Merrill Lynch just re-initiated coverage of Nortel but you have to wonder why they bothered. Analyst Tal Liani gives Nortel a “neutral” rating, citing “market share losses, risks related to investor lawsuits and possible significant share dilution” as the company refinances $1.5-billion of debt. That said, Liani thinks Nortel could outperform Lucent (kind of like saying the New York Jets could outperform the San Francisco 49ers!) because it’s margins are climbing at a better clip and have more room for improvement; it’s cheaper at a 18x 2006 PE mutiple compared with Lucent’s 26x; and it has less exposed to the decline in wireless equipment spending.
Merrill So-So on Nortel