Nortel held a conference call earlier this week to talk about its joint venture with LG, in which Nortel acquired a 50.1% stake for $145-million. The JV was created to give Nortel access to the South Korean market; to sell JV products from Nortel; and leverage the R&D resources of the two companies. According to Desjardins Securities analyst Paul Howbold, the JV has generated $500M to $600M of revenue – most of which will be back-end loaded in 2006 due to some GAAP JV accounting issues. Howbold is concerned, however, that revenue may fall in 2007 as major UMTS contracts wind down. He rates Nortel a "hold – above-average risk" with a target price of US$2.50.
Outlook for Nortel-LG Joint Venture
Nortel held a conference call earlier this week to talk about its joint venture with LG, in which Nortel acquired a 50.1% stake for $145-million. The JV was created to give Nortel access to the South Korean market; to sell JV products from Nortel; and leverage the R&D resources of the two companies. According to Desjardins Securities analyst Paul Howbold, the JV has generated $500M to $600M of revenue – most of which will be back-end loaded in 2006 due to some GAAP JV accounting issues. Howbold is concerned, however, that revenue may fall in 2007 as major UMTS contracts wind down. He rates Nortel a "hold – above-average risk" with a target price of US$2.50.