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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth E. Phillipps who wrote (9553)	2/5/2001 3:53:16 PM
From: FESHBACH_DISCIPLE	Read Replies (1) \| Respond to of 14638

just short the components spinoff at 60 billion its a slam dunk.eom

To: Kenneth E. Phillipps who wrote (9553)	2/8/2001 1:26:30 AM
From: ms.smartest.person	Respond to of 14638

Nortel: Less Than the Sum of Its Parts? -------------------------------------------------------------------------------- In a report dated February 5, SG Cowen analyst Christin Armacost writes that Nortel Networks Corp. (NYSE/Toronto: NT - message board) is undervalued by 40 percent, based on a sum-of-its parts analysis. As a result, she sets a price target of $50 on the stock. If each of its business units -- e.g., photonic components, enterprise, and optical equipment -- were considered a separate business and priced, the sum would exceed Nortel’s current valuation, says Armacost. The price of a unit is arrived at by looking at the unit’s revenue, then multiplying it by an average revenue/price ratio for a typical business in that sector. For example, photonic components had sales of $4.99 billion in 2000. When multiplied by 10, an average revenue/price ratio, this gives a market cap of nearly $50 billion. The author applies a similar logic to the other units like optical transport, local Internet, wireless Internet, and enterprise. When she adds them up, she gets a total valuation of $202 billion. Nortel’s current valuation is $116 billion. According to such analysis, Nortel is potentially undervalued by as much as 75 percent. But the author downplays that, saying that the full value of the calculation could probably not be realized. The author also points out that Nortel stands to realize an even higher market cap if it spins off units that are less profitable. SG Cowen lists six companies that Nortel has spun off within the past four years because they didn’t meet its expansion goals. These include its sale of Advanced Power Systems to Astec in September of 1998 and the disposition of its assembly facility in Creedmor, N.C., to C-MAC Industries in July of 1998. Armacost feels that, given NT’s history of divesting slacking business units, the enterprise unit is the next to go. “Our analysis of the company’s historical results indicates the enterprise segment has under performed the service provider and carrier segment for the last two years. In fact, the enterprise business was operating at breakeven (earnings before taxes) during the first half of 2000. If a spin-off or sale of the Enterprise business were to occur, we believe that it could increase shareholder value.” -- Matt Malina, research associate, Light Reading lightreading.com lightreading.com