Dim Outlook for NT Shares

CBC.com did an investment feature on Nortel, focusing on who’s trading the stock (mostly retail investors, it appears) and the stock’s outlook. The most bearish comments came from Ross Healy, president and CEO with Strategic Analysis Corp. and a long-time Nortel watcher. Healy suggests Nortel’s fair market value is $1.33 a share and he describes the company as a “catastrophe in waiting”. “I look at the long, long, long-term trading pattern of Nortel for the past three decades, and if I had to make guess as to where the stock might bottom in a bearish market I would say that it could double-bottom at its 2002 low,” he said. Healy may be right but Nortel’s troubles (or, conversely, its prospects) may hinge more on market conditions and the state of the company’s technology portfolio, which has been hampered by the company’s accounting woes in recent years, than the current management team. In conversations with many of the senior executive that CEO Mike Zafirovski has recruited over the past year, the common theme is optimism and sincerity. People such as George Riedel and Dietmar Wendt really want to see Nortel do well for all the right reasons. Granted, they probably have sweet incentive packages that will reward them for success but investors may not care too much if Nortel can regain some of its momentum. Of course, Zafirovski and his management team have many, many challenges to overcome. In particular, they still need to figure out where the company is focused strategically. There’s a lot of talk about Wi-Max, 4G and IP-TV but few people look at Nortel as a market leader in any of those areas.  Truth be told, 2007 looks to be a make or break year for Nortel given investors – and customers – are looking for strategic execution now that most of the corporate baggage (accounting scandal, class-action lawsuits, etc.) has been addressed. Update: In the name of fairness, Scotia Scotia has a $2.80 12-month target price for Nortel

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10 Responses to “Dim Outlook for NT Shares”

  1. Alain Says:

    Ross Healy is a long term basher of Nortel. I’ve seen him talk against Nortel several times on the guest segment of Business Newsworld since the late 1990s. Obviously this man will carry a bias in whatever he says.

    Alain

  2. Alain Says:

    Ross Healy is a long term basher of Nortel. I’ve seen him talk against Nortel several times on the guest segment of Business Newsworld since the late 1990s. Obviously this man will carry a bias in whatever he says.

    Alain

  3. Anonymous Says:

    For a little balance, in the same article, Scotia Capital is referenced as calling a $2.80 12 month price target. So what we have is around a $1.50 spread from high to low from the 2 sources mentioned.

    If you were to review the Analyst Information section within Nasdaq.com it also has some interesting information. 35 Analysts have rated Nortel with the results being:

    Strong Buy – 1
    Buy – 8
    Hold – 25
    Underperform – 0
    Sell – 1

    What is really interesting is that Strategic Analysis is not mentioned in that group of 35 analysts.

    Who knows what will happen with Nortel over the next while. As a Canadian company, I personally want to see them survive and prosper.

  4. Luke Says:

    I’ve been in Nortel for years, I know how smart and strong they are. The first tought that came up in my mind when Frank Dunn came in as CEO was: “that guy has nothing to do with Nortel! Why is he here? What’s his plan?”. When Frank Dunn came in, that’s when I left. He was playing his own personal game, abusing Nortel’s name and image.
    Nortel shaped the history of telecommunications, no dubt it will do it again. But of course, whoever is powerful is also hated.

  5. Mary Says:

    It would be impossible for European company to do restructuring without government permission.
    Nortel is free to do whatever they want to.
    They have already lost 70 000 jobs in restructuring without Plan!
    Now Mike fires whoever he wants to, sells assets, and does restructuring without Plan!
    What planet are you from, I would ask Canadians?
    Why Mr. A. and company B is making fun off of OSC?
    Are you Canadians with Americans or against in North American stock market?
    It looks like many different levels of Canadian/ Ontario/Quebec Gov can not agree for anything constructive.
    Protecting frauds is not the way to prosper or is it in Canada?
    Why shareholders must be the victims of accounting frauds and those who cheat and defraud live in their multimillion doll mansions?
    Selling below costs is not the way to trade or is it?
    $327 mill loss on $340 mill of deal_revenue?!
    What about fair competition?
    /Just my rhetoric, as I know some answers, I’m not so naive as it looks like/

  6. 18 years (so far) Says:

    Mary

    Frank Dunn and others must be hald accountable for their actions. If you have followed the other threads on this WordPress page, you would get an insite into the loopholes that Frank Dunn is attempting to use. The next couple of months will show if he is successful or not.

