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

To: larry pollock who wrote (10329)	3/17/2001 12:21:42 PM
From: larry pollock	Read Replies (1) \| Respond to of 14638

Options seen as next Nortel flashpoint JOHN PARTRIDGE Friday, March 16, 2001 High-tech giant Nortel Networks Corp. could be facing another investor and employee relations nightmare, this time over the extensive stock options program it uses to help attract and retain executives and other key staff. Nortel chief executive officer John Roth alone made more than $135-million on stock options last year, when times were better. However, as is the case with scores of other companies whose stocks have plunged in the carnage of the past few months, a large proportion of the options Nortel has awarded to its people are currently worthless. This means they are useless as an incentive, at least short term, and this could send key personnel heading for the exits. But observers warn Nortel would likely encounter more wrath from already angry investors if it seeks to reprice the options lower -- difficult to do under U.S. accounting rules -- or issue new ones on more favourable terms. The Brampton, Ont.-based company is already facing a thicket of class-action lawsuits over the stock price drop that ensued when it unexpectedly slashed previously optimistic growth forecasts on Feb. 15. "It's a real conundrum," said John Koopman, a partner at executive recruiters Heidrick & Struggles Canada Inc. in Toronto. "If you're Nortel today, you've got to hold on to your key people." However, shareholders small and large are turning negative on options, Mr. Koopman added, and the feeling is, "you win in the good times, so shouldn't you lose in the bad times?" The annual report Nortel filed with securities regulators this week shows that about 70 per cent of the nearly 332 million options it had issued as of the end of last year are now under water. The options' value is determined by the difference between the so-called exercise or strike price at which they are awarded and the market price of the company's shares when the employee becomes eligible to cash them in. The higher the stock price over the exercise price, the more the options are worth. The Nortel report shows exercise prices for the underwater options range from $16.13 (U.S.) a share up to $90, with the weighted average coming in at $32.37. But since hitting a 52-week high last July of $89 on the New York Stock Exchange, the stock has plummeted. It closed on the NYSE yesterday at $15.90 a share, up 53 cents on the day. Nortel refused to say yesterday whether it plans to adjust the option plan in some way, but it is far from alone in having to confront the issue. "A lot of companies are struggling with it right now," said Edward Speidel, director of the executive compensation practice at PricewaterhouseCoopers Unifi Network in Boston. A 1998 change in U.S. accounting rules has made simply repricing options almost prohibitively expensive from a tax standpoint, because they become a variable expense whose value must be marked to market throughout the options' term, which can be up to 10 years. Instead, some companies, including Nortel competitor Lucent Technologies Inc. of Murray Hill, N.J., have issued several batches of additional options to employees at lower strike prices as their stocks have fallen. But this tactic is unpopular with investors because it dilutes the value of their shares. Others, including long-distance telecommunications provider Sprint Corp. of Westwood, Kan., are taking advantage of a wrinkle in the post-1998 rules. It allows them to cancel underwater options, then issue new ones six months and one day later at what is then fair market value, without triggering the variable expense consequences. However, The Wall Street Journal reported earlier this week that this tactic, too, can aggravate shareholders because it suggests a turnaround is not imminent. Employees who opt for such a plan, an official of Institutional Shareholder Services of Rockville, Md., told the newspaper, are indicating that they "believe the stock price is going nowhere for the next six months." Report on Business Company Snapshot is available for: NORTEL NETWORKS CORPORATION

To: larry pollock who wrote (10329)	3/17/2001 1:42:18 PM
From: David F.	Respond to of 14638

Your not going to see an analyst give it a buy until its gone up 20 40% and some people will be late, not too late, however late. They didnt downgrade it till it was too late so why would they upgrade until its too late. Sure there is a school of thought that says there is more downside, howmuch more. I just cant stop thinking this, the tech side of things is the future so thats were Im putting my money and now. Whether im buying at 15, 16, or 17$ wont matter in 6 mo.

