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Nortel has Limited Downside
By Mark Evans | September 14, 2006
RBC Capital Markets analyst Mark Sue issued a short research note on Nortel yesterday. Here’s a summary that appeared today’s National Post.
Mike Zafirovski, Nortel Networks Corp.’s president and chief executive, believes the company needs at least 20% market share in each market to be a viable and profitable player.
So what will Nortel do with its wireless business, given RBC Capital Market analyst Mark Sue estimates Nortel only has about an 8% market share?
Its extremely unlikely Nortel will leave the wireless business, given that it accounts for about 40% of Nortel’s revenue. Instead, look for Nortel to milk its profitable CDMA wireless business and pursue opportunities in next-generation wireless technology known as 4G.
Mr. Sue, who rates Nortel a “sector perform” with a 12-month target price of US$3, said in a research note he sees significant challenges facing Nortel.
In the enterprise voice market, Mr. Sue said Nortel has 15% market share while rivals Avaya Inc. and Cisco Systems Inc. have 17% and 25% of the market, respectively. Nortel’s IP-TV business, he said, has gone through a shake-up recently, and the company continues to play catch up with Alcatel and Cisco.
Mr. Sue said Nortel shares have limited downside potential, and may be able to match the returns of telecom peers this year.
“We continue to wait for meaningful catalysts before we become more positive on the shares, recognizing that Nortel is making steady progress both internally and with customers.”
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Topics: Analyst Coverage |
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