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BMO Nesbitt Burns raised its third-quarter earnings and revenue estimates on



Tuesday based on the belief that the company's contract activity has picked up and its enterprise business has improved.

Information technology spending has stabilized somewhat, analyst Paras Bhargava wrote in a research note. Additionally, Nortel's 2003 contract announcements have already surpassed its contracts for all of 2002, the analyst said.

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Bhargava now expects Nortel to lose 1 cent a share in the third quarter, compared with the analyst's previous estimate of a loss of 3 cents. Nortel's revenue projection was lifted to $2.29 billion from $2.16 billion for the quarter.

Still, Bhargava has an underperform rating on Nortel, along with a $2.25 to $2.50 price target.

On average, analysts expect Nortel to break even in the third quarter with sales of $2.32 billion. In the same quarter last year, the company lost 10 cents a share on sales of $2.36 billion.

Bhargava also believes Nortel can reach earnings of 15 cents a share, possibly in 2005, as the company is focused on revenue and is willing to employ aggressive pricing. "The long and short of is that Nortel has sufficient reserve balances to bolster earnings in the near term."

Shares of Nortel were down 1 cent to $3.21 in recent trading.