Nortel CEO Mike Zafirovski. (Darren Brown, OBJ)

Nortel Networks Corp. saw second-quarter losses balloon to triple the year-earlier amount, with revenue growth hampered by a two-per-cent drop in carrier network product sales.

The Toronto-based telecommunications company, which has major research and development operations in Ottawa, said losses grew to US$113 million or 23 cents per share from $37 million or seven cents per share.

The net loss included special charges of $67 million for restructuring and a loss of $21 million primarily from mark-to-market losses on interest rate swaps. Excluding those one-time charges, the company had losses of 11 cents per share, but the figure still far outstripped analysts' estimates of two cents per share, according to a Bloomberg report.

Revenues, meanwhile, grew at a sedate two-per-cent pace during the quarter, to $2.62 billion from $2.56 billion. Top-line numbers were pushed down by the decrease in carrier networks sales to $1.03 billion, with the company's three other main businesses recorded single-digit growth.

However, revenues were stronger than the $2.51 billion predicted by analysts.

Nortel CEO Mike Zafirovski pointed to improved gross margin as a sign that the company's cost-cutting efforts were bearing fruit, as Nortel recorded a 2.04-percentage-point increase in gross margin to 43.1 per cent, the seventh consecutive quarter of year-over-year improvement. Management operating margin rose by 3.02 percentage points to 4.3 per cent.

"Nortel's financial performance in the first half of 2008 has been consistent and disciplined," said Mr. Zafirovski in a statement. "We have achieved our objectives and are on track to meet our targets for the year."

The company reiterated its fiscal 2008 outlook, with revenue expected to grow in the "low single digits" from 2007 sales of $10.9 billion, while gross margin is predicted to be around the business model target of 43 per cent of revenue.

As well, management operating margin is expected to increase by about 300 basis points year-over-year.

Nortel's share price fell by five per cent in early-morning trading on the New York Stock Exchange following the release, dropping to $7.25.