You know the situation is not good when a press release starts with this kind of sentence:
“With a sustained and expanding economic downturn, the Company is experiencing significant pressure as Carrier customers cut back their capital expenditures further than previously expected and certain Enterprise and Metro Ethernet customers defer new IT and optical investments.”
Translation: Nortel needs to aggressively reduce costs to deal with a rough economic and competitive environment.
In addition to likely job cuts, this means Nortel is looking to sell its Metro Ethernet Networks business, which includes its optical and carrier Ethernet portfolios. Nortel believes that it can “monetize this asset” given its strong customer base and technology, which includes 40G/100G optical networking products.
“Monetization of this asset is in line with the further consolidation necessary in the industry and will provide MEN customers and employees with a clear path forward,” Nortel CEO Mike Zafirovski said in a statement. “Throughout the process, Nortel will maintain MEN R&D investments, new product introduction timelines and all customer commitments.”
Over the first six months of 2008, the MEN business had management operating loss of $8-million on sales of $736-million, compared with a loss of $10-million on revenue of $736-million a year earlier.
If/when MEN business is sold, Nortel said it could use the proceeds to make investments to enhance its enterprise business, which has seen three small but strategic acquisitions recently.
Nortel also updated its Q3 and 2008 results. It nows expects Q3 revenue to be about $2.3 billion with gross margins of about 39%, most due to “a product delivery delay into the fourth quarter and customer mix within the Carrier business”. Operating expenses in Q3 (SG&A and R&D) will be $60 million less than the second quarter.
According to Yahoo Finance, analysts had expected Nortel to have revenue of $2.66-billion in Q3 and profits of six cents a share. For 2008, they were looking for profits of 38 cents a share on revenue of $11.2-billion.
Nortel’s revised 2008 outlook is:
- Revenue to decline between two and four percent compared to 2007, compared with an earlier projection of a single-digit increase.
- Gross Margin of approximately 42%
- Management Operating Margin(b) as a percentage of revenue to improve 125 to 175 basis points compared to 2007
- As well, cash balances at the end of Q3 and Q4 are expected be between $2.6 billion and $2.9 billion.
The company will hold a conference call today at 9 a.m. Here’s the info:
To take part in the audio Webcast, please visit:
http://www.nortel.com/mediaevent
To participate in the audio teleconference and Q&A, please call:
- North America 1-866-862-3927
- International 1-416-641-6127
The downward spiral just got steeper. MEN and Wireless contribute significantly to the services revenues, and there is no guarantee that those service contracts will be renewed with Nortel. $$$
Nortel watcher
With the stock being battered today to an ALL-TIME LOW of $3.00, the monetized value of MEN has gone south, too.
The 3-5 yr turnaround plan has been off the mark from the beginning undergoing continuous adjustment in the form of debt refi's, job cuts, and now, jettisoned divisions.
I'm convinced there is no vision at the top just plenty of reaction.
Dissappointed Shareholder
My God....sell the only business unit that appears to be making money and give the proceeds to Hacker....where is the BOD oversight here?
metal_stormer
It's the beginning of the End - the Titanic has hit the iceberg !!!
Still_Waiting
“ It ain't over till the fat lady sings: but she is warming up"
Nortel to Dump Ethernet Business; Cutting More Costs
You know the situation is not good when a press release starts with this kind of sentence:
Translation: Nortel needs to aggressively reduce costs to deal with a rough economic and competitive environment.
In addition to likely job cuts, this means Nortel is looking to sell its Metro Ethernet Networks business, which includes its optical and carrier Ethernet portfolios. Nortel believes that it can “monetize this asset” given its strong customer base and technology, which includes 40G/100G optical networking products.
“Monetization of this asset is in line with the further consolidation necessary in the industry and will provide MEN customers and employees with a clear path forward,” Nortel CEO Mike Zafirovski said in a statement. “Throughout the process, Nortel will maintain MEN R&D investments, new product introduction timelines and all customer commitments.”
Over the first six months of 2008, the MEN business had management operating loss of $8-million on sales of $736-million, compared with a loss of $10-million on revenue of $736-million a year earlier.
If/when MEN business is sold, Nortel said it could use the proceeds to make investments to enhance its enterprise business, which has seen three small but strategic acquisitions recently.
Nortel also updated its Q3 and 2008 results. It nows expects Q3 revenue to be about $2.3 billion with gross margins of about 39%, most due to “a product delivery delay into the fourth quarter and customer mix within the Carrier business”. Operating expenses in Q3 (SG&A and R&D) will be $60 million less than the second quarter.
According to Yahoo Finance, analysts had expected Nortel to have revenue of $2.66-billion in Q3 and profits of six cents a share. For 2008, they were looking for profits of 38 cents a share on revenue of $11.2-billion.
Nortel’s revised 2008 outlook is:
- Revenue to decline between two and four percent compared to 2007, compared with an earlier projection of a single-digit increase.
- Gross Margin of approximately 42%
- Management Operating Margin(b) as a percentage of revenue to improve 125 to 175 basis points compared to 2007
- As well, cash balances at the end of Q3 and Q4 are expected be between $2.6 billion and $2.9 billion.
The company will hold a conference call today at 9 a.m. Here’s the info:
To take part in the audio Webcast, please visit:
http://www.nortel.com/mediaevent
To participate in the audio teleconference and Q&A, please call:
- North America 1-866-862-3927
- International 1-416-641-6127
Technorati Tags: Mike Zafirovski, Nortel