Nortel: When a Profit is Not a Profit
Nortel posted second-quarter earnings
of $366-million this morning, or 8 cents a share
(compared with analyst estimates of about 2 cents). Before investors get too excited and storm off to jump on the bandwagon again, the bottom line was nowhere as good as it appears. For one, profits were buoyed by a $510-million gain from
shareholder litigation recovery. After accounting for charges related
to restructuring and asset sales, Nortel lost about
$89-million in the quarter, or about 2 cents a share. Another sign Nortel has yet to recover is a sharp decline in gross margins to 39% from
43%. However, Nortel remains confident the rest of the year will be more
promising. CFO Peter Currie said the company exepcts strong sales momentum, high single-digit growth compared with 2005, gross margins of 40%, and operating expenses to be flat to slightly up.
