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Nortel surpasses 1Q expectations

Nortel Networks (NYSE: NT) hurdled the consensus estimate in the first quarter.

After market close Tuesday, the network equipment vendor reported first quarter net income of $347 million, or 23 cents per share, excluding special charges. First Call's survey of 32 analysts predicted a profit of 18 cents per share for the quarter ended Mar. 31.

Including acquisition-related cost and one-time events, Nortel lost $730 million, or 52 cents per share.

Shares of Nortel rose as high as 114 in afterhours activity.

First quarter revenue rose to $6.32 billion, a 48 percent gain from $4.29 billion in the year-ago period. Optical networking revenue increased 150 percent year-over-year. Wireless networking sales gained 45 percent. Broadband equipment revenue picked up 50 percent.

The market should get even stronger for the full year, said John Roth, president and CEO. Nortel now expects the overall networking market to grow 20 percent this year, up from the company's previous expectations of 14 to 15 percent annual growth.

Nortel should outgrow the market, Roth added. The company sees 30 to 35 percent revenue growth in 2000 for itself, compared to previous expectations of 20 to 21 percent improvement. Earnings per share from operations will gain about 30 percent in 2000, Roth said.

Sales to service providers and carriers in the first quarter rose 64 percent year-over-year. Enterprise revenue gained 5 percent.

On the expense side, R&D fell as a percentage of revenue to 13.5 mpercent, compared to 15.9 percent in the year earlier period. Sales, general and administrative costs consumed 18.9 percent of revenue, down from 19.2 percent in the first quarter of 1999.

Competitors of Nortel include Cisco Systems (Nasdaq: CSCO) and Lucent Technologies (NYSE: LU).

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