Nortel reduced its losses practically to break even in the second quarter but also reported lower revenues.

The telecommunications and networking firm said it lost $14 million on revenues of $2.3 billion. Analysts had expected $2.4 billion in revenues and break even. Revenues were down 3 percent from the first quarter.

Just a year ago, Nortel (NYSE: NT) reported a loss of $697 million on $2.77 billion in revenue.

Nortel stock closed up 8 cents on Thursday at $3.05 but dropped in after-hours trading. It was down 6 cents in midday trading.

Friday morning, CIBC Worldmarkets upgraded Nortel stock to sector perform from sector under perform.

“Our second quarter results reflected the continued cautious spending exhibited by our customers,” said Frank Dunn, Nortel’s president and chief executive officer, in announcing the earnings. “Although the industry conditions remained difficult, our momentum and leadership position continued across our key focus areas.”

Also Thursday, Nortel announced a contract to build a next-generation 3G wireless network for Asia Pacific Broadband Wireless.