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Updated from 11:47 a.m. EDT

Nortel Networks


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.

Nortel said that accelerated growth in its enterprise and metro ethernet businesses in the second half and the expected completion of wireless contracts in the fourth quarter, representing approximately $350 million of previously deferred revenue, are "key to the company achieving its financial objectives for this year."

Still, Nortel reaffirmed its forecast that revenue should grow in the low single digits compared with 2007. The company added that gross margin should be 43% of revenue this year.

"Nortel's financial performance in the first half of 2008 has been consistent and disciplined," Zafirovski said in a statement. "We have achieved our objectives and are on track to meet our targets for the year."

Nortel's guidance is slightly more positive than that of



, which Tuesday said that it expects full-year revenue to be down in the low- to mid-single-digit range.

Alcatel-Lucent's guidance was tacked onto its second-quarter earnings report, its sixth consecutive quarterly shortfall, released on the same day embattled CEO Pat Russo and Chairman Serge Tchuruk said they would leave the company. Shares of Alcatel were down 0.2% to $6.

Among other networkers and telecom stocks,



was flat, and



was off 0.3%.



was adding roughly 1%.