Aug. 29, 2003. 03:00 PM
DBRS cautiously optimistic on Nortel's future
CANADIAN PRESS
The massive downsizing completed by Nortel Networks last year has eased concerns about its cash resources but the outlook for future revenues remains uncertain, Dominion Bond Rating Services said today.
The debt-rating service confirmed Nortel's long-term ratings at B-high, which is below investment grade, but with a negative trend.
Nortel's revenues remain under pressure due to excess network capacity, much lower capital spending by its customers, slower shifts to new technologies and intense competition, the rating agency said.
"With any growth still a year or so away, Nortel will need to operate on a break-even basis until conditions improve. This will mean maintaining quarterly revenue near $2.4 billion U.S., with gross margins over 40 per cent," Dominion Bond said in its release.
In the meantime, with the 60,000 jobs cut since 2001, Nortel is better able to limit operating expenses "and, as a result, any liquidity issues from ongoing operations should remain a secondary concern over the near term," DBRS said.
It noted Nortel had $4.2 billion cash on hand at the end of the second quarter, and $750 million in bank lines of credit.
But the rating agency added that if there is "no evidence of a turnaround next year, further consolidation could take place during 2004 to further rationalize production and reduce competition."
Nortel stock (TSX: NT) traded today at $4.55, down two cents, on the Toronto Stock Exchange. |
