Nortel beats 3Q profit target but sales disappoint

2 min read

Nortel Networks slipped past analysts' estimates in its third quarter Tuesday, posting a profit of $574 million, or 18 cents a share, on sales of $7.31 billion. However, total sales fell short of analysts' estimates.

First Call Corp. consensus expected the network-equipment maker to earn 17 cents a share in the quarter.

Ahead of the earnings report, Nortel (NYSE: NT) shares closed off $4 to $62.94.

The $7.31 billion in sales represents a 42 percent improvement from the year-ago quarter when it earned $314 million, or 11 cents a share, on sales of $5.15 billion.

Analysts were expecting total sales of $7.63 billion in the quarter.

"We are extremely pleased with the strong growth in the quarter which reflected our continued strength and leadership in the key growth areas of optical Internet, wireless Internet, local Internet and eBusiness solutions," said CEO John Roth in a prepared release.

In the quarter, Nortel's optical Internet sales improved nearly 90 percent from the year-ago quarter while wireless sales jumped to $1.2 billion, a 50 percent jump from the year-ago period.

Local Internet and eBusiness solutions sales improved 35 percent and 200 percent, respectively, from the year-ago quarter.

Roth said the company expects sales for the year to improve 40 percent from fiscal 1999 while sales and earnings will improve between 30 percent to 35 percent in fiscal 2001.

On a conference call with analysts, Roth said the industry should grow in the 20 percent to 25 percent range. "Given our strong market position and industry leading networking solutions, we expect to continue to grow significantly faster than the market," said Roth.

Last quarter, Nortel hurdled analysts' estimates when it returned a profit of $561 million, or 18 cents a share, on sales of $7.82 billion.

Its shares moved up to a 52-week high of $89 in July after falling to a low of $27.75 last October.

Thirty-one of the 35 analysts following the stock rate it either a "buy" or "strong buy."

First Call Corp. consensus expects it to earn 73 cents a share in the fiscal year.