Nortel Stock Runs with a Bad Crowd
It's depressing enough when unstable e-commerce bellwethers tank, or
when valuations of two-year-old companies descend from Fortune 500
heights. But when nice, stable, semi-boring sectors like fiber optics
hit the skids, it's like catching the class valedictorian smoking in
the high-school parking lot with the punks.
Wednesday's newcomer to the bad-boy scene was the Canadian
fiber-optics/networking/telecom firm Nortel. It announced
disappointing (but not horrid) third-quarter revenue, and its stock
plunged more than 25 percent. Investors took it out on other
fiber-optic stocks - the ones that had escaped the tech selloff until
now. Many reporters adopted a nervous, end-of-an-era tone. "Is no one
safe?" asked the Wall Street Journal.
Nortel's fall from grace distressed U.S. markets, but that's nothing
compared to the wreckage on the Toronto Stock Exchange, said Canadian
journalists. Nortel comprises 30 percent of the TSE, wrote the
National Post, and Canadians stand to lose "tens of billions of
dollars." But not Toronto-based money manager Brian Acker, who told
the Post his company ditched Nortel two weeks ago. "I'm going to have
a beer tonight," said Acker. Some of his colleagues might prefer
something stronger.
Countless analysts and journos made the same point about Nortel's
downward spiral: Stocks "priced for perfection" get slammed when they
aren't perfect. Or as one trader told the National Post, they get
"taken out and shot." The Globe and Mail's Matthew Ingram begged to
differ. "Analysts have been saying for some time that Nortel's stock
was 'priced for perfection,' but it now seems to have been priced for
something even better than perfection, whatever that is," wrote
Ingram. Revenue and growth were way up, said Ingram, so what's the
problem? A few stalwart bulls agreed that the market overreacted, and
the Canadian Broadcasting Corporation found some particularly upbeat
pundits to defend the company in a piece entitled "Is Nortel still a
buy?"
That depends on how you interpret Nortel's alibi for its declining
optical sales. "The company blamed the slowdown on customers who had
been double-booking orders in anticipation of a shortage in products,"
said the optical networking site LightReading.com. Such stockpiling is
a compliment, said the Globe and Mail. However, LightReading and the
Wall Street Journal said some analysts didn't buy the double-booking
excuse. What's that, Nortel? You were holding that cigarette for a
friend? Two weeks of detention. - Jen Muehlbauer
Optical Networks on the Blink
thestandard.com
Nortel's Warning Makes Fiber Optics Latest Tech Sector to Crash and
Burn
interactive.wsj.com
(Paid subscription required.)
Stocks Tumble as Nortel Disappoints on Sales Gain
nytimes.com
(Registration required.)
Nortel's Fright Night
lightreading.com
Nortel Warning Reveals Risk of Growth Funds' Network Exposure
thestreet.com
Is Nortel Still a Buy?
cbc.ca
Nortel Skids on Sales Fears
nationalpost.com
Nortel Pounded in After-Hours Trading
ottawacitizen.com |
