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Nortel 2Q earnings rewarded

Nortel Networks (NYSE: NT) was up 1 1/4 to 87 1/2 Wednesday morning, boosted by strong second quarter earnings posted after Tuesday's bell, and an upgrade from CIBC World Markets.

The communications equipment maker, based in Brampton, Ontario, is one of the world's largest, dealing with the transfer of data, voice and video over telecommunications lines.

Nortel posted second quarter earnings of $368 million, or 55 cents a share, beating First Call's prediction of 50 cents a share. Earnings also beat the $212 million, or 40 cents a share for the same period in 1998. Revenue increased 30 percent to $5.41 billion for the second quarter of 1999 over $4.16 billion for the same period in 1998, the company said.

An upgrade from CIBC World Markets Wednesday morning deemed the stock a "strong buy," up from a "hold" rating.

Including acquisition related costs and one-time gains and charges, Nortel Networks recorded a net loss of $145 million or 21 cents a share. An investment in Juniper Networks cost $57 million, and a cost of $509 million was mostly due to the company's merger with Bay Networks.

Developments in the quarter include Qwest Communications Inc. (Nasdaq: QWST) extending its alliance with Nortel, and a contract with NTT in Japan to provide Internet access solutions. New products such as the Passport 15000, the Versalar Switch Router 25000 (a carrier grade high-speed routing switch), and the second-generation Contivity extranet switches lay the groundwork for future growth, the company added.

Carrier segment revenue increased 21 percent, as demand for optical networks in the United States, Europe and Asia Pacific offset a decline in Latin America. Revenue from the Enterprise segment rose 74 percent, driven by the increase in enterprise data revenue due to the Bay Networks merger.

Geographically, revenue for the second quarter of 1999 increased 28 percent in the United States and 40 percent in Canada over the second quarter of 1998. The 32 percent growth outside Canada and the United States was driven by significant increases in both Europe and Asia Pacific.

Nortel met estimates in the first quarter. CIBC World Markets joins seven of the 25 other firms that consider the company a "strong buy," according to Zacks Investment Research.