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For those still counting, Nortel shares touched a low of $5.51 yesterday. It’s either a record low or 25-year low but it’s still a low.

For what it’s worth, Nortel (NT) has dropped by more than 75% since Mike Zafirovski came on board as CEO. The question is whether the stock would have performed differently if someone else had been at the helm. As much as you want to critique and/or criticize his performance, Nortel is operating in a volatile landscape at a time when it continues to go through dramatic structure changes to remain competitive.

Lehman Brothers analyst Jeff Kvaal has downgraded Nortel to “under-weight” from “equal-weight” while slashing its 2008 earnings estimate to 38 cents a share from 92 cents. Lehman still has a target price of $6. 

Kvaal’s downgrade is based on his belief that margin expansion in enterprise and metro Ethernet networks may not offset “carrier headwinds” in the near-term.

In our opinion, Nortel has made significant progress restructuring the company and has a number of potential revenue and margin drivers. However, we believe these are balanced by several possible headwinds. We believe Nortel is facing challenges with regard to revenue growth in the Carrier Networks division, which is currently the engine of profitability for the company. Enterprise Solutions and Metro Ethernet Networks currently have the brightest outlooks for future growth, in our opinion, but are significantly less profitable than Carrier Networks. To us, this suggests modest revenue growth for the entire business is likely to continue, while the company may have near-term challenges expanding its profit margins.

Here’s Lehman EPS table showing its actual, old and new estimates:

Lehman EPS

More thoughts on the downgrade can be found on Barron’s Tech Trader Daily.

Source: Nortel Hits New Low, Lehman Downgrades