Nippon Telegraph & Telephone Corp. (NTT) declared second quarter fiscal 2010 (ending March 31, 2011) financial results that were better than the company’s revised guidance. On a GAAP basis, net income in the reported quarter was approximately $1,911.6 million, up 11.6% year over year. Quarterly ADS was a little over 72 cents, up 11.6% year over year. Quarterly total revenue of $30,002 million grew 0.2% year over year. This was primarily due to a massive growth of IP/Packet communications services.
Quarterly operating expense was more than $25,354 million, down 2.8% year over year. Operating income in the reported quarter was approximately $4,647.7 million, up 20.7% year over year. Operating margin was 15.5% compared to 12.9% in the prior-year quarter. This was mainly due to huge reduction in cost of equipment sold, selling, general and administrative costs and depreciation & amortization charges.
In the first half of fiscal 2010, Nippon generated approximately $16,278 million of cash from operations, up 9.2% year over year. Free cash flow (cash flow from operations less capital expenditures), in the same period was $7,319 million, up 18.4% year over year.
At the end of the second quarter of fiscal 2010, Nippon had approximately $19,962 million of cash & marketable securities on its balance sheet compared to around $17,202 million at the end of fiscal 2009. Total debt was around $51,826 million at the end of the same quarter compared to $48,206 million at the end of fiscal 2009. At the end of the reported quarter, debt-to-capitalization ratio was 0.25 compared to 0.26 at the end of fiscal 2009.
Segment Results
In the quarter under review, Fixed voice revenue was $6,568.1 million, down 8.1% year over year. Mobile voice revenue was $6,285.8 million, down 3.8% year over year. IP/Packet Communications services revenue was $9,982 million, up 7.4% year over year. Sale of telecommunications equipment was $1,390 million, down 12.2% year over year. System Integration revenue was $3,572.1 million, up 5.1% year over year. Other segment generated the rest $2,204 million, up 11% year over year.
Future Financial Outlook
For full fiscal 2010, management is expecting total revenue to be approximately $121,680 million. Operating expenses will be around $97,686 million. Operating income will be around $14,160 million and net income will be approximately $6,000 million.
Recommendation
Currently Nippon is a short-term Zacks Rank #1 (Strong Buy) Stock. We maintain our long-term Outperform for the company.
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