Nortel Network Corporation released its second quarter earnings report for 2006, highlighting a net profit thanks to a litigation victory.

The Toronto-based telecommunications equipment company reported a second-quarter net profit of US$366 million compared to a loss of $33 million a year ago. The earnings were $0.08 per share for this quarter. Revenues increased 5 percent to $2.74 billion from $2.62 billion.

"Our second-quarter performance underscores both the challenges and good progress we are making with Nortel's transformation,' stated CEO Mike Zafirovski.

The firm's revenue for mobility and converged core networks division - which includes wireless equipment - grew 7 percent to $1.59 billion. This was the only unit recording growth for the year.

The growth was part of a bigger trend towards customers signing up for broadband services. The total number of home broadband users grew 30 percent to 102.5 million by May of 2006 from 78.6 million at the same time last year, according to Nielsen NetRatings.

The turnaround from a net loss last year was attributed to a victory in court. The gains were from a shareholder litigation recovery of $510 million.

"We remain intensely focused on delivering improved financial performance and there's solid traction on significant business transformation initiatives including ... our strategic alliance with Microsoft,' said the CEO.

Nortel and Microsoft announced a strategic alliance to work together at the technology, marketing and business levels.

Microsoft