Nortel News: Focus On Wi-Max, Joint Projects With Polycom, Microsoft, Bearish RBC Report, Nortel Settles SEC Suit

Focus on Wi-Max

For many telecom equipment suppliers, including Nortel (NT), there has been a concerted strategic focus on Wi-Max given its potential to create high-speed wireless networks.

At the forefront of the Wi-Max “revolution” has been Sprint Nextel (S), which plans to spend $5-billion over the next three years - a staggering investment - to build a Wi-Max network in the U.S.

Sprint, however, is under growing pressure from the investment community given its weak financial performance, which pressured CEO Gary Forsee to resign last week. Not surprisingly, one of the company’s projects under scrutiny is the Wi-Max network.

According to a CNet analysis story, “Wall Street analysts and investors say Sprint’s WiMax dreams are an unnecessary and dangerous diversion for the company, which is still struggling two years after the $36 billion Nextel merger to realize any of the cost savings that had been promised when the merger was announced.”

“They should stop the WiMax rollout immediately,” Patrick Comack, an equities analyst with Zachary Research told CNet. “They need to get back to the basics and learn how to run a wireless company. This means focusing more on the present rather than the future.”

For more, check out Broadband Reports.

Joint Government Project With Polycom

This little tidbit didn’t attract much attention but, nevertheless, it is intriguing for anyone into rumors and speculation: Nortel and Polycom Inc. will be offering joint solutions for telepresence and high-definition video conferencing to U.S. federal government agencies.

In and of itself, the announcement is pretty plain vanilla but given all the speculation about Nortel’s acquisition plans, you have to wonder if this agreement could be the precursor to Nortel acquiring Polycom - something that has been speculated.

For what’s it worth, acquiring Polycom would cost $2.25-billion at current market values.

Update On Joint Project With Microsoft

Ever since Nortel unveiled a strategic alliance venture with Microsoft (MSFT) involving unified messaging, there has been a lot of interest in how well - or badly - the marriage has been doing.

An important event in their corporate relationship happened yesterday in New York where Microsoft’s Bill Gates introduced three “unified communications” products: Microsoft Communications Server 2007, Microsoft Office Communicator 2007, and Microsoft Office Live Meeting.

Bearish Report From RBC

RBC analyst Mark Sue has gone somewhat bearish on Nortel. In a research report, he slashed his target price to $18 from $22 while keeping his rating at “sector perform”.

“Nortel still lacks a competitive product offering in numerous segments and also lacks the broad scale to compete at a global level,” he wrote in a research report, adding investors getting into Nortel now should assume a long-term approach given new strategic forays such as WiMax and 4G will not have a financial impact for awhile.

Hat tip:Globe & Mail.

Notel Settles SEC Suit

In addition to pursuing ex-Nortel executives, the U.S. Securities and Exchange Commission is now suing Nortel for manipulating its earnings in 2000, 2002 and 2003. The SEC filed its complaint - SEC vs. Nortel, 07-cv-8851 - in the U.S. District Court, Southern District of New York (Manhattan).

Nortel will pay $35 million to settle civil fraud charges with the SEC and will take steps to prevent fraud in the future. Nortel has also agreed to provide the SEC with quarterly written reports detailing its progress in implementing a remediation plan and actions to address weaknesses in its internal controls.If the scheme of things, $35-million seems like a pretty low cost to pay to get the SEC off your back, particularly given Nortel paid $2.7-billion to settle class-action lawsuits.