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Frank
A Dunn, who took over as chief executive of Nortel in November,
told an investor conference in New York that business over
the last month ‘indicated even more resolve by customers
than originally anticipated to minimise spending in the near
term’. Separately, the Brompton, Ontario-based company
disclosed that development of a new optical telecommunications
switch, known as the HDX, was about six months behind schedule.
The optical equipment market is a cornerstone of Nortel’s
recovery strategy.
“Today’s
news was not encouraging,” said Kenneth M Leon, an analyst
at ABN Amro, who attended the conference. Coming a day after
the company said it had dismissed its chief financial officer
in connection with trades involving his 401(k) plan, news
of the slow pace of orders rattled investors.
At an investor conference, Dunn stuck by earlier forecasts
that Nortel’s revenue in the first quarter would be about
10 percent lower than in the final three months of 2001. But
he acknowledged that the recent weakness in demand would ‘make
the task of delivering our first-quarter sales outlook more
challenging.’ He said that the company was projecting
gradual revenue growth beginning in the second quarter, and
a return to profitability in the fourth quarter.
Nortel posted net losses of $1.83 billion for the fourth quarter
of 2001 and $27.3 billion for the year, including large write-offs.
Alex A Henderson, an analyst at Salomon Smith Barney in New
York, doubted whether the company could meet its 2002 goals.
Henderson said the company needed to narrow its losses by
more than the revenue increases it was projecting. “I
don’t see how it can get back to break even,” he
said, “without further cost-cutting than they’ve
announced.”
Nortel’s problems began in late 2000 when the feverish
construction of communications networks abruptly came to a
halt. Major customers for Nortel’s switches and fibre
optic equipment came under financial strain and slowed their
purchases.
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