Nortel wins Olympic gold, but reports Q2 loss

Company will build network for 2012 London Summer Games

It was a good news/bad news week for Nortel.

First the good news: the company was selected to supply the network infrastructure for the 2012 London Summer Olympic Games. Nortel will provide LAN, WAN, voice, data and security gear -- everything from the phone handset to the network transport -- and application software to connect 15,000 athletes from 205 international sporting organizations, 20,000 members of the media, 7,000 volunteers and over 9 million spectators over the two-week event.

"It's like building a network for a Fortune 100 company," says Nortel's Enterprise Solutions President Joel Hackney.

BT is the service provider for the games.

Hackney would not disclose financial details of the award but said they would "not have a material impact" on Nortel's enterprise business.

"It's more perception strengthening," he said.

Nortel is also a supplier and sponsor of the 2010 Winter Olympic Games in Vancouver, Canada.

Now the bad news: Nortel's enterprise business fell 5 per cent sequentially in the second quarter though was up 3 per cent year-over-year. Revenue, totaling US$610 million in the quarter, was positively impacted by higher sales of voice gear and applications, while data networking sales were flat overall, with sales lower in North America than in last year's second quarter.

Overall, Nortel's second-quarter revenue rose 2 per cent over last year's second quarter but the company's losses more than tripled. Nortel is nonetheless sticking to its full year guidance of low single digit revenue growth and a 43 per cent gross margin in what it says is a "challenging" business environment facing "increasing risk due to general macro-economic weakness, continuing competitive pressures and potential of further reduced spending by key North American [wireless] customers."

Nortel says accelerated growth in its enterprise and Metro Ethernet businesses in the second half, along with US$350 million of deferred wireless revenue, are key to the company achieving its financial objectives for this year.

Hackney says he doesn't see enterprise spending improving this year.

"It will be constrained through the rest of the year," he says, echoing similar assessments from John Chambers, CEO of Nortel rival Cisco.

Let the games begin.

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Jim Duffy

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