Telecommunications equipment maker Nortel Networks on Tuesday reported that
third-quarter earnings rose 64 percent, yet sales numbers fell short of some expectations.
Shares fell sharply following the news, down nearly 25 percent to $50.50 in
Net earnings for the third quarter were $574 million, or 18 cents per share.
That compares with earnings of $314 million, or 11 cents per share, for the
same period in 1999. According to a survey by First Call/Thomson
Financial, analysts expected Nortel to earn 17 cents per share.
Revenue totaled $7.31 billion, compared with $5.15 billion from a year ago.
Some analysts expected the company to post sales of more than $7.5 billion
in the third quarter.
Nortel's optical network system sales grew 90 percent in the quarter, compared with
several analysts' expectations of about 120 percent to 125 percent.
The company said a tight supply of optical systems led several customers to
"The good news is that there's plenty of equipment now for our people to
work on now, so they're not being held up," chief executive John Roth said in a conference call. "Now we're at the point where the shortages are being
Roth said the demand for the company's optical systems "continues
unabated," but it is perhaps unrealistic to expect the company's booming
growth rates in the optical networking portion of the market to continue.
"Some people may be hoping we can grow at 150 percent forever," he said in
The company's strength stands in stark contrast to competitor
Lucent Technologies' recent problems. Roth said Nortel's
continued growth was due to
solid sales across several of its product lines.
"Based on the momentum we have experienced during the first nine months and
the strong order backlog, we continue to expect that our percentage revenue
growth in 2000 over 1999 will be in the low 40s (percent)," Roth said in a
"Consistent with our overall expectations for the year is an expectation
that optical Internet solutions revenues will exceed $10 billion.
"We now expect, however, that our percentage growth in (earnings) from
operations in 2000 compared with 1999 will also be in the low 40s, up from
our previously stated expectation, which was in the high 30s," he said.
Reuters contributed to this report.