Nortel Networks (Brampton, ON, Canada) reported earnings this week, easily beating analysts' estimates. Fourth quarter earnings were $755 million, or $0.55 per share, well above estimates of $0.45 per share. The company also announced yet another share split to accommodate its surging stock price.
Chief executive officer John Roth hailed 1999 as a "great year" after the company increased revenue by 26% to $22.22 billion, up from $17.56 billion a year ago. Roth said the strong growth isn't over, forecasting the company's revenues will grow another 21% during the coming year.
In light of competitor Lucent Technologies' dismal fourth quarter performance, Nortel is reaffirming confidence in the nonstop growth of the telecommunications and optical networking markets. Roth was "happy to say that the guidance we provided to the analysts in saying we'd bring in 1999 with $21.5 to $22 billion, we actually topped out, coming in at $22.2 billion." He expanded on the fourth quarter success, remarking, "Our earnings per share are on-target or a little better. We're also pleased about the order-capture rate we experienced in the fourth quarter. We have a very strong book-to-bill in excess of 1.3 to 1, which will set us up with a lot of momentum as we enter the year 2000."
Excluding the impact of amortizing acquisition costs and one-time expenses, the company earned $1.73 billion, or $1.28 per share, up from $1.07 billion, or $0.93 per share, in 1998. But after factoring in acquisition costs and the paying of dividends on preferred shares, Nortel's net loss was $197 million, or $0.15 per common share, an improvement over last year's loss of $569 million, or $0.50 per share.
Roth attributed much of the success to the company "firing on all cylinders at the carrier end of our business," which experienced 31% growth in 1999. Nortel's optical business unit is also continuing to move ahead at a record pace, but is still unable to satisfy all the demand that customers are putting on the company, said Roth. Nortel plans to rectify the situation as quickly as possible. "We're closing the gap on the shortages to our customers...but the expansions that we announced late last year are not going to come onstream until late this quarter and into the second quarter," acknowledged Roth. "So we will not fully catch up with the demand until we're through these next two quarters. But we are making good headway."
Roth stressed that the company is getting new products to market quickly, with 40% of sales coming from products that Nortel sold for the first time in 1999, especially high-performance Internet equipment. The pace of new product introductions will continue, building on rollouts begun last year.
The company's two-for-one stock split will be voted on by shareholders in late April. If approved, it will be Nortel's third split in the past two years.
At midday on Thursday, Nortel stock is trading at $100.50 per share.