No Joy for Nortel: Fool by Numbers

On March 16, communications infrastructure specialist Nortel Networks (NYSE: NT  ) released full-year earnings for the 2006 fiscal year, a period ended Dec. 31.

• Legal costs and benefits, along with restructuring charges, added to up $114 million this year and a whopping $2.6 billion in 2005. Back out these one-time costs, and the tables are turned -- last year's $0.08 profits per share turned into this year's $0.20 loss.
• I'd respect the increased cash position more if it wasn't matched by a larger debt load.
• Nearly 9% higher sales sounds great, until you glance at what the competition is doing. LM Ericsson (Nasdaq: ERIC  ) grows trailing revenues at a 17% clip; Nokia (NYSE: NOK  ) musters 20%; archrival Cisco Systems (Nasdaq: CSCO  ) presents a 23% top-line growth rate; and JDS Uniphase (Nasdaq: JDSU  ) came up with a 45% year-over-year sales increase.
• If this sounds negative, you should check out the company's Motley Fool CAPS page, where it has earned our lowest rating of one star. Too harsh? Get a 100% free CAPS account and chime in with your own analysis today.

(Figures in millions, except per-share data)

Income Statement Highlights

	FY 2006	FY 2005	Change
Sales	$11,418	$10,509	8.6%
Net Profit	$28.0	($2,610)	N/A
EPS	$0.06	($6.02)	N/A
Diluted Shares	434.0	433.8	0.0%

Get back to basics with the income statement.

Margin Checkup

	FY 2006	FY 2005	Change*
Gross Margin	38.9%	40.7%	(1.8)
Operating Margin	2.4%	(26.0%)	28.4
Net Margin	0.3%	(24.8%)	25.1

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	FY 2006	FY 2005	Change
Cash + ST Invest.	$3,492	$2,951	18.3%
Accounts Rec.	$2,785	$2,826	(1.5%)
Inventory	$1,989	$2,080	(4.4%)

Liabilities	FY 2006	FY 2005	Change
Accounts Payable	$1,125	$1,181	(4.7%)
Long-Term Debt	$4,464	$3,885	14.9%

The balance sheet reflects the company's health.

Cash Flow Highlights

	FY 2006	FY 2005	Change
Cash From Ops.	$237	($179)	N/A
Capital Expenditures	$173	$248	(30.2%)
Free Cash Flow	$64	($427)	N/A
Owner Earnings	($74)	($657)	88.7%

Free cash flow is a Fool's best friend.

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.