UBS Disappointed by Nortel’s margins

While Nortel surpassed UBS Securities’ third-quarter revenue forecasts due to strength in the telecom equipment maker’s CDMA and enterprise units, the investment firm was disappointed by the 38% gross margins vs. 39% a year earlier. In a research report, UBS also said Nortel slightly reduced its 2006 to mid-high single digit revenue growth with gross margins of 38% to 39%. This compares with high-single digit revenue growth and gross margins of 40%. UBS said the lower margins are due to "an increasingly price competitive environment and  an evolving product mix towards lower mgn next-generation products appear to be impacting margins". UBS doubts Nortel can reach its goal of double-digit operating margins by 2008 due to a "tough competitive environment" and Nortel’s lack of participation in the industry’s consolidation.

One Response to “UBS Disappointed by Nortel’s margins”

  1. Observer Says:

    Things arn’t getting better since this was written a year ago:

    “In wireless, Nortel has been losing share in every major network technology for two to three years,” Sagawa notes. Although Nortel’s wireless revenues are similar to those of Lucent, which has focused on CDMA, Sagawa argues that Lucent has a superior cost structure because it dominates a single market niche and resources are not spread across so many different areas.”

    They sold UMTS to Alcatel who has now merged with Lucent.

    They kept CDMA though to go head to head with Noika, Ericcson, Seimens etc… and of course noe monster Alcatel who bought Lucent.

    are they winning anywhere?

    well… If they want any GSM traction they better start speaking with their last dance partner Motorola unless they wouldn’t marry them if they were the last company on earth due to previous embarassing dealings =)

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