Nortel tops 2Q estimates, ups 2000 outlook

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Nortel Networks (NYSE: NT) exceeded the consensus estimate in the second quarter and boosted its growth expectations for the full year on Tuesday.

After market close, the provider of networking components and equipment reported second quarter net income of $561 million, or 18 cents per share, excluding special charges and one-time events. First Call's survey of 31 analysts predicted a profit of 15 cents per share.

Including acquisition-related costs and non-recurring items, Nortel lost $745 million, or 26 cents per share.

First half demand gives Nortel reason to raise its own full year estimates, said John Roth, president and CEO. Nortel now expects percentage gains in the 40s for revenue and high 30s for earnings per share in 2000. New orders rose 85 percent in the first half of the year, Roth said.

Nortel previously said it expected 2000 revenue growth in 30 to 35 percent range, with earnings per share rising about 30 percent.

Tuesday's announcement marks the second time this year that Nortel has raised its own targets. The first quarter view was also accelerated from earlier expectations.

Revenue and earnings per share should increase 30 to 35 percent in 2001, said Frank Dunn, chief financial officer.

Second quarter revenue rose to $7.82 billion, a 48 percent gain year-over-year. Service provider and carrier revenue increased 63 percent in the second quarter, largely on demand for optical networks, the company said. Enterprise revenue rose 4 percent.

Optical, wireless and high speed local Internet sales rose 150 percent, 18 percent and 80 percent respectively.

"Our operations team has done extremely well in managing the supply chain for this very, very rapid growth," CEO John Roth said during a conference call with analysts.

That level of demand requires Nortel to increase investment in manufacturing, executives said. Nortel on Monday said it would spend $1.9 billion -- including $1.2 billion on components and $700 million on systems -- to more than double production capacity for optical networking over the next 18 months.

Annual revenue from optical components will more than triple to an estimated $2.5 billion for the full 2000, the company said.

Tuesday's earnings announcement came on the heels of news reports that Nortel may sell its optical components unit to Corning (NYSE: GLW). Executives on Tuesday's conference call declined to comment on the Corning reports.

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