Network Earnings Mollify Market Fears

What’s up with networks? Are they telling us something?

Global Crossing (GLBC) delivered better than expected results Tuesday morning posting strong third-quarter results, as its North American unit swung to a profit for the first time. In addition, its rest-of-the-world segment posted a positive cash adjusted EBITDA of $13 million compared with a loss of $19 million in the year-ago quarter, and the trend is expected to continue. Results beat analyst expectations, where Deutsche Bank expected adjusted cash EBITDA of $45 million, and company delivered $74 million, on strongly rising gross profit margins. Classy. Earlier, GLBC was up 15%, right now trading at +8%.

But that’s not all. Nortel Networks (NT) also swung to a profit in the third quarter, its gross profit margins rose dramatically as well as the company cut costs and sold higher profitable equipment. Just as with GLBC, its gross profit margins rose dramatically as well. Just look at the stock performance yesterday. Up 15%. And we shouldn’t forget: Cisco (CSCO) should report today - something to keep an eye on.

Obviously, some are more fortunate than others. It appears that NT and GLBC have delivered strong numbers selling high-profitable services, and their strong results had a killer effect on their competitor Level 3 (LVLT) yesterday.

Is the network industry telling us something? Well, it may be telling us that “things are definitely not as bad as the market's worst fears," as BMO Capital Markets analyst Paras Bhargava wrote to clients yesterday. "Yesterday, we wrote that we were expecting a relief rally today. We are having one."

Comments

[Craig]

How do you figure that Nortel is a competitor to Level 3? Nortel is an equipment vendor while Level 3 is a Service Provider.

[Craig]

How do you figure that Nortel is a competitor to Level 3? Nortel is an equipment vendor while Level 3 is a Service Provider.

[Craig]

Sorry for the double post. Browser error.

[Beris]

Craig, thank you for reading and for your comments. Just thought to straighten some things out, Nortel is also a service provider, not perhaps through fiber backbone exploatation, but through different means of utilizing fiber and airspace communication means. Nortel is very well involved in providing multiple services, and it's not just involved in manufacturing equipment