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

To: - with a K who wrote (13890)	5/22/2004 12:25:38 PM
From: - with a K	Read Replies (2) \| Respond to of 14638

Another Yahoo post: by: doctoroe Long-Term Sentiment: Strong Buy 05/21/04 04:00 pm Msg: 518381 of 518628 The brief against Nortel NT is long and substantial: All of top management has been fired for cause because of accounting fraud. Every government in North America seems to be pursuing the company. It is clear that the monumental turn that we saw in 2003 didn't happen. The debtors could shut the company down if they wanted to. Bankruptcy then would be the only option. The brief in favor of the company is short and to the point, but not reassuring. It rests on nine words uttered by ex-vice chairman of the Joint Chiefs of Staff and an retired admiral: "Past revenue and the company's cash reserves are unaffected." If that statement hadn't been presented by a man of great integrity -- away from Nortel -- then it would be nuts to buy Nortel. Maybe Nortel would simply take its place with Worldcom and Enron on the list of gigantic scams that went to zero. But for the life of me, I can't understand why retired Adm. Owens would say those nine words if he didn't have some assurances they were true. Why not just say, "We don't know anything." Why not just say nothing? What's the percentage in saying anything after all the lies we have been told? Because of those nine words and because I have not heard protests from companies whose names are being used openly by Nortel when it says those companies are taking product, I don't want to give up on Nortel. I want to buy Nortel for my account. I truly believe that the whole scam here related to hyped bonuses for business that was indeed done, and that the bonus scheme simply got out of control. But let's look at it another way. The last time Nortel was at these prices, going to below $1, the industry wasn't ordering and business was bleak with massive overhead and a balance sheet from Hades. I wonder, though, whether Nortel ever deserved a price below $1. Unlike Lucent LU it didn't have to start abandoning ship and selling off assets through bargain basement levels. It turned out that Nortel had some pretty good businesses and product lines that were in strong demand when telecom spending picked up at the end of 2003. Why though, in 2002, didn't Nortel file for bankruptcy? I think it was a combination of things: Canada didn't want its largest company to file for bankruptcy and overtly helped the company. Nortel's a real business with real sales and real product and real cash flow that held up fairly well in the downturn. It didn't have as many bad legacy businesses as Lucent. All three factors are still at work today, with the stock at $3. They don't guarantee anything, except if the stock goes to $1, they all could be back in play. In the intervening weeks since this disaster has been visited upon the market, I have done extensive work on Owens and what he is like and what he is capable of. From many sources, I have found him to be a no-nonsense man of few words who, when he says something, says it after a huge amount of homework and lots of conviction; nothing idle about the man. I am convinced that he said those nine words not to prop up Nortel's stock, not to sell more product than he would otherwise and not to put a good face on a bad situation. He said them because he knows them to be true. So at $3, the stock just seems too cheap to me despite a news backdrop that seems right out of the Enron-Worldcom world. There's no doubt that the accounting at Nortel had the effect of inflating earnings, perhaps immensely. But I still believe that there were profits at Nortel, and the turn was real, yet not as spectacular as the numbers printed. Let's say half of what was said was wrong. No, let's say three-quarters of it was inflated. I would pay $3 for the quarter of the honest earnings that leaves you. And so I will.