TORONTO - Despite posting a deeper loss in the first quarter, the chief executive of Nortel Networks Corp. (TSX:NT) says he's satisfied a long turnaround at the major telecom equipment maker remains on track.
The Toronto-based company said Friday its loss in the quarter was US$138 million, deeper than US$103 million a year-ago on restructuring costs, foreign exchange rates and a patent lawsuit settlement.
"The transformation of Nortel continues," president and CEO Mike Zafirovski said on a conference call with analysts, adding that the company expects to meet its full-year goals, thanks to strong operational progress in margins combined with steady revenue growth.
"As we enter the third year of our turnaround, I can see that the hard work, the strategy and the plans which we have put in place are bearing fruit."
On a per share basis, the loss amounted to 28 cents, compared to a loss of 23 cents a year ago. Excluding special charges, Nortel pegged the per share loss at five cents.
Revenue rose 11 per cent to US$2.76 billion, up from US$2.48 billion, boosted by deferred sales associated with a contract in an LG-Nortel joint venture.
Nortel shares, which have fallen dramatically from about $29.50 three years ago, nudged upward slightly Friday. At mid-morning, they were at $8.97, up 10 cents, on the Toronto Stock Exchange.
Analysts surveyed by Thomson Financial were expecting a loss of 14 cents per share and revenue of $2.5 billion.
One-time items affecting earnings included a restructuring charge of $88 million, a $19 million charge due to changes in foreign exchange rates, $12 million related to a patent lawsuit settlement and a gain of $16 million primarily from mark-to-market gains on interest rate swaps.
Once among the most sought-after of Canadian stocks, Nortel's shares were devastated when the dot-com bubble burst at the beginning of the decade. On top of that, the company has been hampered by stiff global competition, accusations of questionable accounting and allegations of executive fraud.
It's latest management team, headed by Zafirovski, a former CEO of Motorola Inc., has made sizable inroads in improving Nortel's performance, though it has not yet made a complete recovery.
"We do understand that customer momentum is the key element of any strategy and we do also understand that 2008 is a pivotal year for Nortel," Zafirovski said.
He noted that Nortel's operating margin, a key measure of its turnaround plan, was 4.7 per cent in the first quarter, increasing by 512 basis points compared to the year-ago quarter.
"We started the year off with a good quarter in a pretty tough macro environment, and we remain firmly focused on achieving our 2008 objectives" to grow Nortel's business in low single-digits, record gross margin of 43 per cent and grow operating margins by 300 basis points.
"We continue our relenting focus on driving operating earnings growth ahead of the markets, which I believe the best way to measure that is the operating margin, and continuing to build marketing and customer momentum."
