Nortel Networks Corp. stock lost more than 10 per cent of its value Tuesday as investors were disappointed by company talk of pricing pressures and lower margins.

Nortel shares fell 28 cents to close at $2.42 on the TSX. 

Early Tuesday, the company reported a smaller third-quarter loss thanks to some one-time gains and higher revenue.

The telecommunications company lost $99 million US (two cents a share) in the most recent quarter, compared with a loss of $136 million US (three cents a share) a year earlier.

Analysts had been forecasting that Nortel would post an adjusted profit of one cent a share.

Third-quarter revenue came in at a better-than-expected $2.96 billion US, up 17 per cent year over year. But the company's revenue forecasts fell slightly short of analysts' estimates.

Reverse stock split coming

Nortel also announced it would consolidate its shares on a one-for-10 basis by Dec. 1. That would boost Nortel's share price to about $24, based on Tuesday's closing. The number of shares outstanding would drop from about 4.34 billion to 434 million.

"True shareholder value will be driven by ongoing progress and company performance, but this step helps create a better foundation on which to build," Peter Currie, Nortel's executive vice-president and chief financial officer, said in a statement.

Despite the Q3 revenue growth, the company's chief executive officer sounded a cautious note.

"Pricing pressures and the speed at which our revenues are shifting to next-generation, early-cycle products is increasing our challenge to drive profitability improvements," said Mike Zafirovski.

Currie said fourth-quarter revenue growth is expected to be in the mid- to high-single digits compared to the fourth quarter of 2005.