Citing momentum from the completion of an LG-Nortel joint venture contract, Nortel reported Q1 2008 revenue of $2.76 billion, up by 11 percent year over year. Gross margin in the first quarter of 41.6 percent, up 120 basis points year over year. Operating margin in the first quarter of 4.7 percent, up 512 basis points year over year. The net loss in the first quarter of 2008 of $138 million included special charges of $88 million for restructurings, a loss of $19 million due to changes in foreign exchange rates, a charge of $12 million related to a patent lawsuit settlement and a gain of $16 million primarily from mark-to-market gains on interest rate swaps.
"Nortel had a strong first quarter, driven by the completion of a contract in our LG-Nortel joint venture and continued improvements in gross and operating margins. Nortel's operating margin, a critical measure of our plan's traction, expanded for the seventh consecutive quarter year over year, recording a 512 bps improvement to 4.7 percent," said Mike Zafirovski, Nortel president and chief executive officer. "We expect to achieve our full year guidance and we continue to make solid progress against the strategy to turn around the company. Our relentless focus on execution and our determination to deliver value to customers is strengthening the foundation upon which to build our performance over the balance of 2008 and beyond."
Some highlights for the quarter:
- Carrier Networks (CN) revenue in the first quarter of 2008 was $1,218 million, an increase of 21 percent compared with the year ago quarter and a decrease of 10 percent sequentially. Compared to the year ago quarter, CN revenue benefited from the LG-Nortel joint venture contract completion, partially offset by a slight decline in CDMA and lower legacy switching sales.
- Enterprise Solutions (ES) revenue in the first quarter of 2008 was $641 million, an increase of 7 percent compared with the year ago quarter and a decrease of 16 percent sequentially. Compared to the year ago quarter, ES revenues were positively impacted by higher voice and applications revenues, primarily from customer migration to unified communications, partially offset by a decline in the data networking business primarily from lower sales in the North American and EMEA regions and significant contract completions in the first quarter of 2007, not repeated to the same extent in the first quarter of 2008.
- Global Services (GS) revenue in the first quarter of 2008 was $516 million, an increase of 15 percent compared with the year ago quarter and a decrease of 15 percent sequentially. The first quarter showed strong growth in network implementation services and managed services, partially offset by a decline in network support services. Compared to the year ago quarter, GS revenue benefited from the LG-Nortel joint venture contract completion and other growth in implementation services primarily in the Asia region.
- Metro Ethernet Networks (MEN) revenue in the first quarter of 2008 was $327 million, a decrease of 12 percent compared with the year ago quarter and a decrease of 24 percent sequentially. The year over year decrease in revenue was primarily due to decreases in optical and data revenue resulting from the completion of large contracts in the first quarter of 2007 not repeated to the same extent in the first quarter of 2008.
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