AT&T-BellSouth Deal Bad News For Nortel, Lucent

In the wake of AT&T’s plan to acquire BellSouth for $65-billion, Standard & Poor’s has downgraded Nortel Networks and Lucent Technologies to “sell” from “hold”. In a research note, S&P analyst Kenneth Leon said “besides the continued trends of carrier consolidation around the globe, we see convergence and competition to new IP-based solutions called IMS leading to price pressure and lower margins.” He believes Nortel and Lucent are the most exposed to these trends because they have a high sales mix from fixed-line and wireless carriers. Lucent is the largest equipment supplier for AT&T and BellSouth. Leon lowered his target price for Nortel and Lucent to $2.50 from $3 and $3.50 respectively.
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