent for the first quarter of 2007 and 7.6 percent for the
fourth quarter of 2007. The first quarter of 2008 operating margin
increased by 512 basis points compared to the year ago quarter, marking
the seventh consecutive quarter of year over year improvement. The
improvement was driven by higher gross margin and lower operating
expense to revenue.
Other
Special charges in the first quarter of 2008 of $88 million related to
costs associated with previously announced restructuring plans.
If you don’t have a telecommuting program, how much revenue is your business losing? Learn more, download free white paper.Discover how Unified Communications can help you gain the competitive edge, with more efficient internal operations, increased productivity and improved customer service. Learn more, download free white paper.Discover the top 10 reasons to throw out your old PBX and replace it with a new software based IP PBX. Learn about a new end-to-end billing and network management solution for independent Internet Service Providers.Learn about front office and back office systems which are less and less dependent on the underlying technology and more and more agile. Learn how to maintain seamless business continuity while migrating from traditional voice mail, to unified communications.
Other income (expense) - net was $37 million of income for the first
quarter of 2008, compared to income of $66 million in the first quarter
of 2007 and income of $93 million in the fourth quarter of 2007. Other
income included interest and dividend income of $38 million, a foreign
exchange loss of $19 million and a $16 million gain on an interest rate
swap.
Minority interest was an expense of $78 million in the first quarter of
2008, compared to an expense of $22 million for the first quarter of
2007 and an expense of $39 million for the fourth quarter of 2007.
Minority interest expense included an expense of $11 million related to
the ongoing payment of preferred shares dividends, but was primarily
driven by the profitability of the LG-Nortel joint venture.
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.
Interest expense was $80 million in the first quarter of 2008, compared
to $96 million for the first quarter of 2007 and $80 million for the
fourth quarter of 2007.
Income tax expense was $36 million in the first quarter of 2008,
compared to an expense of $13 million for the first quarter of 2007 and
an expense of $1,040 million for the fourth quarter of 2007 which
included an increase to the valuation allowance against the deferred
tax asset of $1,043 million.
Earnings
The Company reported a net loss in the first quarter of 2008 of $138
million, or $0.28 per common share on a basic and diluted basis,
compared to net loss of $103 million, or $0.23 per common share on a
basic and diluted basis, in the first quarter of 2007 and net loss of
$844 million, or $1.70 per common share on a diluted basis, in the
fourth quarter of 2007.
Significant Impact Items and Tax Impact
Q1 2008 Q1 2007 Q4 2007
Net Earnings / (Loss)
($138) ($103) ($844)
Restructuring Charges
$88
$80
$38
Litigation Settlement Mark to Market
($54)
Loss (Gain) on Sale
($2)
($1)
($23)
Currency Exchange Loss (Gain)
$19
($40)
Income Tax - Adjustment to Deferred Tax Asset
$1,043
Investment Impairment
$8
Patent Litigation Settlement
$12
Other Income - Loss (Gain) from Swap
($16)
($15)
Total Tax Impact of above items
($6)
($1)
($5)
The net loss in the first quarter of 2008 of $138 million included
special charges of $88 million for restructurings, a loss of $19
million due to changes in foreign exchange rates, a charge of $12
million related to a patent lawsuit settlement and a gain of $16
million primarily from mark-to-market gains on interest rate swaps. The
net loss in the first quarter of 2007 of $103 million included a
shareholder litigation gain of $54 million reflecting a mark-to-market
adjustment of the share portion of the class action settlement and
special charges of $80 million for restructuring. The net loss in the
fourth quarter of 2007 of $844 million included a reduction of the
deferred tax asset of $1,043 million, special charges of $38 million
for restructurings, a gain of $23 million on the sale of assets, a gain
of $40 million due to favourable effects of changes in foreign exchange
rates and a gain due to a market value adjustment of $15 million on an
interest rate swap.
Cash balance at the end of the first quarter of 2008 was $3.22 billion,
down from $3.53 billion at the end of the fourthquarter of 2007. The
decrease in cash was primarily driven by a cash outflow from operating
activities of $260 million, cash used in investing activities of $44
million and cash used in financing activities of $14 million. The cash
outflow from operating activities of $260 million included a net loss
of $138 million and outflows of $264 million primarily related to the
payment of 2007 bonuses and fourth quarter sales compensation, $121
million related to pension funding, $51 million cash payments related
to our previously announced restructuring plans, partially offset by
net cash inflows of $99 million of working capital and non-cash
additions including $82 million of amortization and depreciation and
$78 million of minority interest primarily related to profitability of
the LG-Nortel joint venture.
Outlook(a)
Nortel reiterates its financial outlook for the full year 2008, and
continues to expect:
* Revenue to grow in the low single digits compared to 2007
* Gross Margin to be about the business model target of 43 percent of
revenue
* Operating Margin as a percentage of revenue to increase by about 300
basis points compared to 2007
(a) The Company's financial outlook contains forward-looking
information and as such, is based on certain assumptions, and is
subject to important risk factors and uncertainties (which are
summarized in italics at the end of this press release) that could
cause actual results or events to differ materially from this outlook.
About Nortel
Nortel is a recognized leader in delivering communications capabilities
that make the promise of Business Made Simple a reality for our
customers. Our next-generation technologies, for both service provider
and enterprise networks, support multimedia and business-critical
applications. Nortel's technologies are designed to help eliminate
today's barriers to efficiency, speed and performance by simplifying
networks and connecting people to the information they need, when they
need it. Nortel does business in more than 150 countries around the
world. For more information, visit Nortel on the Web at www.nortel.com.
For the latest Nortel news, visit www.nortel.com/news..
Nortel will host a teleconference/audio webcast to discuss First
Quarter 2008 Results:
Date: Friday, May 2, 2008 Time: 8:30 a.m. ET
To take part in the audio Webcast, please visit:
www.nortel.com/q1earnings2008
To participate in the audio teleconference and Q&A, please call:
* North America 1-866-225-6564
* International 1-416-641-6139
*** Please dial in at least 15 minutes prior to the start of the event
***
Replay: A replay of the audio teleconference will be available at 11:00
a.m. ET at:
* North America 1-800-408-3053 Passcode: 3256865#
* International 1-416-695-5800 Passcode: 3256865#
Audio webcast replay: www.nortel.com/q1earnings2008
CONTACT: Media Jay Barta, Nortel
Tel: +1 972 685 2381
e-mail: jbarta@nortel.com
Mohammed Nakhooda, Nortel
Tel: +1 905 863 7407
e-mail: mohammna@nortel.com
Investors
Tel: +1 888 901 7286
Tel: +1 905 863 6049
e-mail: investor@nortel.com
WWW: http://www.nortel.com
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provided within M2 PressWIRE. Data supplied by named party/parties.
Further information on M2 PressWIRE can be obtained at
http://www.presswire.net on the world wide web. Inquiries to
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