Nortel Announces $3.5 Billion Loss in Third Quarter

By Tom Cohen Associated Press Writer Published: Oct 18, 2001

TORONTO (AP) - Nortel Networks said sagging demand for its telecommunications equipment contributed to a massive $3.5 billion loss during the third quarter. The results, announced Thursday, raised Nortel's total losses for the fiscal year to more than $20 billion as the Canadian company continued to struggle with the slumping high tech industry.

The company lost $1.08 a share for the quarter ended Sept. 30, compared to a loss of $586 million, or 17 cents a share, the same time a year ago. Analysts polled by Thomson Financial/First Call had predicted a loss of 28 cents.

The losses from ongoing operations, before charges, was $854 million, or 27 cents a share.

The company's stock has plunged 90 percent in less than a year, losing more than $300 billion in market value. In trading Thursday on the New York Stock Exchange, shares of Nortel were down 4 cents to close at $5.92. They rose 13 cents, or 2.2 percent, in extended trading.

Nortel said two weeks ago it expected a $3.6 billion third-quarter loss. Thursday's results showed a 45 percent drop in operating revenue from $6.73 billion in the third quarter last year to $3.69 billion in 2001, and an operating loss - before charges and other items - of $854 million, or 27 cents a share.

"Revenues for the quarter reflected the challenges presented as the telecom industry adjusted to new levels of spending," outgoing president and chief executive officer John Roth said.

New strategies being adopted this fiscal year were preparing Nortel to deal with quarterly revenue of less than $4 billion in the future, he said.

"The structure is expected to be in place in the first quarter of 2002," said Roth, who is stepping down in November. He'll be replaced by chief financial officer Frank A. Dunn.

Nortel has been troubled for almost a year because of problems that have dominated the meltdown of the technology industry: misguided acquisitions at sky-high prices, overly aggressive expansion, risky lending practices with new customers, and a tendency toward exuberant forecasts.

The company is cutting its work force to 45,000 from nearly 95,000 workers.

Dunn said uncertainty in the industry and overall economy would prevent Nortel from offering forecasts for the fourth quarter and 2002.

"While we believe we are beginning to see early indications that capital spending by service providers is approaching sustainable levels, it still remains difficult to predict," he said.

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On the Net:

http://www.nortelnetworks.com

AP-ES-10-18-01 1856EDT

-- Anonymous, October 18, 2001

Answers

Microsoft First-Quarter Profits Fall 42 Percent

By Allison Linn The Associated Press Published: Oct 18, 2001

SEATTLE (AP) - Microsoft Corp., hurt by a much-weakened market for personal computers and losses from investments, saw earnings drop by 42 percent in its fiscal first quarter. The software giant still managed to beat Wall Street's reduced expectations, but warned that second-quarter and full-year earnings results would fall shy of analysts' projections.

For the three months ended Sept. 30, Microsoft earned $1.28 billion, or 23 cents per share, compared with $2.2 billion, or 40 cents per share, in the year-ago period.

The results include a hefty $1.24 billion charge, or 20 cents per share, related to investment losses.

Analysts polled by Thomson Financial/First Call had forecast earnings of 39 cents a share - a figure already reduced after the company warned of slumping PC sales.

Microsoft Chief Financial Officer John Connors said the company has considerable cash reserves and does not expect the losses to impact the company's investment in research and development or marketing.

Revenue was 6 percent higher, at $6.13 billion, than revenue of $5.77 billion in the year-ago quarter.

The Redmond, Wash.-based company said PC sales would continue to be slow through June, but the new desktop operating system Windows XP, due out next week, could boost performance later.

"We're anticipating that Windows XP will be a very successful product both from a customer satisfaction standpoint and from a financial standpoint - for the long term," Connors said.

AP-ES-10-18-01 1932EDT

-- Anonymous, October 18, 2001

Computer Maker Gateway Misses Wall Street Expectations By Seth Hettena Associated Press Writer Published: Oct 18, 2001

SAN DIEGO (AP) - Computer maker Gateway Inc. posted a $520 million quarterly loss Thursday, citing the costs of corporate restructuring, soured investments and weakened demand for its products following the Sept. 11 attacks. The results missed Wall Street's diminished expectations and extended Gateway's losses on the year to more than $1 billion. Still, the No. 4 U.S. computer maker said it was "cautiously optimistic" that it would make a profit in the fourth quarter, but analysts were not so sure.

Gateway took a $571 million charge related to its exit from international operations and the closure of some U.S. call centers and factories. The company also laid off a quarter of its global work force of 19,000 and moved its headquarters from San Diego to the suburb of Poway.

Excluding one-time charges, Gateway lost $83 million, or 17 cents a share in the third quarter, missing Wall Street's lowered expectations by two cents, according to analysts surveyed by Thomson Financial/First Call. In the same period a year ago, Gateway earned $132 million or 40 cents a share.

With the exception of industry leader Dell Computer Corp., the PC business has been battered by its first decline in worldwide in 15 years.

But Gateway has been hit especially hard due, in part, to its focus on the oversaturated U.S. consumer market.

Gateway, the first PC maker to ship systems with Microsoft's new operating system, Windows XP, reported that U.S. computer sales in the third quarter were 818,000, down by nearly a third from the year- ago period.

"It's a tough environment out there. It's going to continue to be a tough environment," said Ted Waitt, Gateway chairman and chief executive officer. But Waitt was confident the company he founded 16 years ago in an Iowa farmhouse had turned the corner on its recent problems.

"We've got a lot of distractions behind us," he said. "We have control of our business and our destiny."

Joseph Burke, Gateway's chief financial officer, said sales have rebounded in the past few weeks and he said he was "cautiously optimistic" that the company would return to profitability next quarter.

But Eric Rothdeutsch, an analyst with Roberston Stephens, doubted whether Gateway would be in the black by the end of the year.

"I think it's clear that Gateway has some challenging issues in front of it," he said. "It is going to be a challenge for them to be profitable in the fourth quarter."

Rothdeutsch said he did not expect Gateway to turn a profit until the second quarter of 2002, at the earliest.

Gateway is moving to tap high-growth, high-tech U.S. markets such as networking and computer services and software, Waitt said.

Gateway said that $140 million of third-quarter revenue came at the point of sale, and $102 million was recorded after the sale.

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On the Net:

http://www.gateway.com

AP-ES-10-18-01 1917EDT

-- Anonymous, October 18, 2001

Gawd, I am getting so nervous about Sweetie's job again.

-- Anonymous, October 18, 2001

Have you heard anything about the possibility of him being laid off?

-- Anonymous, October 18, 2001

No, but then we didn't with his last job, either. The R&D division was responsible for generating 20% of the company's $15m profit last year and Sweetie had been given a 6% raise just a month before. There was absolutely no indication that they would be laid off, on the contrary. Some of his new company's clients are airlines. . .

-- Anonymous, October 18, 2001

I can see why the concern. I will keep my fingers crossed that he keeps this one.

-- Anonymous, October 18, 2001

there may be some openings at America Media, Inc. in Boca, if you don't mind the commute.

-- Anonymous, October 19, 2001

Very funny!

-- Anonymous, October 19, 2001