Nortel breaks from storm clouds

After a flurry of discouraging news in recent months, Nortel Networks Ltd. released brighter financial expectations for the first quarter and remainder of the year. The company also announced it appointed David Drinkwater to serve as CFO on an interim basis following Peter Currie’s resignation effective April 30.
Nortel said it expects first-quarter revenues to reach $2.48 billion, which represents a 4% increase from the same period last year and a slight jump on Wall Street’s expectation of $2.47 billion. The gross margin for the quarter is expected to come in slightly higher than 40% of revenue, and operating margin is expected to be slightly negative but still an improvement compared to the same period last year. The Toronto-based company also expects gross margin for all of 2007 to remain in the low 40% range of revenues and the operating margin to be at least 5% of revenues.
“The news is positive and a signal that restructuring activity is gaining traction,” Ittai Kidron of CIBC World Markets wrote in a note to investors following the announcement.
Nortel’s stock was up almost 8% on the news to around $24.90 per share.
“Nortel today is different than the Nortel of a year ago,” President and CEO Mike Zafirovski said. “I see a new Nortel emerging, a Nortel that is focused on the customer. A Nortel that grows and creates value as we help our customers seize the opportunities that exist in the market.”
He added that “Nortel is on the offense again for the first time in many years. We are attacking, winning customers, and gaining market momentum.”