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Nortel warns of tough quarter

Nortel Networks has told investors that weak demand for its telecom and network equipment among carriers will make the first months of 2002 a challenging quarter for meeting revenue forecasts.

Last month, Nortel said it expected revenue in the first quarter of 2002 to be about 10% less than the $3.46bn (£2.41bn) posted in the fourth quarter of 2001. But company executives said it would be difficult to achieve that goal.

Nortel's warning came just before a scheduled conference with investors, where executives detailed the company's strategy and outlook for the year, and a day after the resignation of its chief financial officer over potentially improper stock trades.

Terry Hungle, Nortel's chief financial officer, resigned over allegations of insider trading. The company announced it had voluntarily notified the US Securities and Exchange Commission (SEC) and the Ontario Securities Commission of the circumstances surrounding some of his personal investment transactions last year.

Nortel pledged to maintain "a laser-like focus" on high-margin products, with a pared-down product portfolio for the largest 50 carrier customers, Frank Dunn, Nortel's chief executive officer, told investors at the conference.

Nortel expects wireless communication traffic to double by 2005, with data becoming an increasing share of the transmissions. The company expects increasing carrier investment in Code Division Multiple Access (CDMA) for next-generation wireless networks and wave division multiplexing in terrestrial networks.

Carriers have cut spending on new equipment as a reaction to the economic downturn, with the largest local carriers' equipment budgets down an average of about 20% from the previous year.

Despite the revenue warning, the company maintains its projection of reaching profitability targets for fourth quarter of 2002.

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