Mark Evans

Nortel's Q2: Some Good, Some Not-so-good

Nortel's second-quarter results have finally been released and I guess the positive news is there are no major surprises. On the plus side of the ledger, revenue was up 10% from a year ago while sales in each of the four business units improved. That said, the wireless unit, which is supposed to be Nortel's growth engine, was up just $8-million, or 1%, due to Nortel missing out on the Cingular contract. Nortel's net income of $45-million was helped by a $58 million gain from “other income”, which included $21 million from the sale of an investment and $17 million from a contract settlement. “The end markets look pretty healthy here,'' Gus Papageorgiou, an analyst at Scotia Capital Inc. in Toronto, told Bloomberg before the results came out this morning. “What I'm really concerned about is that their profitability, vis-a-vis their main competitors, is still pretty weak.'' Investors should get some more perspective on Nortel's results when Cisco posts its fiscal fourth-quarter results tomorrow. CIBC World Markets analyst Steve Kamman expects Cisco to benefit from strong U.S. government sales - an area Nortel CEO Bill Owens has heavily targeted with the US$448-million purchase of systems integrator PEC Solutions Inc. earlier this year.