Q4 Looks Good

While cutting 2,900 jobs is far from positive news, Nortel also announced preliminary fourth-quarter results that surpassed the expectations of UBS Securities. Nortel said revenue will be $3.26-billion while gross margins will be about 40% – ahead of the $3.1-billion and 38.5% expected by UBS. In a research note, UBS analyst Robert Dennison said strength in CDMA and LG-Nortel joint venture likely accounted for the higher than expected sales in Q4. He said Nortel’s CDMA high-margin CDMA business likely helped gross margins.

Dennison is raising his 2007/2008E EPS estimates to $1.00/$1.86 from $0.66/$1.50 while increasing his stock target price to $28 from $26. “We expect near-term momentum in NT’s stock on the back of CDMA strength and ongoing cost reductions,” he said. “We remain concerned though on the outlook for 2008 when we expect high-margin CDMA revenues to decline substantially. We estimate CDMA contributed 80-90% of overall company EBT in 06.”

Update: The flurry of news over the past 24 hours (CFO Peter Currie’s resignation, the layoffs, the preliminary Q4 rsults) helped All Nortel, All the Time generate record traffic today (2,700 pageviews).

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5 Responses to “Q4 Looks Good”

  1. jayemmay Says:

    Mr Dennison’s guestimates for target stock price appear ridiculous to me. Isn’t a target supposed to be a guess as to what the price will be some months in the future. He forecasts a target of $28 and lo and behold that is the price today.

    More important than his forecast is the reaction of the market to the early unofficial announcement of the fourth quarter figures. The price leaped up 9% and the volume was 4 times average volume. And the day before the price dropped sharply when the announcement was made of Currie’s departure.

    Irrationality does prevail on the stock market in the short term.

  2. the harlequin Says:

    Heh! I’m already a casualty – and the drive started DAYS ago! But this news kind of makes it legitimate – and official! No need to hem and haw anymore!

  3. Nortel employee Says:

    Mark – as a Nortel employee who regularly reads your blog, I find your update crass and offensive even if it was meant as tongue in cheek.

    I would ask you to consider removing it (or at least re-wording it) before it causes offence to other hard working employees trying their best to move the company forward.

    You may find pleasure in the company having to sack people and end their livelihoods at a great institution; as a people manager it is one of the hardest and saddest things to have to to.

  4. Mark Evans Says:

    Nortel Employee,
    A fair comment. My apologies. It certainly wasn’t intended to be seen as disrespectful

    Mark

  5. Nortel employee Says:

    Thank-you (for revising the wording of the update)…

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