Nortel: Starting to Turn the Corner

RBC Capital’s Mark Sue today boosted his price target on Nortel Networks (NT) to $32 from $28, asserting that the company is “slowly starting to turn the corner,” and that the company “has worked steadily to increase its relevance with major customers.”

He also thinks the company could win some business from recent stumbles by Alcatel-Lucent (ALU).

Sue is not quite a raving bull on the stock; he has a Sector Perform rating, and his new price target is just a smidgen ahead of the current stock price. Moreover, he says the company’s fourth quarter gross margin of 40% “may have peaked for the near-term.”

“Steady but slow improvements may be the theme for Nortel in 2007 following numerous painful years of restructuring and restatements,” he writes.

Meanwhile, for a more dramatic theory on what could happen to Nortel, you should take a look at a post yesterday on the 24/7 Wall Street blog, where Douglas McIntyre floats the idea that Motorola (MOT) might want to buy Nortel. Hmmm. Maybe. I’m not convinced that buying a struggling equipment maker is the solution for what ails Motorola. But you never know.

Nortel today is up 37 cents at $30.87.

NT 1-yr chart