Comments on: Tough Times Ahead for Nortel http://www.allaboutnortel.com/2006/07/12/tough-times-ahead-for-nortel/ All the News about Nortel Networks Thu, 09 Feb 2012 03:34:00 +0000 hourly 1 By: nortel http://www.allaboutnortel.com/2006/07/12/tough-times-ahead-for-nortel/comment-page-1/#comment-236 nortel Wed, 12 Jul 2006 14:50:39 +0000 http://allaboutnortel.com/?p=227#comment-236 good points. my assumption is based on the idea mike z.'s recognizes there is plenty of low-hanging fruit in terms of cost reductions that can be achieved. in theory, this could boost profits even if revenue is flat. of course, if prices drop at a greater pace than mike z. can slash expenses and/or nortel struggles to find new sales, then it could be a different story. good points. my assumption is based on the idea mike z.’s recognizes there is plenty of low-hanging fruit in terms of cost reductions that can be achieved. in theory, this could boost profits even if revenue is flat. of course, if prices drop at a greater pace than mike z. can slash expenses and/or nortel struggles to find new sales, then it could be a different story.

]]> By: Godzilla http://www.allaboutnortel.com/2006/07/12/tough-times-ahead-for-nortel/comment-page-1/#comment-237 Godzilla Wed, 12 Jul 2006 14:00:31 +0000 http://allaboutnortel.com/?p=227#comment-237 "do not be surprised if Nortel’s bottom line shows significant improvement over the next few quarters as CEO Mike Zafirovski’s restructuring plan, which includes job cuts and operational streamlining, starts to generate dividends" Mark You assume flat or rising revenues. Once you have established a breakeven position, any revenue above that falls disproportionately to the bottom line, as the incremental costs are small. The reverse is also true. Notwithstanding Z's effort on setting a lower breakeven, it won't do him any good if he can't raise revenues. And with annual price erosion, unit volume needs to increase proportionately just to stay in place. Just as everyone else is asking, where is the strategy that is going to increase the top line? “do not be surprised if Nortel’s bottom line shows significant improvement over the next few quarters as CEO Mike Zafirovski’s restructuring plan, which includes job cuts and operational streamlining, starts to generate dividends”

Mark

You assume flat or rising revenues. Once you have established a breakeven position, any revenue above that falls disproportionately to the bottom line, as the incremental costs are small. The reverse is also true.

Notwithstanding Z’s effort on setting a lower breakeven, it won’t do him any good if he can’t raise revenues. And with annual price erosion, unit volume needs to increase proportionately just to stay in place.

Just as everyone else is asking, where is the strategy that is going to increase the top line?

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