Nortel Reports Financial Results for the Second Quarter 2008
Increases Revenue and Improves Margins
AUGUST 01, 2008
Revenue of $2.62 billion, up 2 percent year-over-year and 7 percent on a year-to-date basis
Gross margin at 43.1 percent, up 204 bps from prior year period
Management operating margin(a) at 4.3 percent, up 302 bps from prior year period
Maintains full year guidance, in an increasingly challenging business environment
TORONTO - Nortel* Networks Corporation [NYSE/TSX: NT] announced its results for the second quarter of 2008, demonstrating continued progress against the Company's financial targets. Results were prepared in accordance with United States generally accepted accounting principles (GAAP) in U.S. dollars.
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Financial Information
Subscribe to the latest news and events from Nortel.>>
"Nortel's financial performance in the first half of 2008 has been consistent and disciplined. We have achieved our objectives and are on track to meet our targets for the year," said Nortel president and CEO Mike Zafirovski. "In the second quarter, the company focused on the work at hand and improved productivity, stepped-up cost reduction activities and enhanced margin performance. We delivered gross margin of 43.1%, the seventh consecutive quarter of year-over-year improvement, and management operating margin of 4.3%, the eighth consecutive quarter of year-over-year improvement."
"We continue to see strong customer momentum in key growth areas of our business. In recent months, we've signed a comprehensive global managed services telepresence agreement with Deloitte, have secured approximately 20 wins for our innovative 40G offering, and earlier this week signed on as the official network infrastructure partner for the London 2012 Olympic and Paralympic Games," said Zafirovski. "In the second half, faced with a challenging business environment, we will continue our focus on execution and on delivering accelerated growth in key segments in order to achieve our financial objectives for the year."
Revenue in the second quarter of $2.62 billion, up 2 percent year over year and up 7 percent on a year-to-date basis.
Gross margin in the second quarter of 43.1 percent, increasing over the prior year period for the seventh consecutive quarter.
Management operating margin in the second quarter of 4.3 percent, increasing over the prior year period for the eighth consecutive quarter.
Cash balance, as at June 30, 2008 of $3.07 billion, included an outflow of cash from operations in the quarter of $74 million. On May 28, 2008, Nortel successfully completed the issuance of $675 million in a Senior Notes offering and used the net proceeds together with cash on hand to redeem at par the $675 million outstanding principal amount of convertible notes due September 2008.
Another Olympic win. Nortel was awarded the contract to be the Official Network Infrastructure Partner for the London 2012 Olympic and Paralympic Games. Nortel will provide an end-to-end information infrastructure with everything from a metro area network to the wireless network down to the call center and the telephones that will be used.
Unified communications offer continues to strengthen. Nortel announced carrier hosted solutions with Microsoft and IBM. The solutions are designed to enhance productivity and offer powerful unified communications to small and midsize businesses (SMBs). Nortel received the IBM IMPACT Innovation Award for its key IBM SOA foundation resource, the Nortel Agile Communications Environment.
4G progress continued. Nortel announced a strategic agreement with Alvarion to create an end-to-end WiMAX solution to meet the needs of the evolving wireless broadband market. This alliance allows Nortel to drive growth in WiMAX while focusing R&D resources on 4G LTE and wireless applications.
40G continues to gain market momentum with 20 customer wins. Rascom and Southern Cross Cables selected Nortel 40G solution in the U.S., while Virgin Media teamed with Nortel to successfully trial 40G on its existing 10G network in the U.K.
Carrier Ethernet chosen by Verizon. Nortel will provide Verizon Telecom with new generation switching equipment to help Verizon expand its metro Ethernet backbone. The Nortel carrier Ethernet solution chosen by Verizon includes industry-leading PBB and Ethernet OAM technologies, and provides Verizon with flexibility and scalability to support new applications and requirements.
Deloitte signs Telepresence contract. Focused on saving costs, improving internal collaboration and driving down their global carbon footprint. Deloitte selected Nortel as a global managed services provider for telepresence, video conferencing and associated multimedia services. The new managed services agreement with Nortel will enable Deloitte's global organization and as many as 130 Deloitte member firm locations around the world to obtain telepresence and open standards-based video conferencing services.
Energy consumption message resonates with wide customer audience. Customers such as Prairie Cardiovascular Consultants, Sweetwater Sound, Earth Rangers and partners like Ronco Communications and Electronics Inc.,have adopted energy-efficient Nortel communications solutions, which offer significant energy consumption benefits vs. key global competitors.
GSM-R gains traction in EMEA. Nortel secured two contracts in Germany with Deutsche Bahn and in Algeria with Agence Nationale d'Etudes et de Suivi de la Réalisation des Investissements Ferroviaires (ANESRIF). The GSM-R upgrades are expected to improve safety and enable faster train speeds while reducing operational costs.
Revenue was $2.62 billion for the second quarter of 2008, compared to $2.56 billion for the second quarter of 2007 and $2.76 billion for the first quarter of 2008.