Canadian telecom equipment maker Nortel Networks Corp. said Monday that fourth-quarter earnings declined by 75 percent from a year ago, but the results beat Wall Street expectations and the company forecast improved revenue in 2005.

Net income dropped to $133 million (€103.4 million), or 3 cents per share, for the three months ended Dec. 31 from $528 million (€410.5 million), or 12 cents per share, a year earlier. The latest quarter included income of $37 million (€28.8 million) from discontinued operations, restructuring charges of $81 million (€63 million) and a $134 million (€104 million) gain related to customer financing recovery and settlements.

Revenue fell to $2.62 billion (€2.04 billion) from $3.27 billion (€2.54 billion) in the fourth quarter of 2003.

Analysts surveyed by Thomson Financial were expecting profit of 2 cents per share on sales of $2.51 billion (€1.95 billion) in the latest period.

Gross margins improved to 45 percent of sales, above forecasts of 40 percent to 44 percent.

For the full year 2005, Nortel said it expects revenue to increase year-over-year and gross margins to be in the range of 40 to 44 percent of revenue.

For the first quarter of 2005, Nortel forecasts modest year-over-year revenue growth, and said gross margins are expected to be in the range of full-year guidance. Operating expenses are projected to increase slightly compared with the first quarter of 2004, and the company forecasts an ending cash balance of about $3.5 billion (€2.7 billion).

Nortel has been struggling to recover from accounting irregularities, which necessitated numerous restatements and the firing of several executives, as well as regulatory and criminal investigations.

Nortel shares fell a penny to $2.48 in morning trading on the New York Stock Exchange, near the low end of their 52-week range of $2.45 to $5.90.