Nortel's annual loss increases sixfold
Published: 3 March, 2009
READ MORE: Nortel Networks | Financial
More misery for Nortel, which announced from the shelter of bankruptcy protection that its fourth quarter loss more than doubled to US$2.14bn, from $844m a year earlier, on a 15% slide in sales to $2.72bn, and over $2bn in non-cash writedowns. For the full year, Nortel lost $5.8bn, six times more than its 2007 loss of $957m.
The telecoms equipment maker refused to provide any forecasts, but spoke of declining demand as its major customers reduce or postpone spending because of the global economic crisis. Of course, Nortel also faces the near-impossibility of winning flagship new deals with such heavy question marks hanging over its future, a situation highlighted by its failure to gain any of Verizon's recently announced LTE contract, despite being an incumbent supplier with advanced technology, and having reportedly performed well in trials.
Nortel is restructuring, having filed for bankruptcy protection in January, and announced a further 3,200 job cuts last week. Its efforts are starting to bear fruit - operating costs in Q4 were 30% down on the previous year. In Q4, gross margin fell from 43.7% to 40.4% but operating margin rose from 7.6% to 11% because of cost cutting. The company named CFO Pavi Binning to the additional role of chief restructuring officer.
Analysts were unfazed by the results, which were largely in line with expectations. The consensus analyst forecast was for revenue of $2.74bn. The Canadian firm said its results included a $1.24bn goodwill writedown, as well as a writedown of $951m to reduce its deferred tax asset. It also incurred $97m in restructuring charges.
CEO Mike Zafirovski refused the traditional conference call to discuss the results, but said in a statement that the company was progressing with its restructuring plan. "We're not naive to the challenges facing the industry," he said. "But there's lots of resilience, there's lots of knowhow within the company."
Nortel's shares were unchanged at 10.5 Canadian cents on Monday morning, a sad decline from their peak price, in mid-2000, of C$1,100.
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