Archive for March, 2007

Analyst Update

March 25, 2007

Here’s some recent activity by financial analysts:

– Robert W. Baird lowered its 2007 revenue estimate to $11.2-billion from $11.5-million, while raising its EPS target to 75 cents from 74 cents. For 2008, Baird is looking for revenue of $11.6-billion and EPS of $2, compared with an earlier estimate of $11.7-billion and $2.11 respectively.  Meanwhile, RBC Capital Markets lowered its 2007 EPS estimate 44 cents from 47 cents on flat guidance; CIBC World Markets lowered its 2007 estimate to EPS of 72 cents on revenue of $11.4-billion from $1 on $12.4-billion; and Prudential Equity Group lowered its 2007 estimates to 17 cents from 45 cents and its 2008 estimates to $1.23 from $1.54.

Merrill Lowers Revenue, EPS Targets

March 7, 2007

After meeting with CEO Mike Zafirovski recently, Merrill Lynch analyst Vivek Arya decided to lower his 2007 revenue estimate to $11.48-billion from $11.78-billion amid concerns the company will see a 12% to 15% decline in wireless sales, which accounted for 44% of overall sales in 2006. Arya also reduced his 2007 EPS target to 68 cents from 74 cents (compared with the average estimate of 75 cents), and his 2008 EPS forecast has been dropped to $1.48 from $1.55.

The Nortel PR Machine Strikes Again

March 6, 2007

Obviously putting aside the recent restatement and the surprising departure of its CFO, CRN Australia has a glowing story on Nortel called “Is this Nortel’s Year?” that puts the spotlight on the fine folks within Nortel’s media relations group. According to the article, CEO Mike Zafirovski is doing a great job, Nortel’s enterprise efforts are starting to gain momentum and its channel partners are getting more enthusiastic. Of course, this may be all true but the rule about Nortel that everyone should have learned in recent years is you need to throttle back your enthusiasm just in case.

Nortel-LG Unveil Set-Top Box

March 5, 2007

Nortel unveiled another part of its IP-TV strategy with the launch of a set-top box for carriers looking to offer television services to consumers. The box, which will be built by Nortel’s LG-Nortel joint venture, could put an end to speculation that Nortel is looking to make an acquisition to get into the business, which includes rival such as Cisco and Motoroal. Nortel has been using Cambridge, U.K.-based Amino Communications as a set-top box partner. Consultant Rob Enderle told LightReading that Nortel could established a foothold in the set-top box business by making it work extremely well with other Nortel gear used by carriers – thereby making it difficult for rivals to get into the market. “You only have a few companies in each geography that can sell products of this class, so you could have a chance to lock someone out,” Enderle says.

Thanks, Duncan!

March 2, 2007

Duncan Stewart was kind enough to cite my blog within a column he wrote for the National Post on different ways for retail investors to get information these days. After mentioning newspapers and Web sites such as Seeking Alpha, he talked about blogs – and highlighted how my posts on Joel Hackney were way ahead of the mainstream media.
Update: I also got mentioned – and quoted – in the News Observer today.

Hackney Story Finally Picked Up in Canada

March 1, 2007

It took almost a week but the Canadian media has finally picked up on the Joel Hackney parking lot rage story. The Ottawa Citizen has a story on the front of today’s business section. Unfortunately, it’s behind a walled garden but it describes Hackney as one of the company’s management “stars”. According to Nortel spokeswoman Ann Fuller, the company “conducted a comprehensive review and determined it was an isolated incident”.
Update: For more about Hackney, the News Observer did a profile on him last June.

Zafirovski’s E-mail About Hackney

March 1, 2007

This is an internal e-mail that Mike Zafirovski issued about the Hackney “incident”.

“All of us at Nortel have an obligation to act with personal and professional integrity. These behaviors are the hallmarks of great leaders and great companies. I place as high a value on integrity and ethics as I do our goals of driving superior performance and business results.

As many of you know, there has been great concern recently because of an incident involving one of our co-workers and a leader, Joel Hackney. Given the nature of this incident I want to personally restate our commitment to ethics and integrity and share the action we have taken.

Last October, following a basketball game that he attended with his wife and children, Joel was involved in an incident that resulted in him entering into a consent agreement, which means he is required to complete certain actions by May 2007 before the charges will be completely dismissed.

Nortel takes this incident very seriously and, for the last six days, Chief Compliance Officer Bob Bartzokas has led a rigorous review involving numerous external and internal interviews (the internal interviews were with employees in and outside of Joel’s organization). This process was comprehensive in nature and I want to assure you that we took full account of all the employee input and response we’ve received regarding the incident.

Bob and the Compliance Committee completed their review and concluded the October incident was isolated. The Committee recommended certain appropriate actions and advised the board of directors of its findings and recommendations. The specific details of the actions will remain private, as they would for any Nortel employee.

Joel deeply regrets this incident and the impact it is having on everyone concerned. Knowing my intent to update you today, he asked me to share the following statement:

“I want you to know that I am taking full responsibility for the consequences of my actions. I have also communicated my personal apology to Ms. Ogden. I know this incident has caused embarrassment for my family, my employer and my co-workers. I am truly sorry.”

Joel is a leader with an important mandate who will need to continue to challenge his team to perform at world-class levels while exemplifying our leadership and core values. His track record includes very strong results and his leadership capability has been validated by employee assessments (as recent as December 2006), which included feedback from all of his direct reports. That said, I know Joel is taking this incident very seriously and will use it to work to become an even better leader.

I am absolutely confident of Joel’s ability to execute our business objectives, and he has given me his full assurance that he will hold to the highest ethical and professional standards expected of a Nortel leader.

Mike Z

Yet Another Restatement?

March 1, 2007

You had to know it was only a matter of time before Nortel restated its results again, right? Nortel and its principle operating unit, Nortel Networks Ltd., will restate their financial results for 2004, 2005 and the first nine months of 2006, and will make adjustments to periods prior to 2004. So, what’s up? Apparently, it has to do with third-party errors related to employee benefit plans and – surprise, surprise – timing errors on the recognition of revenue.

“This restatement has no material impact to our fourth quarter 2006 operating expectations or performance, ” said CFO Peter Currie, who’s leaving the company next month after abruptly announcing his resignation a few weeks ago. “During 2006, we have implemented significant remedial measures and other actions to address our internal control weaknesses. This has resulted in a substantial reduction of control weaknesses as at year end and represents a major milestone in our journey toward consistent, reliable and timely financial reporting.”

While the restatement is relatively minor, it’s certainly not a positive sign for a company that appeared to be gaining its footing again and more confidence from investors. Nortel said it expects revisions to its previously reported 2006 nine month results that will boost revenues and improvements in net earnings by about $24 million and $15 million, respectively. Its 2005 results will decline by $28-milion while losses will climb by $87-million. Revenue in 2004 will rise by $33-million while the net loss will increase by $42-million.