Nortel News: China Telecom CDMA Deal, Analyst Notes

Lost in the shuffle of the third-quarter results and the restructuring news was Nortel being selected as the key vendor in the evolution of China Telecom’s (CHA) CDMA network in seven provinces. Nortel will supply the enhanced base station controllers and base stations.

“CDMA is at the heart of networks deployed by some of the world’s largest operators, providing voice, data, and video to millions of consumers,” said Richard Lowe, president Carrier Networks, Nortel. “We’re delighted to be working with CTC as it rolls out its next-generation network and look forward to a long, successful relationship. In China, Nortel has over 35 years of experience helping operators deliver exceptional service quality and has made China a strategic focus with significant manufacturing, R&D and service capabilities.”

CTC’s expanded network will provide improved voice service and mobile multimedia applications - including Web browsing, e-mail, instant messaging, picture messaging, gaming and advanced data services - to a rapidly expanding customer base.

Recent Analyst Research Notes

Robert W. Baird analyst Ken Muth has reduced its target price on NT to $1 from $3, while maintaining its “neutral” rating.

In a research note, RB said Nortel will likely to burn through $813 million of cash in 2009, while reducing its EPS estimates for FY08 and FY09 from -$0.06 to -$0.25 and from $0.20 to -$1.40, respectively.

In an interview with the News & Observer after the third-quarters results were released, Muth said:

“They’re breaking up the company to sell the pieces, that’s the reality. The question is: Can they get those sales done before they run out of money?”

Scotia Capital analyst Gus Papageorgiou has called it like he sees it:

“Given the overall economic and market environment, we do not believe NT shares are well positioned. We would prefer investors locate their capital in companies with at least two of the following three characteristics: strong balance sheet, high growth, and strong profitability. As a result we continue to suggest investors avoid the shares.”

In a report, Papageorgiou goes on to say that:

“We believe Nortel faces some serious challenges in 2009. The company needs to re-establish priorities, preserve cash, divest at least one of its business units, and prove to the market that it can generate enough free cash flow to remain solvent as the global economy passes through one of the roughest periods in years.”

The Wall St. Journal has a story looking at the four senior executives who were let go on Monday.

Comments

[jepittman:]

An interesting way to invest in this long term is Qualcomm (qcom). They have the CDMA patents and IMO the management is honest. As a longterm shareholder I have been well treated.

2008 Nov 12 09:01 AM