Nortel reports 37% decline in revenue
TORONTO – Nortel today announced a 37 percent decline in revenue, which amounted to a $507 million loss in the first quarter of 2009.
Nortel, which has been operating under bankruptcy protection since mid-January, said the net loss for the first quarter was equal to $1.02 per share.
The Toronto-based company, which reports its results in U.S. currency, said its revenue fell to $1.73 billion, down from $2.76 billion for the first quarter of 2008.
The decline – largely due to a weak economy and Nortel's well-known financial problems – was worsened by the impact of currency fluctuations, which reduced overall revenue by $225 million, representing 8 percent of the decline.
Nortel has said it's exploring the potential for selling off some of its businesses (story here), and it said Monday that it was reporting the results for the first time in four segments, which have been positioned to operate as independent businesses.
The company’s biggest revenue contributor, carrier networks, saw a 32 percent decline from a year earlier to $737 million.
The enterprise solutions segment declined 41 percent to $395 million, metro Ethernet networks dropped 10 percent to $360 million, and the company's joint venture with LG fell by two-thirds to $188 million as a major contract came to an end and didn't contribute.
On the expense side, sales, general and administration were cut to $528 million in the first quarter of 2009, down from $597 million a year earlier, while research and development spending fell 19 percent to $341 million – from $420 million.
Most of the cost reductions were a result of staffing reductions, which were made in late 2008 and early 2009, before and after the company got protection under Chapter 11 of the U.S. bankruptcy code, the Companies' Creditors Arrangement Act in Canada and elsewhere.
One of the few bright spots in Nortel's quarter was an increase in cash balance, which increased to $2.48 billion, a 3 percent increase from $2.4 billion at the end of the fourth quarter of 2008.
The company said in January that it was seeking court protection, despite such a large cash balance, because under the current conditions Nortel wouldn't be able to get outside financing – known as debtor-in-possession funding – to pay for its restructuring.
Nortel CEO Mike Zafirovski revealed little about the company's plans, except to say the decision process is "well under way" and that steps have been taken for the various segments to operate as stand-alone businesses.
"We have made the necessary structural decisions to give Nortel the ability to optimize value and preserve innovation platforms and employment to the greatest extent possible. Our businesses will have the opportunity to more effectively serve the discrete needs of their respective customers and market segments, while maintaining high customer service and network performance levels," Zafirovski said.
Nortel said it would decentralize its carrier sales and global operations functions over the coming weeks but didn't elaborate on what impact that would have on staffing.
On the other hand, the Nortel Business Services organization will also be enlarged to include functions from global operations, corporate operations and finance.
Nortel shares, which are likely to become worthless as a result of the restructuring, fell 3.5 cents to 26 cents in the first half hour of trading Monday.