Nortel's Loss Widens; Shares Plummet

Updated from 11:47 a.m. EDT

Nortel Networks (NT Quote) posted a loss in the second quarter that ballooned from a year earlier and warned that the remainder of 2008 could be trying.

The Toronto-based telecom-equipment maker had a loss of $113 million, or 23 cents a share, in the second quarter. Those numbers widened from a loss of $37 million, or 7 cents, a year ago, but shrank from a first-quarter loss of $138 million, or 28 cents a share.

The loss in the second quarter included charges of $67 million for restructuring, a loss of $21 million primarily from mark-to-market losses on interest rate swaps and a gain of $34 million due to changes in foreign-exchange rates.

Excluding these items, the company had an adjusted loss of 11 cents a share, which was worse than the Thomson Reuters average estimate of a loss of 4 cents. Shares of Nortel were lately down $1.13, or 14.8%, to $6.51, pushing its year-to-date loss past 53%.

Sales rose 2% from a year ago to $2.62 billion, although that was down 5% sequentially. Wall Street wanted to see sales of $2.49 billion.

Nortel also said that its operating margin came in at 4.5% in the second quarter, which improved from 1.3% a year ago but declined from 4.7% in the first quarter and 7.6% in the fourth quarter.

Looking ahead to the second half of the year, Nortel CEO Mike Zafirovski said the company will be "faced with a challenging business environment," because of general macroeconomic weakness, continuing competitive pressures and the potential for further cuts in capital spending by key North American CDMA customers.