Nortel, Commerce One, Ericsson report sharp losses

Nortel Networks Corp. yesterday reported the second-largest loss in its history, announcing a quarterly net loss of $19.4 billion and a pro forma net loss of $1.55 billion. based on revenue of $4.61 billion. On a per-share basis, the loss for the quarter ended June 30 was 48 cents.

The Brampton, Ontario-based networking equipment vendor also took a one-time after-tax charge of $12.3 billion for the write-down of intangible assets.

Company officials see no sign of a turnaround until later next year, Nortel said in a statement. The company blamed its bleak financial report on a continuing lack of demand for its equipment, a slowdown that has pushed it to cut 30,000 jobs.

"While I am disappointed with our results for the second quarter, we have taken the right steps in this environment to strengthen Nortel Networks' leadership position," said Nortel President and CEO John Roth. "I am pleased with the progress that we have made to date on our 'return to profitability' plan. I know this has been a very difficult process for employees, shareholders and our other stakeholders; however, it has been absolutely necessary that we take these steps."

The losses were in line with the forecast Nortel released last month, along with an announcement that it planned to cut additional employees from its workforce (see story). At the time, the company predicted a net loss of around $19.2 billion, with a net loss on operations of $1.5 billion and revenue from continuing operations totaling $4.5 billion.

Of the 30,000 positions being lost, 23,000 have already been cut, and another 7,000 will be lost during the next eight weeks, Nortel said. The company added that those cuts and other efforts to streamline operations should save it about $1 billion before taxes per quarter.

Also reporting losses yesterday was business-to-business commerce vendor Commerce One Inc., which posted a net loss for the quarter of $2 billion, or $9.02 per share, on revenue of $101.3 million. The loss included acquisition-related costs such as loss in market value of professional services and consulting company AppNet Inc., which was purchased by Commerce One last year, a company spokesperson said.

Pleasanton, Calif.-based Commerce One's loss compares with a net loss of $43.1 million, or 28 cents per share, for the same quarter in 2000. Although revenue was improved over the same period in 2000 by 61%, officials said Commerce One posted a net operating loss of 31 cents per share.

In a conference call with investors and reporters, Commerce One Chairman and CEO Mark Hoffman said the company experienced a shortfall on software licenses and professional services income, which he blamed on the sour economic climate plaguing the technology industry.

Hoffman also pointed to a business-to-business marketplace shift from public to private exchanges, which he said is causing a period of transition for the company. Earlier this month, Commerce One, i2 Technologies Inc. and BroadVision Inc. all announced that quarter-to-quarter revenues would likely fall by at least 30% (see story).

"Commerce One is in a transition," Hoffman said. "The public e-marketplaces are alive and well and are definitely gaining traction. [But] today, the opportunity for software license sales is shifting to companies creating enterprise e-marketplaces or private exchanges."

In addition, Commerce One officials said the company plans to divest nonprofitable services, implement cost-reduction programs and refocus sales efforts on the enterprise.

Also hit hard during the quarter was LM Ericsson Telephone Co., which today reported a net loss of $1.31 billion for the quarter, compared to a net profit of just under $1 billion in the second quarter of last year, the company said in a statement.

The Stockholm-based telecommunications equipment maker also said overall sales were down 3% from last year and lowered its outlook for the rest of the current fiscal year. Burdened by heavy restructuring charges and its loss-making handset division, Ericsson said its second-quarter loss before taxes was in line with expectations it laid out in April (see story).

Overall sales in the second quarter were down 3% from the year-ago period and were pushed lower by the mobile handset division, where sales dropped 39%. Sales at Ericsson's systems division, which sells mobile networks, were up 9%, the company said.

Looking ahead, Ericsson said weak market conditions persisted in the second quarter and officials gave a grim outlook for the future. The company now expects market growth for mobile systems this year to be "flat to slightly positive" compared with last year. Ericsson had previously estimated year-on-year growth of between 5% and 15%.

"Many of our customers have delayed spending on network expansion and in some cases postponed contracted deliveries," Ericsson President and CEO Kurt Hellstrsom said in a conference call. "We cannot predict how long this situation will prevail, as we have yet to see signs of improvement. Today, I cannot offer any comfort to a quick market recovery."

Joris Evers of the IDG News Service and Cathleen Moore of InfoWorld contributed to this story.

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