Nortel Breaks Through Telecom Clouds

Nortel's (NT Quote) first trip back to profitability didn't last long, but the company hopes to start making the journey a regular event.

There was good news from Brampton, Ontario, on Thursday, as the big phone-equipment maker posted a stronger-than-expected first period that kind of passes for its first quarterly profit in three years. Though it's early yet to say that telecom's long spending crisis has passed, the apparent success of Nortel's long restructuring offers a bit of hope in a beaten-down sector.

"This helps me believe more in the stability thesis for the industry," says Lehman Brothers analyst Steve Levy, who has a neutral rating on the stock. Nortel shares rose 3 cents to $2.59.

But this being Nortel, the victory didn't come without an asterisk or two. Yes, going by certain measures the company posted a penny-a-share profit in the first quarter. But as Nortel execs noted sheepishly on a Thursday morning conference call, that's before the effect of some performance-based money paid out to workers. ...