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Nortel announces intent to divest optical business, revises outlook

By Bo Gowan September 17, 2008 6:32 am EDT

Nortel this morning has issued this press release with two significant pieces of news:

  • Nortel has announced the intent to “explore a divestiture” of its Metro Ethernet Networks (MEN) business.
  • Nortel has announced a preliminary view on 3Q08 results (ending Sept 30), and revised its full-year 2008 outlook.

The MEN business, which is led by Philippe Morin, includes Nortel’s optical business (including the 40/100gig solution that’s been making news in recent months) and Nortel’s Carrier Ethernet business.  The release states that Nortel intends to explore the divestiture (the sale) of the MEN business for the “monetization of this asset”, which the press release highlights as “a premium asset with a highly differentiated offering.”

On the financial side, the press release outlines a preliminary view to 3Q08 results, with expected revenues in the third quarter of about $2.3 billion. Third quarter gross margin is currently expected to be approximately 39 percent of revenue. With this, Nortel has also revised its full year 2008 outlook and now currently expects:

  • Revenue to decline between two and four percent compared to 2007
  • Gross Margin of approximately 42 percent of revenue
  • Management Operating Margin as a percentage of revenue to improve 125 to175 basis points compared to 2007

For complete info regarding outlook visit the press release.

Nortel CEO Mike Zafirovski and CFO Pavi Binning will host a conference call this morning at 9:00am ET to discuss the news.  You can listen to a webcast of the event by going here.

We’ll also be talking about today’s news here on Buzzboard, so stay tuned.

Categories: Corporate / Executives, Nortel News, Optical/MEN
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Comments

  1. if great things are being done by the MEN team why divest it? its going to be great for company morale. whose next? as another discussant said maybe these guys from the MEN team will actually be able to thrive elsewhere and not amongst “talkers” and not “doers”.
    Mike iknow when you leave or are fired you will leave with agood pay package and will not need to worry about working again; because i do not think any one will want to hire you; but think about the average shareholder who you have decimated in 3 yrs. today Nortel has hit a new 20 yr low. great job.

    September 17th, 2008 at 4:27 pm by nishit Mehta

  2. Yes it looks good on the Horizon for Z and his package,just look at what Bill Owens is getting ($100k/month) for what amounts to step losses from the purchase of PEC and also the huge losses($250 million) of the first $500 million BSNL contract that was signed under Bill Owens!

    September 17th, 2008 at 4:40 pm by Bill Stock

  3. mehta - I’d point to George Riedel’s Q&A to the question of why divest the MEN business. http://tinyurl.com/6g256r

    September 17th, 2008 at 4:43 pm by Bo Gowan

  4. If you sell the MEN, you will also loose the significant portion of Enterprise business. I hundreadly percent sure that will loose complete portion of services as well.

    October 24th, 2008 at 9:10 am by trabian

  5. trabain - while some of our optical sales do go to enterprises, that does not make up a “significant portion” of sales. Also, our services business is much larger than just MEN. I believe we Nortel’s services biz is running at around 20% of total revenues, and only a portion of that is related to MEN.

    October 24th, 2008 at 4:17 pm by Bo Gowan

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