Nortel Still a “Sell”

Standard & Poor’s analyst Kenneth Leon has maintained a “sell” recommendation on Nortel, suggesting CEO Mike Z.’s cost-cutting program may not be enough to generate higher financial returns. Leon’s decision comes in the wake of the latest saga in Nortel’s recovery efforts as the company’s insurers have agreed to cover pay $228.5 million toward former shareholder class-action lawsuits. Leon said while legal and regulatory risks are still around, he doesn’t believe it affects the company’s ability to operate. Instead, his sell recommendation is “based on the increased buying power of Nortel’s traditional fixed-line and wireless carrier customers, which we think will lead to lower pricing and narrower margins,” he said.

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