Nortel’s Ambitious Financial Targets

The financial guidance that came out of Nortel’s annual investor conference yesterday is the following: 13% operating margins, 43% gross margins, 10%+ revenue growth, and $1.5-billion+ in operating margin expansion by 2008. UBS Securities believes double-digit operating margins will be a challenge given the "touch competitive environment and Nortle’s absence in the consolidation wave". UBS said, however, it is "comforted by some examples of the progress the company is making towards its profitability goals and by the optimism and confidence exuded by the management team". UBS has a neutral rating on Nortel with a price target of $2.35. For more, check out the Globe and Mail, which has a story on Nortel’s strategy to boost margins. Tags: ,

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3 Responses to “Nortel’s Ambitious Financial Targets”

  1. Observer Says:

    Margins Nortel calls “stable” now have declined, not increased, citing comeptitive pressures.

    How can they be stable if they are hoping to better them in a market of consolidating peers and customers while increasing overhead through bonds.

    The clock is ticking and things arn’t turning around are they? Quite the contrary it seems.

  2. McGregor Says:

    $2.35?! is he serious

    I thought he was an analyst

    Is he aware there is a reverse split in December?

    They will be lucky to be around in a few years at this rate!

  3. Ryan Says:

    I think ‘ambitious’ is a gross understatement of what Nortel hopes to achieve. The company cites that there are pricing pressures and higher competition for market share, something that clearly was a problem for them this past quarter. Yet manages to keep a straight face while telling investors that the company will magically pull a 43% gross margin and high single digit growth. I don’t see this happening–ever. Nortel is unfortunately putting itself in a position of not keeping up with sector trends by avoiding a merger of any sort. How does it plan on competing effectively with companies that it currently cannot compete with, once these companies become one and become more efficient? I certainly don’t know, but at least I’m thinking about. Something I feel should be brought up at a board meeting one day to make the executives aware of it too. What worries me even more is that they are aware of it and just ignorant of the fact. I think what we have here is an overly ambitious group of executives with overly ambitious goals. Unforunately they have no means to make their fantasies a reality.

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