warned of third-quarter weakness late Tuesday but said its fourth quarter looks stronger.
The news came as the company's yearlong audit of previous financials began to bear fruit, with the posting of some preliminary results for the first three quarters of this year as well as the three previous years.
The Brampton, Ont., telecom gearmaker said it expects to lose 6 cents a share in its third quarter ended in September, on revenue of $2.3 billion. That's less than Wall Street expected, as reflected by the Thomson First Call estimate for a break-even quarter on revenue of $2.47 billion. The company said gross margin for the quarter was 37%, which is below its full-year target range as a result of an India wireless project that took 6 points off the margin.
But the company said the fourth quarter would help to make up for the shortfall. CEO Bill Owens said in a postclose press release that Nortel is targeting fourth-quarter revenue of $2.8 billion to $2.9 billion, which is ahead of the $2.7 billion Thomson First Call estimate.
"While customer support remains strong, the ongoing restatement activities and the internal restructuring and realignment programs initiated in August have impacted business performance in the third quarter, but this impact is temporary," Owens said. "I am particularly encouraged by a strengthening fourth quarter."
That said, Nortel still expects full-year revenue to fall short of estimates. The company projected a 2004 top line of around $10.1 billion to $10.2 billion, which falls short of the $10.3 billion estimate. Nortel said its 2004 revenue would fall from 2003 levels, now that previous years have been restated to reflect the proper timing of revenue recognition for projects undertaken in the 2001-2003 period.
Nortel reiterated Tuesday that it expects to file restated results with securities regulators starting Jan. 10. The company has repeatedly moved that target date back in recent months, but its firmness on that issue in recent weeks has soothed investors who had begun worrying about a potential delisting of the company's stock.
Last month, Nortel shocked observers with the discovery of $3.1 billion in misbooked revenue from 1999 and 2000. About $250 million of that figure was deemed entirely bogus. Last week, the company tacked $100 million onto the mistimed revenue figure, bringing it to a staggering $3.2 billion.
Nortel started probing its books last year and has had to postpone its filings all year. The filing delays have run afoul of credit agreements, and Nortel has had to seek five waivers from its lender, Export Development Canada.
Nortel dropped 9 cents Tuesday to $3.69.