Nortel Networks Corp. (NT) Restructuring on Track
Nortel's (NT, 27.03) fourth quarter results confirm that the network equipment giant's restructuring efforts remain on track. A nearly 14% increase in sequential revenue growth and a 140 basis point improvement in gross margins underscores strength in end-markets and stable market share trends. Given the fact that the Toronto-based company pre-announced its figures, there were no major surprises in the report, which hit the wires after Friday's close.
On an apples to apples basis, excluding items, an actual of 4 cents per share easily surpassed analysts' expectations of $0.18. NT benefited from a positive impact from its minority interest in its joint venture with LG. Operating margins, which Nortel is aiming to boost to 10%, grew to 4.2% in the fourth quarter from 1.4% the year prior.
For the full year FY07, the company forecasts revenues to be flat to down slightly compared to 2006, reflecting a decrease in revenues as a result of the UMTS Access disposition. However, if we strip out the impact from UMTS access-related revenues, management's guidance implies a positive 6% year/year growth. We would expect there to be a degree of conservatism in these figures. US carrier consolidation is having an impact on the entire equipment space, affecting first quarter spending trends. Nortel forecasts first quarter revenues to decline.
NT remains a restructuring story appropriate only for investors with an appetite for risk. While its underlying business remains healthy, Nortel faces a litany of competitive pressures. We expect that at some point, Nortel may become the latest takeover target in this ever-shrinking telecommunications equipment space. The stock trades at 1.0x price to sales and 37.2x forward earnings.
--Kimberly DuBord, Briefing.com
On an apples to apples basis, excluding items, an actual of 4 cents per share easily surpassed analysts' expectations of $0.18. NT benefited from a positive impact from its minority interest in its joint venture with LG. Operating margins, which Nortel is aiming to boost to 10%, grew to 4.2% in the fourth quarter from 1.4% the year prior.
For the full year FY07, the company forecasts revenues to be flat to down slightly compared to 2006, reflecting a decrease in revenues as a result of the UMTS Access disposition. However, if we strip out the impact from UMTS access-related revenues, management's guidance implies a positive 6% year/year growth. We would expect there to be a degree of conservatism in these figures. US carrier consolidation is having an impact on the entire equipment space, affecting first quarter spending trends. Nortel forecasts first quarter revenues to decline.
NT remains a restructuring story appropriate only for investors with an appetite for risk. While its underlying business remains healthy, Nortel faces a litany of competitive pressures. We expect that at some point, Nortel may become the latest takeover target in this ever-shrinking telecommunications equipment space. The stock trades at 1.0x price to sales and 37.2x forward earnings.
--Kimberly DuBord, Briefing.com
Labels: Nortel Networks Corp., NT
posted by Stock Administrator @ 3:51 PM
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