Are The Troubles Over For Nortel Networks?

Jan.29.07 | About: Nortel Networks (NT)

The troubles of former market darling Nortel Networks Corp. (NT) are well documented. This week’s approval of a $2.5-billion settlement to U.S. and Canadian shareholders, resolving seven lawsuits related to alleged investor deception, ends yet another ugly chapter for the company.

With chief executive Mike Zafirovski at the helm, the telecommunications company continues to restructure with the hope of signing big contracts and capturing business in new technology markets such as VoIP and WiMax.

In a research note, Citigroup analyst Michael Genovese said he thinks Nortel’s restructuring story makes it an attractive investment option.

He has raised his price target on the company’s shares to $35 from $25, representing upside of 34% from its current trading level. He has also upgraded his rating to “buy” from “hold.”

Nortel plans to reduce roughly $1.5-billion in costs by the end of 2008, Mr. Genovese noted.

As a result, he thinks the company’s earnings per share will turn positive in 2007 and grow about 140% in 2008 to $1.75.

“With consensus at US$1.52 we do not think the Street is giving Nortel the proper credit for the restructure,” Mr. Genovese said.

NT 1-yr chart