Sometimes being seen as a financial basket case can have its advantages.

Take Nortel Networks, for example.

The Canadian-based telecommunications equipment maker has been struggling for so long to get its financial house in order - a process that has included a series of earnings restatements and several rounds of layoffs - that even the smallest piece of good news seems like a ray of blinding sunshine.

That's certainly the reaction Nortel got when it reported its second-quarter financial results last week.

After the company boosted its growth outlook for the second half of the year, its shares took off, climbing 12 per cent in a single day on heavy volume, and several analysts upgraded their forecasts for the networking-gear maker, as well as raising their 12-month price targets.

Investors could be forgiven for thinking the clouds have finally parted for the struggling telecom company, but a single quarter's raised expectations doesn't mean that Nortel is in the clover for good.

It still faces some significant challenges in boosting its market share.

Over the past three years, Nortel has taken so many body blows that it's a wonder the company is even standing at all.

It has had to chop billions of dollars from its book value, close plants and lay off tens of thousands of staff, and it faces securities investigations and lawsuits related to its financial performance under chief executives John Roth and Frank Dunn.

The company only recently returned to filing its quarterly statements on time.

Just when investors thought Nortel was finally emerging from its years of turmoil, the company suffered another blow: A few weeks after hiring two senior executives from Cisco Systems to fill out its management team, its new employees suddenly resigned.

Nortel said only that CEO Bill Owen had differed with his new hires when it came to corporate strategy.

Analysts and investors were less than enthusiastic about this sudden change of direction.

Given that kind of backdrop, Nortel's latest quarter definitely came as a breath of fresh air.

Not only did its sales rise by 10 per cent when analysts had expected a rise of 4 per cent, but its profit also increased - although it still came in at an underwhelming US$45 million ($63 million), or 1c a share.

Helping to propel sales higher was the company's business networks division, which saw its revenue rise by 26 per cent over the previous year, thanks in part to Nortel's acquisition of PEC Solutions earlier this year.