Hang On, Nortel
RELATED SYMBOLS: (NT)
Mar 29, 2001 (Communications Today/Phillips Publishing via COMTEX) -- Nortel
Networks [NT] executives probably felt like they were riding the new "Hypersonic
XLC" ride at Paramount King's Dominion amusement park in Virginia. The company's
stock took a vertical dive Wednesday, losing 16.5 percent of its value before
the brakes were applied at $14 per share.
Almost 32.5 million Nortel shares were traded on the New York Stock Exchange
after the Canadian telecom equipment giant said it would miss revenue targets
for the first quarter and would slash another 5,000 employees on top of 10,000
cuts announced last month. Nortel said it would fall short of first- quarter
revenue projections by $100 million to $200 million and would post losses of
between 10 cents and 20 cents per share, compared to a previous loss estimate of
4 cents per share.
John Roth, Nortel president and CEO, blamed the company's problems on the
"economic slowdown in the United States," as well as an increasingly sluggish
global telecom marketplace. "Reduced and/or deferred capital spending and
increased pricing pressures are resulting in lower overall revenues," he added.
Analysts' notes followed fast and furious. Ken Leon of ABN-AMRO said in a
"flashnote" that investing in Nortel would be a "leap of faith" at this point.
He lowered estimates for the company's 2001 earnings per share and revenues, but
kept a "hold" rating for Nortel's stock.
Merrill Lynch's Tom Astle was not so kind. He downgraded Nortel's stock to
"neutral" from a previous "accumulate." He wrote in an investor's note that
Nortel was in "product transition dead zone."
Goldman Sachs, Lehman Brothers and J.P. Morgan also lowered their earnings and
revenue estimates for Nortel.
By Fred Donovan, fdonovan@pbimedia.com
Communications Today, Vol. 7, No. 59
Copyright Phillips Publishing, Inc.
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