Comments on: Bigger Q4 Loss; Smaller Nortel

By: Nortelhand

Nortelhand — Fri, 29 Feb 2008 10:50:23 +0000

the blood has been flowing from Nortel for a long time now. How much more bleeding can it do? Just look at the chart, and they still have not offically said there is a recession yet. Sometimes long hard winters kill sick old animals/companies.

By: Nortelhand

Nortelhand — Fri, 29 Feb 2008 05:50:23 +0000

By: Observer

Observer — Fri, 29 Feb 2008 00:05:32 +0000

Nortelhand – Wall street is full of tricksters, fraud, speculators and traders who want nothing more than to make money at the expense of shareholders. They care little about accounting or finance and thrive on volatility. They are walking the market down as the recession hits in the United States. Once we see a full bear market and there is blood in the streets the buying will start once more and Nortel will be perceived as a good value play. The game goes on.

By: Another Nortel Watcher

Another Nortel Watcher — Thu, 28 Feb 2008 20:37:00 +0000

AFTER taking into account the tax write-off, EPS is still below market expectations. THAT is what caused the stock value to drop. I'm sure MZs “It's not my fault” finger pointing didn't help any.

By: inalmm

inalmm — Thu, 28 Feb 2008 18:58:48 +0000

if you deduct something from the asset side of the balance sheet you need to deduct the same amount either from equity side or from the liability side just to offset it.

if you look at the 2007-end figures, the ownership equity came in as US$2,7 bn vs the third quarter 2007 figure of US$2,9 bn.

now, you can see that this loss did not affect to the company's shareholders equity, but the it reduced liability side. if it was a real loss, the shareholder equity must have been depressed around US$1 bn.

Nortel has a shareholder equity of around US$3 bn and market cap of US$4 bn.

it means that investors are paying only US$1 bn for the company's future income stream.

does it worth it or not, you decide it?

if you think that Nortel is going to make money in the future hold on to the stock,

if you think that the company will loose more money (reminding that the company made profit out of its operations in 2007) and its equity will melt down, than sell the stock.

regards,

By: Not An Accountant

Not An Accountant — Thu, 28 Feb 2008 18:11:42 +0000

I have a question and it might sound really stupid. But since I'm not an Accountant I think I can ask it to the commentators of this blog.
OK, NT have “written off” $1bn of deferred tax assets because of governance rules, etc. It's not cash out, we all got this part. But the fact that they had to be written off now, does it automatically imply that these tax credits were “incorporated” in past company balances?

By: inalmm

inalmm — Thu, 28 Feb 2008 17:29:40 +0000

the price should come down to reflect US$1 bn asset write off. actually, it happened so. you can think of this deferred asset as a bonus (not paying tax in the future). it had been in the share price and since it is written off, the share price must be adjusted accordingly. hence this is a corporate governance or analyst awareness issue, not an operational issue. in other words, this loss is irrelevant of Nortel's operations. Nortel actually made a profit out of its operations in 2007.

would you guys say the same thing if there were no write-off but a 30 cent earnings per share?

By: Nortelhand

Nortelhand — Thu, 28 Feb 2008 16:25:42 +0000

I am not an accountant, but wall street is full of them and it seems they are voicing there feeling loud and clear by dumping Nortel. So I guess that a tax loss is just as bad as a sale loss, otherwise wall street would not be dumping? Call me a stupid engineer, but a big negative number is a big negative number and it seems that the accountants on wall street agree with me.

By: Mr D

Mr D — Thu, 28 Feb 2008 14:17:39 +0000

Nortelhand, it seems you don't hold out much hope for the future. I agree with your comment about the crew, but if it wasn't for the tax adjustment, Nortel would have made a profit in 2007 - a fact that appears to be missed by a lot of the general commentary.

Also, are you aware of the quote from an analyst at Charter Equity Research: “Growth is very slow for everybody, including Nortel, and it's not going to get any better any time soon"?

As for a takeover, in the unlikely event this happened, I don't think the approach would be 'using what is good and liquidating what is bad'. The approach would probably be to relocate (i.e. sack) *all* the employees, adopt a very small portion of the plethora of products in the Nortel portfolio, and consign the rest to history. I don't believe this would be in the best interest of the industry, let alone the company.

By: Nortel watcher

Nortel watcher — Thu, 28 Feb 2008 13:30:57 +0000

ex-nt,

What about adding to your list:

- adjusting Nortel staff salaries downward to within industry average

It is common knowledge that Nortel pays employees above the industry average still today.