To: larry pollock who wrote (10329)	3/17/2001 2:27:03 PM
From: Ian@SI	Read Replies (2) \| Respond to of 14638

In your complete and unbiased coverage of NT related news you seemed to have missed this one. Or is it just a result of living at the bottom of an outhouse that gives you your outlook on life? +++++++++++++ thestar.com Manager of the Year is buying Nortel again Ian Ainsworth heads Altamira technology fund Diana Cawfield SPECIAL TO THE STAR Whether you're a hot-stock player watching technology stocks shrivel or a value investor enticed by bargains, the year 2001 may prove a challenge. The buy, hold and prosper philosophy of investment pundits such as Warren Buffett takes a strong stomach in a rocky market. Especially when your cutting-edge stocks get more than 50 per cent of their value kicked out of them. Ian Ainsworth, managing director and head of the equity team at Altamira Management Ltd., including lead manager of the star Altamira Science & Technology fund, knows all about a 50 per cent plummet in stock value. Just three months ago, Canadian Business magazine cited ``the sizzling performance of Altamira's mutual funds.'' One of those sizzlers was Altamira Science & Technology that burned through the stratosphere with a 175 per cent return in 1999. Well, for the moment, the sizzle has fizzled. Altamira Science & Technology, which ranked Number 1 among the science and technology funds in 2000, with more than $700 million in assets under management, has lost 52.8 per cent in the year-over-year period ended Feb. 28, 2001. The year-to-date return is minus 23.8 per cent. Then, to add insult to injury, the registered retirement savings plan season has proven painful - the worst season in years for the fund industry. Net sales for Altamira Management Ltd. went from a heady $237.9 million in February, 2000, to a little more than $23 million this year. The spawning ground for robust science and technology growth that feeds on capital expenditure ``is in a much more terrible environment for capital spending than people thought even two months ago,'' says Ainsworth. ``We've got a credit crunch that is working its way through capital markets.'' Costly oil prices, interest rates concerns and a substantial cut by nervous U.S. consumers in information and technology spending have all created a toxic effect. But Ainsworth, 50, with more than 22 years of investment hindsight, seems unabashed. Soft-spoken and methodical, Ainsworth somehow seems an unlikely fit for an erratic sector that can fly off the rails in a heartbeat. Perhaps it's this grounded perspective that has earned him accolades. For the second year in a row, he's won the Canadian Manager of the Year award for mutual funds. Paul Bates, president and chief executive of Charles Schwab Canada, handed Ainsworth the award at a year-end gala, describing him as a canny money manager in a challenging sector, and an exceptional gentleman in the industry. ``You think you don't deserve it - your team deserves it,'' says Ainsworth, modestly downplaying the industry recognition. ``And in the case of my feelings, it does put pressure on you. It makes you want to not disappoint.'' As an all-star portfolio manager, the question is why didn't he foresee Nortel's market dive? Nortel Networks Corp., the world's leading manufacturer of optical systems that can ignite or extinguish the science and technology sector, has seen its stock drop more than 75 per cent from its 52-week high of $124.50, reached last July. ``We did expect Nortel to see some slowdown,'' Ainsworth says, ``but . . . the credit crisis was something that even (U.S. Federal Reserve chairman Alan) Greenspan couldn't see.'' In the current carnage of stocks such as Nortel, Ainsworth is practising what he's preaching to investors. He's buying Nortel again.The market is ripe for buying opportunities, he says - ``Pessimism has been built into the market, so now put the money in.'' Ainsworth has been with Altamira since 1992 and launched Altamira Science & Technology in 1995. The portfolio is volatile, geared to aggressive investors, and split 90/10 per cent between communications technology companies and genomics, the biotech industry, respectively. Brampton-based Nortel Networks Corp., makes up almost 10 per cent of the fund. Although pessimistic in the short term, Ainsworth says we're only at the Model-T Ford stage of Net-driven businesses. ``The Internet, optics, Java and genomics are creating the best opportunity to invest in growth stocks that we have had in decades. Take the approach of adding when it looks like the world is ending and reducing when there are no clouds on the horizon.''