    Inside Nortel, there is optimism, perimism, burnt-out and fresh new hires – every combination you see in most companies. We see the contracts and sales that we win every day. We see the differences in how Nortel bends over backwards to win contracts and keep customers in a very different fashion that competitors such as Cisco. But we are a fat company – and Mike Z and his team have us on quite the diet I can assure you.

    I look forward to the Q3 and Q4 reports, as the effects of the “dieting” should be visible.

    18

  7. Observer Says:

    “We see the differences in how Nortel bends over backwards to win contracts and keep customers in a very different fashion that competitors such as Cisco. But we are a fat company – and Mike Z and his team have us on quite the diet I can assure you.

    I look forward to the Q3 and Q4 reports, as the effects of the “dieting” should be visible.”

    Just what contracts are you refering to? And how can you assure us?

    Revenues from BSNL and exhaused asset sales to restorting to selling parts of the business still lose more every year even after printing so much Nortel paper…

    We see what their business is.

    Any perks from these numbers to me would indicate money moved forward or unreliable like Q205 revised sales/profits.

    Where is the money from their initial $3.5B in revisions and their initially downplayed 1.5B in revisions that almost doubled… totalling a whopping $5 billion? Do you see operations increasing earnings?

    May I suggest if anything, it will not be the effects of dieting but rather ongoing finangling, again if anything and we see what their business is.

    Their last good order was BSNL as they cut product while others merge. Just what contracts are you refereing to, all I hear is years out hype like Neptune or putian with this WiMAx/4F/IPTV…

    May I suggest they are not dieting but starving to zero directionless.

  8. 18 years (so far) Says:

    The contracts and sales that I am refering to are not the large headline grabbing sales that are fulfilled a year later, but the real day-to-day orders/upgrades/new sales that we work on. Daily we are in competion with Cisco and Avaya in the enterprise space, and we hold our own very well with the bread and feature depth of Nortel products.

    As for the starving to directionless…I cannot disagree that over the past 2 years a direction has been lacking. Mike Z has shaken up the executive team and direction is pretty darn clear. Goals are clear. Priorities are clear. Data is being used to make decisions where emotion and gut-feel would previously by the norm.

    Again – optomistic….but I am also realistic and cannot expect things to swing positive overnight.

  9. Observer Says:

    But Nortel needs large orders like $19B BT. Nortel has not bottomed out yet, still cutting jobs, even products, and now business after exhausting assets, as peers grow or merge bracing for the future Nortel directionlessly seeks with the least efficient R&D they boasted cutting for so long. Low return acquisitions do little too.

    Nortel is cash strapped with an unacceptible time frame and unacceptable or reliable numbers.

    Turn around was lie for bonuses they keep that plagues the company with billions in paper liabilities.

    Reducing liability through revisions at the cost of a lower stock value which
    shows profit is like their greatest asset being a tax credit, a double edged sword.

    Lets see what the CEO’s shared optimistism for Q3/Q4 brings.

    Nortel has proverbially expressed optimism without improvement.

    I fear 2007 is the “do or die” year where their long term may be constrained depending on short term performance given 2008 debt issues and business decline.

    Lets hope that they can at least salvage staff and areas that are at least viable, worst case, should they have to restructure under protection in this trend.

    Thanks for the civil response, I hope you optimism proves true and I wish I could agree. Lets hope they get 3 to 5 years as a last chance too…

  10. Jerry Says:

    Update: In the name of fairness, Scotia Scotia has a $2.80 12-month target price for Nortel
    =======
    re
    Did Nortel call you again?
    It’s pathetic!
    I remember Nortel has called you before to ask you to be more optimistic about the stock and the stock was around $5 at that time!
    You were right then and you are wrong making noise about $2.80 targets now
    I remember JNPR charged some posters on a message board and look at JNPR today!
    These posters were right posting negative things about JNPR as they posted the rumored facts. JNPR is 50% lower now!
    Can we post critics about stocks when in fact 3 years chart shows pps declining year after year and fundamentals are bad and not reliable at all!?

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