|
Corporate Information
Investor Relations
 |
 |
Your Location: Home / News & Events / News Releases
January 29, 2004
Nortel Networks Reports Results for the Fourth Quarter and Year 2003
- Q4 2003 revenues of US$2.83 billion, up 12 percent compared to the fourth quarter of 2002, and up sequentially 25 percent
- Q4 2003 net earnings of US$499 million, US$0.11 per common share on a diluted basis
- Strong cash balance of US$4.0 billion, up sequentially US$428 million
- Strategic Universal Mobile Telecommunications System (“UMTS”) contract win with Partner Communications (a Hutchison property) to build what is expected to be Israel’s first third generation UMTS wireless network;
- Trial of a breakthrough WLAN (Wireless Local Area Network) architecture with MIT (Massachusetts Institute of Technology) and plans for a jointly proposed trial with BT (British Telecom) and one of its leading customers, to drive significantly reduced service provider costs for transport of high-speed wireless data from Wi-Fi (Wireless Fidelity) networks to wired broadband networks;
- Global System for Mobile communications (“GSM”) momentum in Asia, with a contract win to expand the capacity of Pak Telecom Mobile Limited’s Ufone 900 digital wireless network, as well as a deployment with China Mobile to expand and upgrade its GSM network;
- Selection by Verizon to be its supplier to build the largest U.S. converged, packet-switched wireline network using Voice over Internet Protocol (“Voice over IP”) technology. The network is expected to offer one of the industry’s most comprehensive suites of Voice over IP and multimedia services, providing consumers and businesses with communications capabilities that dramatically increase functionality, mobility and productivity;
- Further momentum in converged packet networks using Voice over IP technology for Class 5 applications, with contract wins with Dacom (Korea) and Chunghwa Telecom (Taiwan) for multimedia services, and with CODETEL (Dominican Republic) and Cable & Wireless (Cayman Islands) for Voice over IP access technology, including Internet Protocol (“IP”) enabled Succession* Media Gateway 9000 deployments;
- Momentum in the deployment of enterprise IP Telephony solutions, with Inbal Insurance (Jerusalem) and the Sheraton New York Hotel & Towers marking Nortel Networks 50 millionth enterprise telephony line deployment;
- Extended ties with BellSouth with a contract to supply IP Telephony solutions to small and medium-sized businesses and branch offices with voice and data convergence packages;
- As part of Nortel Networks Secure Mobility initiative, announcement of an industry leading Virtual Private Network (“VPN”) gateway to support IPSec (Internet Protocol Security) and SSL (Secure Socket Layer) remote access, and a VPN secure mobility solution deployment by Unidad Editorial, Spain’s second largest newspaper by circulation;
- Deployments of Nortel Networks Enterprise Network and Service Management (ENSM) suite to enable real-time network services like IP Telephony and video by Southern Company (one of the largest electric utilities in the U.S.) to manage its network for power grid control and provide IP Telephony and advanced customer service applications, and by Manchester City Council (one of the largest metropolitan districts in the U.K.) to simplify and centralize network management;
- Multimedia Communication Server (MCS) 5100, a Session Initiation Protocol (SIP)-based IP PBX, won the Network World Blue Ribbon award for its high grade collaboration features, including videoconferencing, instant messaging, white boarding and web co-browsing, as well as network management and security;
- Announcement of a two year frame agreement under which Bell Canada plans to invest CDN$170 million in Nortel Networks optical technology, such as the Optical Mutiservice Edge platform and the OPTera* HDX optical switch, to enhance Bell Canada’s ability to deliver hosted IP Telephony and multimedia services; and an announcement of a joint Optical Innovation Center that will accelerate the deployment of new IP-oriented optical solutions;
- Strong momentum with metro optical C/DWDM (Coarse or Dense Wavelength Division Multiplexing) solutions, with deployments of the OPTera* 5000 line of products by cable operators such as Mediacom and Lightpath, and enterprises, such as CGI Group and ENMAX Envision and contract wins with voice carriers such as T-Com (fixed network division of Deutsche Telekom);
- Success in the utility sector, with deployments of the OPTera* 3000 line of metro optical next-generation SONET (Synchronous Optical Network) solutions by the Vermont Electric Power Company and L.A. Department of Water and Power;
- Continued traction with Optical Ethernet solutions, with deployments of the OPTera* 1000 series of products by Golden Telecom (Russia) and cable telecom operator Retecal (Spain); and
- Launch of a three year strategic relationship with Avici Systems to integrate, sell and support Avici’s carrier-class core routers, allowing Nortel Networks to offer end-to-end networking solutions for carriers, to help with seamless transition to Voice over IP and converged wireline/wireless networks.
