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TD Likes What It Sees
By Mark Evans | June 7, 2007
After doing some more digging on the Nortel strategic story, TD Securities analyst Chris Umiastowski has come away impressed. In a report entitled “We Like What We See”, Umiastowski said Nortel appears on a “solid path” towards improved earnings, and that some of its internal R&D programs are encouraging. “We believe that Nortel is on track to deliver solid near-term EPS improvement from cost cutting,” he said. “We also see good growth opportunities in Metro Ethernet networks and enterprise networks. We think Nortel is poised to beat consensus 2007 EPS of $0.63 (we are at $0.78) and we recommend owning the stock”. For the record, Umiastowski has a “buy” rating with a target price of $35.
His enthusiasm/bullishness comes from industry and corporate sources who suggest the following:
- Nortel is keeping a “tight grip” on spending, although it does appear to affecting important R&D programs
- Nortel has implemented a “deliver” culture within its R&D operations, and that employees are motivated to meet deadlines or risk having to answer to CEO Mike Zafirovski.
- The company’s relationship with British Telecom is strong
- The Wi-Max strategy is going well, including trails with Comcast, which would be a huge win for Nortel after it missed out on the Sprint deal
- Momentum in the enterprise data business is “quite good”, and the company is focused on offering customers products that are better and cheaper than Cisco.
- The carrier VoIP business is accelerating as Nortel replaces legacy TDM switches with call servers and other related gear. Synergy Research suggests Nortel is the leading player in the carrier VoIP market.
Topics: Analyst Coverage |