Nortel CEO Mike Zafirovski

Nortel Networks Corp. posted wider net losses in its first quarter, despite an 11-per-cent increase in revenues, as the telecom giant absorbed restructuring costs and suffered from foreign exchange losses.

The Toronto-based company, which has major research and development operations in Ottawa, said net loss grew to $138 million or 28 cents per share, from $103 million or 23 cents per share a year earlier. The loss included $88 million in restructuring charges, $19 million in foreign exchange losses, and a $12-million charge related to a patent lawsuit settlement.

Revenues, on the other hand, increased by a healthy 11 per cent to $2.8 billion, pushed up by growth in most of its businesses, although its metro ethernet networks division had a 12-per-cent decline to $327 million.

"Nortel had a strong first quarter, driven by the completion of a contract in our LG-Nortel joint venture and continued improvements in gross and operating margins," said Nortel CEO Mike Zafirovski in a statement. "We expect to achieve our full-year guidance and we continue to make solid progress against the strategy to turn around the company. Our relentless focus on execution and our determination to deliver value to customers is strengthening the foundation upon which to build our performance over the balance of 2008 and beyond."

Mr. Zafirovski also noted that Nortel's operating margin expanded year-over-year for the seventh consecutive quarter, widening by 0.5 percentage points to 4.7 per cent. Gross margin grew by 0.12 percentage points to 41.6 per cent.

The company maintained its fiscal 2008 guidance, with revenue expected to grow in the "low single digits" from 2007 numbers, while operating margin as a percentage of revenue is anticipated to increase by about 300 basis points year-over-year, and gross margin is expected to be around the business model target of 43 per cent of revenue.

Nortel shares gained 70 cents or 8.05 per cent on the New York Stock Exchange before market open, to $9.40, shortly after the first-quarter results came out.