Nortel Ends 1999 on Strong Earnings

NEW YORK (01/25/2000) - Saying that its carrier and service provider business remains strong, Nortel Networks Corp. today reported operational earnings for the fourth quarter, which ended Dec. 31, 1999, of US$755 million, or 55 cents per share.

The results, which excluded one-time charges and other events, were up 53 percent from the same period in 1998 and handily beat analyst estimates, Nortel said in a release issued today. The consensus forecast of 18 analysts polled by First Call/Thomson Financial was 45 cents.

Revenue for the quarter was $6.9 billion, up 21 percent from $5.8 billion for the same period in 1998.

Including acquisition-related charges and other one-time events, Nortel recorded net earnings of $417 million or 30 cents per share in the fourth quarter. Among the one-time charges recorded during the quarter were expenses related to ongoing amortization of assets from the 1998 acquisition of Bay Networks Inc.

The increase in net earnings, excluding the one-time charges, was due mainly to higher revenue and a decrease in the effective tax rate, according to a company statement issued today. The company's carrier and service provider businesses also remained strong, Nortel said in the statement.

For fiscal 1999 as a whole, revenue increased 26 percent to $22.2 billion from $17.6 billion in 1998. Net earnings from operations for 1999 were $1.7 billion, or $1.28 per share, compared to $1.1 billion, or 93 cents per share for 1998, an increase of 38 percent. This also beat the consensus forecast of $1.17 per share, by 21 analysts polled by First Call.

Including one-time gains and charges, Nortel had a net loss of $197 million, or a 15 cent per share loss, for 1999.

Key growth areas for the company for the year included optical and high-speed Internet access products, as well as wireless technology, John Roth, president and chief executive officer of Nortel, said in a conference call today. The company's strong fourth quarter put it in a good position for the start of fiscal 2000, he added.

Specifically, the company's business related to optical Internet technology grew more than 80 percent over 1998, Nortel said in its statement. The company did not immediately break out the actual revenue figure for 1999.

The company also said it had strong momentum in the wireless infrastructure business in the second half of fiscal 1999.

The Internet access business experienced triple-digit growth in the year, according to Frank Dunn, Nortel's senior vice president and chief financial officer, speaking on today's conference call.

The company did experience a drop-off in business from the U.S. regional Bell operating companies, but that was offset for the most part by an uptick in business from competitive carriers, Dunn said. In general, the enterprise business -- consisting of corporations -- did not do as well as Nortel expected, Dunn noted.

Also, Roth said a stock split, subject to shareholder approval, has been proposed. A stock split would give shareholders two shares -- each worth half of current shares -- for every one they have now.

Nortel, in Brampton, Ontario, is at http://www.nortel.com/.