Nortel Shares Jump on Raised Outlook for Sales, Margins

Shares of Nortel Networks moved higher after North America's biggest maker of telephone gear raised its outlook for revenue and gross margins in its first quarter.

Nortel said late on Tuesday that revenues will likely be $2.48 billion, up 4%, year-over-year. In March, it said it expected flat first-quarter revenue because of the sale of its high-speed wireless UMTS access business to Alcatel-Lucent for $320 million.

As well, Nortel now expects gross margin to be slightly higher than 40% of revenue. That compares to the Toronto-based company's earlier expectations of gross margin in the "high 30s" for the quarter.

It also said that if the impact of the UMTS sale is excluded, "revenues increased by 12%" compared with the same quarter a year earlier.

Nortel said its cash balance at the end of the first quarter was $4.55 billion. It said for the full year, it continues to expect revenues will be flat or down slightly from 2006 levels.

Nortel also announced it has appointed David Drinkwater as an interim replacement for departing chief financial officer Peter Currie, who left the company effective Monday.