Nortel fell into the red in the second quarter with a $37 million loss in a surprise to analysts that follow the telecommunications gear maker.
Before the markets opened Thursday, Nortel (NYSE: NT) missed revenue and profit projections with a loss of $37 million, or 7 cents a share, on $2.56 billion in sales.
Nortel shares were down 6.7 percent, or $1.44, to $20.30 in late-morning trading.
Analysts polled by First Call/Thomson Financial had expected an 8 cent per share profit on sales of $2.75 billion.
Bloomberg’s survey of analysts had reported an expected 9 cent-per share profit on $2.8 billion.
A year ago, Nortel reported a $342 million profit on $2.78 billion in revenues.
Revenues were up 3 percent from the previous quarter, but sales to telecommunications carriers were off 16 percent from a year earlier.
Nortel reported a $103 million loss in the first quarter on revenues of $2.48 billion.
Nortel Chief Executive Officer Mike Zafirovski found comfort in several areas. Zafirovski has reshaped the company in many ways since taking over as CEO in November of 2005. Part of his moves included layoffs of some 3,900 employees in February, with 1,000 of those jobs being offshored to less expensive locations.
"Good progress is being made in our effort to reshape Nortel to deliver sustained value to shareholders,” Zafirovski said in a statement. “On balance, the key indicators of our financial health moved in a positive direction in the quarter.
“Gross margin of 41.1 percent was the highest in eight quarters and the operating margin expanded significantly on a year-over-year basis for the fourth consecutive quarter,” he added. “Revenues were down 8% this quarter, principally as a result of the UMTS divestiture and the timing of contract completion. Revenues were up 3% sequentially and we are confident that the traction we are seeing with customers will translate into much higher sequential growth for the remainder of the year."
Nortel shares closed at $21.74 on Wednesday.
