Nortel Inks Telecom Deals In Comeback Effort

MANHASSET, N.Y. — Showing signs of emerging from a year of turmoil, Nortel Networks Corp. signed several telecom agreements Wednesday (June 1) and updated its financial reporting.

Since financial reporting irregularities emerged last year, Nortel (Toronto, Canada) has been fighting an uphill battle, overhauling its management and repeatedly delaying reporting its quarterly financials. Nortel finally reported its 2004 earnings May 2.

Several deals with major telecom providers signal the troubled company is in the early stages of a comeback.

In one deal, Nortel inked a $126-million agreement with Bell Mobility, Canada's leading wireless carrier, to supply equipment for a 1xEV-DO network. Bell Mobility would become the first Canadian wireless carrier to offer wireless services at speeds of 2.4 megabits per second, six times faster than what is currently available.

In a second deal, Nortel said it would supply British Telecom the equipment to deploy a nationwide voice and data communications network to the UK Ministry of Defense (MOD) and the British Armed Forces. The deployment is part of a five-year extension under which British Telecom would manage the UK MOD's telecom infrastructure.Nortel also announced it has completed the acquisition of PEC Solutions Inc. for $448 million, in a move to accelerate U.S federal business.

The company still faces challenges in regaining profitability, though.

For the first fiscal quarter of 2005 ended May 31, Nortel posted a loss of $49 million, or 1 cent per share on sales of $2.54 billion, compared to earnings of $59 million, or 1 cent per share on sales of $2.44 billion the first quarter of 2004. First fiscal 2005 quarter results included special charges of $21 million related to restructuring activities.

Peter Currie, executive vice president and chief financial officer of Nortel, said in a statement, "For the second quarter of 2005, we expect solid revenue growth compared to the second quarter of 2004, margins to be at the low end of our expected range for 2005 due to the mix of business and spending to be lower as a percent of revenue compared to the second quarter of 2004."