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Technology Stocks : Earnings: Networkers & Communications
CSCO 39.36+0.8%3:59 PM EDT

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To: 2MAR$ who started this subject1/29/2004 6:45:19 PM
From: 2MAR$   of 12
***Nortel $6.58~$7.80 Leaps After Earnings Blowout

By Scott Moritz Senior Writer
01/29/2004 06:20 PM EST

Updated from 4:46 p.m.

Nortel (NT:NYSE - news - research) surged late Thursday as investors celebrated a huge quarter. But the resurgent Canadian telecom gearmaker spent much of its conference call warning analysts not to bet the house on a repeat.

Nortel soundly beat fourth-quarter estimates Thursday and said it expects to grow faster than the market in 2004. Its shares zoomed 17% in postclose action, as gross margin expanded sharply in the latest period.

The news comes near the end of a month that has been very good to Nortel's long-suffering shareholders. Counting this afternoon's postclose rally, the stock has nearly doubled in the space of a month as investors have bet that telecom-industry network spending will finally revive this year. That surge has also lifted rivals ranging from Lucent (LU:NYSE - news - research) and Foundry (FDRY:Nasdaq - news - research) to JDS Uniphase (JDSU:Nasdaq - news - research) .

"Their quarter was very good," says UBS analyst Mike Urlocker, whose firm has a buy rating on the stock and banking ties to the company. "They had growth in wireless, growth in wireline thanks to [voice over Internet protocol] and a sustained recovery in enterprise sales. All that, and gross margins held up well."

Indeed, the company's message was surprisingly positive for the fourth quarter, considering how poorly Nortel was performing just a year ago. Even as investors expect to see a bounceback in telecom spending this year, Nortel expects to outperform its peers. But seeking to tamp down red-hot expectations, it won't say exactly how well it expects to do in the first quarter.

"While we expect that the percentage growth in the overall capital spending by our customers will be in the low single digits in 2004 compared to 2003, we expect to grow faster than the market by leveraging our particular strengths in Voice over IP and wireless data solutions," CEO Frank Dunn said in a earnings release.
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