Nortel, Lucent sales expected to finally rise, analysts say

By Scott Lanman
Bloomberg News Service

SAN FRANCISCO — Nortel Networks Corp. and Lucent Technologies Inc., the two largest makers of telephone equipment in North America, may have seen the worst of sales declines that led to $61 billion in losses in the past three years.

Brampton, Ontario-based Nortel reported a narrower fourth-quarter loss as sales rose from the prior three months for the first time in two years. U.S. rival Lucent Technologies Inc. said its sales will be higher this quarter than last.

"You've got to be at least somewhat more positive on the group," said Christopher McHugh, who helps manage $8.5 billion at Turner Investment Partners. "You are beginning to see balance-sheet and income-statement improvement."

Nine analysts raised their ratings on Nortel stock, and three boosted their recommendations on Lucent after the two reported results last week, according to Bloomberg data, saying job cuts of 146,500 since 2000 and other cost reductions are enough to compensate for sliding sales. Customers such as AT&T Corp., the largest U.S. long-distance company, have said they plan to slow spending reductions this year.

The slowing economy and bankruptcies of companies such as WorldCom Inc., the second-largest U.S. long-distance carrier, and Global Crossing Ltd. sliced demand for switches and routers made by Lucent, Nortel and others. The slumping demand, and write downs of the value of assets, led to 12 straight losses at Nortel and 11 at Lucent.

Sales of equipment to telecommunications companies will rise 4 percent in 2003 to $79.5 billion, Synergy Research Group Inc. said in a report last month. That compares with an estimated 33 percent decline last year and a 19 percent drop in 2001.