Nortel Headed for Rough Ride

Well Nortel’s quarterly results are in and the results are below analysts expectations. Then always seems to be a ongoing theme with Nortel. Seems about every 5 years or so they take their eye off market changes and have to knock heads to get back in the game. –

The value of Nortel Networks Corp.’s stock was cut in half after the company announced a restructuring, including plans to sell off its Metro Ethernet Networks business and “mitigate the risks” in its LTE, 4G effort. Market watchers took the language to indicate hopes for a potential teaming with another wireless infrastructure company.

The news coincided with a preview of Nortel’s third quarter; the company expects revenues of about $2.3 billion and gross margin of 39%, numbers down from previous expectations. Nortel blamed the drop on the “sustained and expanding” economic downturn as well as “product delivery delays.”

The news is just the latest in a long string of troubling issues at the company. Nortel suffered years of financial difficulties following the tech blowout at the turn of the century. Although things had seemed to turn a corner with the addition of CEO Mike Zafirovski, a mix of sluggish spending and wider, macro-economic troubles have served to pull the company back to the edge.

Nortel’s stock dropped from around $5 per share to around $2.50 per share after the company’s restructuring announcement earlier this week.

Here’s Nortel’s stock over the last 3 months. —

I take particular note over the the phrase ‘mitigate risks in the LTE…’. It would appear that all is not rosy in the LTE development cycle for Nortel. Question is are they solving the issue internally or are they going to go outside and find a partner?

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