Nortel Q1 sales down 37 percent to $1.73B
TORONTO: A 37 percent decline in revenue and shrinking margins pushed Nortel Networks Corp. to a $507 million loss in the first quarter, the struggling telecom equipment maker announced Monday.
The Toronto-headquartered company, which has been operating under bankruptcy protection since mid-January, said the net loss for the three months ended March 31 was equal to $1.02 per share.
That net loss compared with a year-ago loss of $138 million or 28 cents per share.
The company, which reports its results in U.S. currency, said its revenue fell to $1.73 billion, down from $2.76 billion for the first quarter of 2008.
The decline, largely due to a weak economy and Nortel's well-known financial problems, was worsened by the impact of currency fluctuations, which reduced overall revenue by $225 million, representing eight percent of the decline.
Nortel's biggest revenue contributor, carrier networks, saw a 32 percent decline from a year earlier to $737 million.
The enterprise solutions segment declined 41 percent to $395 million, metro ethernet networks dropped 10 percent to $360 million and the company's joint venture with LG fell by two-thirds to $188 million as a major contract came to an end and didn't contribute.
On the expense side, sales, general and administration were cut to $528 million in the first quarter of 2009, down from $597 million a year earlier while research and development spending fell 19 percent to $341 million from $420 million.
Most of the cost reductions were a result of staffing reductions, which were made in late 2008 and early 2009 before and after the company got protection under the U.S. bankruptcy code and the Companies' Creditors Arrangement Act in Canada.
Despite such a large cash balance, the company said in January that it would file for court protection because Nortel would not be able to get outside financing - known as debtor-in-possession funding - to pay for its restructuring.
Nortel has said it is exploring the potential for selling some of its businesses. On Monday, the company said it was reporting the results for the first time in four segments that could operate as independent businesses.
"Discussions are taking place with various external parties, however, decisions have not been taken and we continue to evaluate our restructuring alternatives. To provide maximum flexibility we are also taking the appropriate steps to complete the move to standalone businesses," Mike Zafirovski, the president and chief executive officer, said in a news release.
One of the few bright spots in Nortel's quarter was an increase in cash balance, which increased to $2.48 billion, a 3 percent increase from $2.40 billion at the end of the fourth quarter of 2008.
Nortel said it would decentralize its carrier sales and global operations functions over the coming weeks, but didn't elaborate on what impact that would have on staffing.
On the other hand, the Nortel Business Services organization will be expanded to include functions from global operations, corporate operations and finance.