Mike --
I know GTE's gear wasn't NN's. (A word search gives two NN references back in '96.) I know they have a preferred supplier agreement with CSCO, but I'm not sure whose gear was involved in the case of Yahoo and Amazon's failures.
Here's an update from FT on Nortel's botched analyst conference in NYC:
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THURSDAY OCTOBER 1 1998 Telecoms
Nortel suffers aftershocks
Canadian group's shares are down and analysts are considering their positions, write Edward Alden and Scott Morrison
Nortel Networks, the Canadian telecommunications equipment maker, may not have meant to drop a bomb at its New York analysts' meeting on Tuesday. But intentional or not, the dust from the explosion has yet to settle.
According to analysts present, at the end of an upbeat presentation, Wes Scott, chief financial officer, said that Nortel's revenue growth would not meet third-quarter projections. Rather than the 20 per cent or so analysts had been led to expect, growth would be only in the low double-digits.
The comments touched off a wave of selling that pushed the stock down C$7.40 to C$54.30, knocking almost C$4bn, or 12 per cent, off the value of the company before trading was halted at 1pm on Tuesday. The bleeding continued yesterday, with Nortel stock down another C$7.45 to C$46.85 by mid-day trading.
The cryptic warning left analysts shaking their heads and leaves the company with the big task of restoring its reputation with investors.
"It's terrible handling," says one New York analyst. "People are going to use the phrase 'management credibility'. You had immediate uncertainty where nobody knew what to think except to assume the worst."
There is still confusion as to exactly what Nortel anticipates will happen to its revenues, and no Nortel officials returned telephone calls yesterday. But the collapse of the stock, which is now down by more than 50 per cent from its 52-week high, shows just how jittery investors have become about the entire sector. Alcatel, the French telecoms equipment maker, and Philips, the consumer electronics manufacturer, have both recently issued profit warnings.
Shares of Lucent Technologies, Nortel's biggest competitor, were hit yesterday despite its recent statement it would meet both its top-line and bottom-line expectations for the current quarter. Cisco, the US data networking equipment maker, has also been caught in the panic. Its shares were down $3 1/8 at $61½ in mid session.
According to those at the closed meeting, Mr Scott made only a brief statement, but then was surrounded by a scrum of 20 to 25 analysts trying to get more details.
Mr Scott explained that revenues would be weaker than anticipated in most of the core businesses, including central office switching, wireless, and enterprise networks. Weaker Asian economies, reduced purchases from the US regional Bell companies and a stronger US dollar were cutting into revenues, he said.
Gurinder Parhar, analyst at HSBC Securities in Toronto, says that while Nortel's revenues will be weaker in the quarter, it anticipated maintaining earnings through selling higher-margin products. Most analysts are either dropping their earnings expectations, or at best holding them, he says.
The upheaval for Nortel comes on the heels of concerns that US$7bn was too much to pay for Bay Networks, the US data networking company. Nortel has promised the acquisition will increase earnings next year, but analysts are sceptical that it can integrate the two companies without a drop in short-term earnings.
Nortel cannot afford any erosion in its core businesses of central office switching, wireless, enterprise and broadband networks, analysts say.
Prior to Tuesday's meeting, Nortel issued a bullish statement saying the world telecoms industry was expected to grow by 14 per cent annually over the next three years and that the company expected to grow faster than that.
But analysts at the meeting came away with a different impression about the company's prospects and the bomb blast in New York clearly damaged Nortel's credibility. "Nortel didn't quite understand that their friends on Wall Street are fair weather friends," says one Toronto analyst. "They know it now.">>> |
