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Tomorrow, Nortel Networks (NT) will effect a 1-for-10 reverse stock split, as announced on November 7. In theory, this really shouldn’t matter to the performance of the stock. And yet, maybe it will. In a research note this morning, RBC Capital’s Mark Sue notes that an analysis of recent companies that have completed a reverse split found the stocks fall on average by 8% in the first week after the reverse split.

You don’t need to look that far to find examples, in fact. Two other companies in the telecom equipment sector have completed reverse splits: JDSU (JDSUD) did a 1-for-8 reverse split, and Ciena (NYSE:CIEN) did a 1-for-7 reverse split. In both cases, the stocks sold off after completion of the splits.

Meanwhile, RBC’s Sue maintains a Sector Perform rating on Nortel shares.”Considering the consolidation in the industry and increased competitive-pressures, we believe Nortel may remain in rebuilding-mode for the next several years,” he wrote today. “In terms of business fundamentals, we believe it will take time to stabilize the business, increase market sharem, reduce costs and ramp new products.”

Nortel shares today are down 1 cent at $2.14.

Source: Nortel May Sell Off Tomorrow On Reverse Split