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Nortel Warns of Lower Q1 Revenues

Telecom equipment giant Nortel Networks Corp. said its first-quarter revenues and pro-forma loss would come in below analysts' expectations, as it fully draws on a $1.75 billion of bank credit.

Before today's opening bell on Wall Street, Nortel said it expects first-quarter revenues to total $2.9 billion, which is below Thomson Financial/First Call-reported analyst expectations of $3.01 billion. Also, Nortel said it expected to record a pro-forma loss of $0.14 a share in the quarter, which is slightly above analysts' expectations of $0.13, according to a Thomson Financial/First Call survey.

Included in the pro-forma loss is an expected charge of approximately $200 million for excess and obsolete inventory, primarily related to recently completed negotiations with all of its major suppliers, Nortel said.

In a statement, Nortel officials blamed the shortfall on "limited capital expenditures by customers, resulting in a sequential decline in revenues of approximately 16% compared to our previous guidance of approximately 10%."

Net loss per share from continuing operations, including acquisition-related costs and charges primarily for workforce reductions, is expected to be approximately $0.26, Nortel also said. The company expects to be in compliance with all of its credit facility covenants as of March 31.

In the future, Nortel said it will "fully draw" on a $1.75 billion bank facility, and plans to exercise its one year term loan option to obtain an additional year of liquidity under the facility. While Nortel doesn't have an immediate need for the funding, Nortel Chief Executive Officer Frank Dunn said the company is taking advantage of "the favorable terms in our current facilities rather than seeing this source of liquidity eliminated."

Nortel Networks plans to release its financial results for the first quarter of 2002 and comment on its outlook on April 18.