May 2 (Bloomberg) -- Nortel Networks Corp., North America's biggest maker of telephone equipment, reported a wider first- quarter loss on expenses for job cuts. The shares fell 2.3 percent in Toronto trading.

The net loss expanded to $138 million, or 28 cents a share, from $103 million, or 23 cents, a year earlier, the Toronto-based company said today in a statement. Revenue rose 11 percent to $2.76 billion after the company completed a joint-venture contract with LG Electronics Inc.

Costs to cut jobs rose 10 percent to $88 million. Chief Executive Officer Mike Zafirovski is eliminating 2,100 positions and moving another 1,000 to lower-cost locations in a bid to reduce operating expenses. Nortel and larger rival Alcatel-Lucent SA have lost more than half their market value in the past year as demand for older wireless and Internet-access gear wanes.

``We see the operating environment becoming more challenging amid a weakening macroeconomic climate,'' Standard & Poor's analyst Ari Bensinger of New York said today in a report. He now expects the stock to reach $10 in the next 12 months, down from a previous target of $12, and advises holding on to the shares.

Nortel, founded in 1895 to make telephones for Bell Canada's forerunner, declined 20 cents to C$8.67 at 4 p.m. on the Toronto Stock Exchange. The shares have fallen 42 percent this year.

Analysts' Estimates

Excluding the reorganization costs and other expenses, the loss was about 7 cents a share. Analysts in a Bloomberg survey predicted, on average, a loss of 12 cents on $2.51 billion in sales. Currency fluctuations trimmed profit by $19 million. The company also recorded a $12 million expense to settle patent litigation.

Sales in Nortel's carrier networks unit rose 21 percent to $1.22 billion, boosted by deferred revenue from the 2005 venture between Nortel and LG. The carrier unit accounts for more than 40 percent of sales.

The contract, worth $266 million, was to provide wireless equipment and services to Korea Telecom, according to Nortel Chief Financial Officer Pavi Binning. Nortel received acceptance for the contract a quarter earlier than expected, allowing it to report the revenue.

``If you strip out the impact of the contract, we were still in line with last year, which was a very strong quarter,'' Binning said.

`A Huge Portion'

``The deferred revenue event appears to have contributed a huge portion of earnings,'' said analyst Ehud Gelblum of JP Morgan Securities Inc. in New York. He put the figure at about 60 percent of Nortel's operating income. ``The deferred revenues recognized were highly and unusually profitable.''

Nortel reiterated its February forecast that full-year revenue will grow ``in the low single digits'' from 2007, when it was $10.9 billion.

``This quarter's outperformance was all from deferred revenues, indicating we will have to bring down estimates for the rest of the year,'' BMO Capital Markets' Paras Bhargava said in a note to clients. The Toronto-based analyst has a ``market- perform'' rating on the shares and a C$15 price estimate.

(Nortel held a conference call to discuss results. To hear a replay, visit http://www.nortel.com/.)

To contact the reporters on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Vivek Shankar in Washington at vshankar3@bloomberg.net

Last Updated: May 2, 2008 16:16 EDT