Compared to the fourth quarter of 2002, Wireless Networks revenues increased 33 percent, Enterprise Networks revenues decreased 2 percent, Wireline Networks revenues increased 9 percent and Optical Networks revenues decreased 18 percent. Compared to the third quarter of 2003, Wireless Networks revenues increased 35 percent, Enterprise Networks revenues increased 10 percent, Wireline Networks revenues increased 26 percent and Optical Networks revenues increased 16 percent. Revenues by geographic region
Compared to the fourth quarter of 2002, the United States increased 26 percent, Europe, Middle East and Africa region (“EMEA”) decreased 5 percent, Canada increased 48 percent and Other decreased 12 percent. Compared to the third quarter of 2003, the United States increased 38 percent, EMEA increased 11 percent, Canada increased 56 percent and Other decreased 2 percent. Gross margin Gross margin was 48 percent of sales in the fourth quarter of 2003, including a benefit of approximately 1 percentage point from non-recurring purchase discounts related to the finalization of the JDS Uniphase purchase arrangement. Nortel Networks continues to expect its gross margin percentage to trend in the mid 40’s range over the near term. Expenses Selling, general and administrative (“SG&A”) expenses were US$482 million in the fourth quarter of 2003, which included a benefit of US$37 million related to a net reduction in provisions as a result of collections in the quarter of certain trade and financed receivables. This compares to SG&A expenses of US$473 million for the fourth quarter of 2002 and US$486 million for the third quarter of 2003. Research and development (“R&D”) expenses were US$523 million in the fourth quarter of 2003, compared to US$498 million for the fourth quarter of 2002 and US$485 million for the third quarter of 2003. The increased R&D expenses in the quarter reflected additional program spending in wireless data solutions. Other income (expense) – net was US$97 million income for the fourth quarter of 2003, which primarily related to interest and investment income of US$42 million (including US$17 million of mark to market investment gains), net foreign exchange gains of US$18 million and a gain of US$17 million resulting from the finalization of the valuations related to changes in ownership of certain European operations. Discontinued Operations
The Company reported net earnings from discontinued operations of US$109 million, which primarily reflected a gain in the amount of US$31 million from the disposition of shares in Arris Group Inc., a collection of US$26 million of previously deemed uncollectible receivables and a gain of US$18 million for the sale of our fixed wireless access business. Pension Related Matters
The Company recorded a non-cash charge in the fourth quarter of 2003 to shareholders’ equity of US$374 million (US$318 million after-tax) related to the minimum required recognizable deficit associated with the Company’s pension plans. The Company expects its pension plans to have a deficit of approximately US$1.9 billion at December 31, 2003. In 2003, strong pension asset returns and cash contributions were more than offset by the impact of declines in discount rates and foreign exchange rates. Cash Cash balance at the end of the fourth quarter of 2003 was US$4.0 billion which was up from US$3.6 billion at the end of the third quarter of 2003. This increase in cash from the end of the third quarter was primarily driven by cash from operations of US$264 million which included cash payments for restructuring of US$106 million. In addition, Nortel Networks received US$73 million of net proceeds from discontinued operations resulting from the sale of a minority investment and the collection of previously deemed uncollectible receivables. Year 2003 Results For the year 2003, revenues were US$9.81 billion compared to US$10.57 billion for the year 2002. Nortel Networks reported net earnings of US$732 million, or US$0.17 per common share on a diluted basis for the year 2003, compared to a net loss of US$3.27 billion, or US$0.85 per common share, for the year 2002. The year 2003 results included US$353 million of net earnings from discontinued operations – net of tax; US$189 million of special charges for restructuring; and an aggregate of US$162 million for the amortization of acquired technology and deferred stock option compensation associated with acquisitions. Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Enterprise Networks, Wireline Networks, and Optical Networks. As a global Company, Nortel Networks does business in more than 150 countries. This press release and more information about Nortel Networks can be found on the Web at www.nortelnetworks.com. Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the sufficiency of our restructuring activities, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; continued reductions in spending by our customers; fluctuations in operating results and general industry, economic and market conditions and growth rates; the communication by our auditors of the existence of material weaknesses in internal control; the ability to recruit and retain qualified employees; fluctuations in cash flow, the level of outstanding debt and our current debt ratings; the ability to meet the financial covenant in our credit facilities; the use of cash collateral to support our normal course business activities; the dependence on our subsidiaries for funding; the impact of our defined benefit plans and our deferred tax assets on our results of operations, cash flows and compliance with our financial covenant; the dependence on new product development and our ability to predict market demand for particular products; the ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of our customers and the impact of customer financing and commitments; stock market volatility generally and as a result of acceleration of the settlement date or early settlement of our purchase contracts; risks associated with a consolidation of our common shares; the impact of supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; the future success of our strategic alliances; and the adverse resolution of litigation, intellectual property disputes and similar matters. For additional information with respect to certain of these and other factors, see the most recent Form 10-Q and Form 10-K filed by Nortel Networks with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, Nortel Networks disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. *Nortel Networks, the Nortel Networks logo, the Globemark, Business Without Boundaries, Succession and OPTera are trademarks of Nortel Networks. Nortel Networks will host a teleconference/audio webcast to discuss Q4 and Year 2003 Results. TIME: 5:00 PM – 6:00 PM ET on Thursday January 29, 2004 To participate, please call the following at least 15 minutes prior to the start of the event. Teleconference:
North America: 888-211-4395
International: 212-231-6007 Webcast: www.nortelnetworks.com/q4earnings2003 Replay:
(Available one hour after the conference until 11:59 pm ET, February 13, 2004)
North America: 800-383-0935
Passcode: 21177866#
International: 402-530-5545
Passcode: 21177866#
Webcast: www.nortelnetworks.com/q4earnings2003 Contact for Press and Analysts:
Investors:
Nortel Networks
888-901-7286
905-863-6049
investor@nortel.com
Media:
Tina Warren
Nortel Networks
905-863-4702
tinawarr@nortel.com
Additional Media & Analyst Contacts
Consolidated Results (9.8 KB) Consolidated Balance Sheet (9.7 KB) Consolidated Statements of Cash Flow (10.3 KB) Supplementary Information (10 KB) 