CRAMER ON NORTEL
Dear Action Alerts PLUS Subscriber,
Every once in a while, a company attempts to commit
financial suicide. That's what's happening now with Nortel
(NT:NYSE). I am long it and I will keep buying it, but I
have to admit that I don't think I can recall a suicide
attempt this outrageous and awful. Put simply, could Nortel
have done anything worse to its shareholder base than
remain stunningly silent? Could there be anything worse
still out there?
Curiously, it is that bit of extremism that has lured me
into buying the stock. The news backdrop is the without a
doubt the worst I have ever seen, including Enron and
WorldCom. The total lack of communication about anything,
from financials to leadership, is astonishing. The vacuum
has allowed every cockamamie theory to take root, from the
possibility that it is out of cash to the probability that
it will never recover. There are people out there saying
that this company has no business whatsoever and actually
lost money last year. There are other people who think that
this company's whole turn was completely bogus. There are
still others out there who think that the company is simply
going to file for bankruptcy and make it so the common
stock is wiped out.
That rush to sell has made it so there is no bottom to the
stock. I can't blame anyone for not selling the darned
thing. The management -- whoever it is -- simply is
encouraging you to sell. The auditors are disgracefully as
silent as the board. I simply don't think that this could
be handled worse than it has been.
But what if this is what is happening: The company actually
is trying to make a clean breast of things, perhaps to sell
or to make sure that there will never be another accounting
altercation again. What if what's going on is that the
board knew that the previous management would be indicted
under Sarbanes-Oxley and rather than have to go through the
painful process of having the CEO be put on trial, it moved
with alacrity to get the issue behind it?
At this point, the reason you would sell Nortel is because
you know it is going bankrupt. That's hard for me to
believe, given its cash position and its business. Could I
be wrong? Absolutely.
But sometimes "ugly" gets in a stock and "too ugly" gets in
a stock. We've passed the "ugly" stage; I think we are in
the "too ugly" stage. Which is why, tomorrow, when I am
free to buy Nortel, I will do so, barring some further
astonishing piece of information coming out tonight that
reveals there is no cash in the bank.
Regards,
James J. Cramer
DISCLOSURE: At the time of publication, Cramer was long
Nortel.
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