Protection hasn't stopped Nortel bleeding red

In its first financial report since filing for bankruptcy protection, Nortel Networks showed mixed results.

On the one hand the Canadian telecom equipment maker said Monday its revenues plunged 36 per cent from the previous three month period, pulling in $1.7 billion (all figures in U.S. dollars) for the quarter ending Feb. 28 and resulting in a net loss of $507 million. Sales were down in each of its four divisions, which company CEO Mike Zafirovski blamed on the "severe economic downturn and our filings for creditor protection."

If the negative impact of foreign exchange fluctuations were excluded, the decrease in revenue would have been only 29 per cent.

On the other hand, the company still managed to increase its cash balance to $2.48 billion, primarily due to cash from operating activities of $202 million.

As a result, Zafirovski could put a positive spin on the numbers, arguing "revenue has stabilized and our cash balance is stable from year-end 2008."

"We accomplished our initial objectives of maintaining our customer commitments and strengthening our operational performance," he said in a news release. "Network performance and customer service levels are at multi-year highs and customers are expressing their support of Nortel. Our employees have done a tremendous job under challenging conditions."

Nortel has been trying to sell assets since last fall, when in September said its Metro Ethernet Networks division was available and in November announced another restructuring of three other divisions. At the time it described that move as a decentralization to give greater financial and operational control to the business.

Indeed it did manage one sale, of application acceleration products to Radware.

However, today's news release for the first time described the goal as to create independent "standalone businesses" of the four divisions - Carrier Networks (which includes wireless networks as well as carrier VoIP and application solutions or CVAS), Metro Ethernet Networks, Enterprise Solutions and the LG-Nortel joint-venture.

Creating divisions that are largely standalone would help make them more saleable, or, in the company's words, "will provide Nortel with maximum flexibility to choose the ultimate path forward for each of the businesses."

However, Nortel spokesman Mohammed Nakhooda suggested little should be read into the inclusion of the word "standalone" and that it is not a signal Nortel wants to break up the company. At the same time, he said the company retains the right to be flexible.

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