TORONTO – Nortel Networks Corp. shares rose 12 percent Tuesday morning on the New York Stock Exchange despite lower revenue as the Canadian telecom equipment supplier reported its best operating margin since 2004.
Shares jumped more than 12 percent, or $1.96 to $18.24 in midmorning trading Tuesday.
Net income totaled $27 million, or 5 cents per share, versus a prior-year loss of $63 million, or 14 cents per share.
The latest quarter includes charges of $56 million for restructuring, a $33 million tax expense, a loss of $3 million on the sale of assets, a gain of $67 million gain on foreign exchange rates and a $14 million gain due to a market value adjustment on an interest rate swap.
The net loss in the prior-year quarter included special charges of $22 million for restructuring and a gain of $15 million on the sale of assets.
Revenue fell 7.6 percent to $2.71 billion from $2.93 billion. Excluding the impact of the sale of its radio-access business to Alcatel-Lucent, revenue fell 2 percent, Nortel said.
On average, analysts surveyed by Thomson Financial forecast a quarterly profit of 11 cents per share and revenue of $2.77 billion. Those predictions
“Nortel achieved solid results this quarter in a challenging business environment,” said Mike Zafirovski, Nortel president and chief executive. “We delivered operating margin of 5 percent, the highest since 2004, driven by the highest gross margin in nine quarters.”
Quarterly gross margin totaled 43 percent, up 460 basis points year over year, while operating margin of 5 percent was 277 basis points better from the 2006 quarter.
Nortel forecast flat revenue in the fourth quarter, will full-year revenue down from 2006.
U.S. regulators filed civil fraud charges Monday against four former Nortel Networks executives, including ex-CEO Frank Dunn, alleging they repeatedly altered the telecom equipment maker’s revenue to meet Wall Street expectations
Since 2005, Nortel has been attempting to recover from an accounting scandal that skewed results and prompted shareholder lawsuits, regulatory investigations and the firing of key executives, including Dunn.
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