Nortel misses revenue forecast
Wallets stay shut
Toronto, Canada-based Nortel said that sales for the quarter would be $2.9bn, 6% lower than previously given guidance, and 53% lower than the year-ago figure. Nortel did not say whether or not it still believes it can achieve sequential revenue growth in the second quarter. Regarding its bottom line, Nortel said it would improve from the $1.8bn net loss it made in the fourth quarter of 2001.
Echoing the words of several other companies, including IBM, that have warned of lower sales in the last few days, president and CEO Frank Dunn said that customers are "showing more resolve than originally anticipated to minimize spending."
Despite the revenue warning, it was still in compliance with all its credit facility covenants and it said that it had given notice to its banks that it would fully draw on its $1.75bn credit facility. Dunn claimed that the company does not have an immediate need for the funds, but that it is using them to optimize its "financial flexibility".
Nortel said it expects to report a cash balance of $3.0bn as of the end of March, which includes a $500m tax recovery. It has also received an additional tax recovery of $700m earlier this month, because of recent changes to US tax legislation.
Investors did not punish the stock in early trading yesterday, but Nortel's NYSE-listed shares were already trading at a five-year low following Moody's downgrade last week of its bonds to junk status.
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