« Nortel Q4/2007 Financials Out Tomorrow | Main | Nortel Now a Penny Stock »
Bigger Q4 Loss; Smaller Nortel
By Mark Evans | February 27, 2008
Nortel’s fourth-quarter results produced nothing too exciting after taking into account a $1.04-billion tax-related charge.
The far more interesting development is a plan to slash another 2,100 jobs - something that has been hitting the rumor mill in recent weeks - while moving another 1,000 positions to “higher growth and lower cost geographies”.
Is this the sign that Nortel is resigned to becoming a smaller, but profitable, player in the telecom space? Does it suggest that it’s going to become a second-tier, niche supplier while Cisco, Ericsson, Alcatel-Lucent and perhaps Huawei become the tier-one suppliers.
Here’s an early take on the results by UBS Securities:
“Revenues lower than expected; Gross Margin in-line Revenues/Gross Margin (GM) of $3.198B/43.7%, compared to UBSe of $3.318B/43.6%, consistent with our expectations going into the Qtr. of downside risk to Revenues but in-line GM. Adjusted, Non-GAAP Operating margin of 7.6% was lower than UBSe of 9.8%, on higher opex (36.1% of sales vs. UBSe of 33.8%).
OM in Enterprise and Optical remained at the break-even level, showing no meaningful progress. Nortel profitability continues to be driven by CDMA. Enterprise, Optical Networks miss UBSe; No surprise in 2008 guidance Enterprise and Optical Networks revenues came in lower thanour estimates, while Carrier Networks revenues were in-line and Services higher, benefiting from timing of project completion. Management guided to 2008 revenue growth of low-single digits y/y and gross margins of 43%, consistent with our current estimates (subject to revision) of 2.5% y/y growth in revenues and 43% GM.”
UBS rates Nortel as a “neutral” with a $15 target price that is now under review.
Update: Duncan Stewart has a column in today’s National Post about Nortel and the perils of joint ventures. As well, here’s a Globe & Mail story on the results.
Technorati Tags: Nortel
Topics: Financials |