Nortel: Tough Times Ahead?

Nortel Networks' (NT) decision to stick with the Long-Term Evolution [LTE] wireless market is a puzzling one that will hurt the struggling company, UBS Investment Research said Thursday.

The research firm has lowered its 12-month price target for the Canadian telecommunications company to $6 from $7.50.

In a research note, UBS analyst, Nikos Theodosopolous said:

Our new price target reflects an EV/EBITDA multiple of just under 4x ... justifiable given Nortel's inability to generate free cash flow in the last decade.

It is also unlikely that Verizon Wireless (VZ) will choose Nortel's LTE network, he said.

There are several challenges to success for Nortel. The company is working through some massive internal restructuring with a new management team and their cost-savings goals are “ambitious given ongoing pricing and competitive pressures in the industry,” UBS said. Former Nortel executives were indicted for fraud this past June.

Meanwhile, Nortel's  competitors are consolidating, presenting more challenging rivals than ever before.  The company's investments are also broad, making it tougher to compete with companies with focused portfolios.

Mr. Theodosopoulos said:

Nortel lacks scale and mind share in the faster growing data and  video segments.

Comments

[exnt:]

Tough times *ahead*? Always tough times at Nortel.

2008 Sep 14 08:11 AM

[LeeWillcox:]

Looks bad, very bad but I bet the CEO and friends gets their bonus.
You don't have o be a good CEO to get a bonus. Just make sure
all the people on the board are friends of yours

2008 Sep 14 09:56 AM

[Nasir Khan:]

Todays news was very disappointing. Mike Z until August 1 maintained that 2008 would see a low single digit revenue growth. And now we are told that revenue would fall as much as 4%. Very poor judgement.

2008 Sep 17 12:55 PM