Nortel's third quarter figures fall below estimates

Nortel Networks expects its revenue in the third quarter to fall below the previous quarter's estimated number and for its...

Nortel Networks expects its revenue in the third quarter to fall below the previous quarter's estimated number and for its full-year 2004 revenue to grow slower than the overall communications equipment industry.

Last month, Nortel released estimated unaudited revenue of $5.1bn (£2.8bn) for the first half of this year, with approximately $2.5bn for the first quarter and $2.6bn for the second quarter.

The network gear maker said it expects the industry as a whole to have faster revenue growth, according to a statement announcing Nortel's biweekly regulatory disclosure to the Ontario Securities Commission. In a disclosure last month, it had projected that its revenue would outpace the market.

The company, a major supplier of wireless and wireline network infrastructure, is under investigation by the Ontario Securities Commission and the US Securities and Exchange Commission regarding the restatement of its financial results for periods going back as far as 2001. It is required to submit biweekly updates to the Ontario regulator.

Nortel now expects to report results for 2003 and the first two quarters of 2004 by the end of October, according to spokeswoman Tina Warren.

By the end of this month, the company plans to provide details of a workforce reduction of about 3,500, or about 10%, that it announced last month, Warren said. Nortel expects the cuts to cost about $300mi to $400m and deliver annual savings of about $500m, she said.

Nortel is having trouble winning new customers in some segments because of perspective clients who shy away from the company's perceived problems, according to analyst Frank Dzubeck of Communications Network Architects.

Nortel's products are good and the company is not on the verge of being acquired, so potential customers should not be affected, in Dzubeck's view. A longer perspective is needed, he said.

"If you see that this happens on a quarter-after-quarter basis, then the trend is indicative... of that fact that there are problems," Dzubeck said. But it is hard to draw conclusions yet. "It's all speculative until they restate," he said.

Stephen Lawson writes for IDG News Service

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