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.

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