Nortel Shares Hit New Low

By Mark Evans | Published: August 26, 2008

For those still counting, Nortel shares touched a low of $5.51 earlier today. It’s either a record low or 25-year low but it’s still a low.

For what it’s worth, NT has dropped by more than 75% since Mike Zafirovski came on board as CEO. The question is whether the stock would have performed differently if someone else had been at the helm. As much as you want to critique and/or criticize his performance, Nortel is operating in a volatile landscape at a time when it continues to go through dramatic structure changes to remain competitive.

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  • Disgruntled Ex Nortel

    Years from now Frank Dunn will be vindicated in future business textbooks, in chapters on how not to be scapegoated by regulators and analysts.
    (and no I am not he, nor have I ever worked for or met him)

    The accounting scandal was exacerbated by the hysteria in the SEC by the ENRON, TYCO, WORLDCOM fiasco's. When this all went down i remember watching one of the business channels where the analyst stated that he couldn't understand what the big deal was, all they had done was move some revenue from some fund to a certain quarter(I cant remember verbatem) but what I do remember him saying was that “other companies do it all the time”. The reason a profit was so crucial was that NT was contractually obligated to turn a profit by that quater or face receivership.
    This would have gone unnoticed if it wasn't for “those meddling kids!” oh, and the “return to profitability bonuses”.

    The irony is that Nortel may have staved off receivership, but the company now is run as if it is in receivership! Managers at all levels are more concerned with counting, measuring and metricizing, the most mundane minutia of day to day operations, then ACTUALLY DOING ANYTHING TANGIBLE! needless excel spreadsheets, and powerpoint presentations for other managers and executives higher up in the food chain, that have absolute zero clue about the business, or the day to day operations of the department presenting the spreadsheets, but yet they can appear to be informed if they notice that these numbers from last quarter to this quarter are up or down.
    But I'm digressing into another one of my rants which I'll save for another day.

  • NOT there anymore

    Z has proved what Dave Packard told John Young when Hewlett and Packard came back into active roles at HP in the mid-80's “you can't save your way back to health – make somehing that customers need — then sell it” What is it that Nortel has that customers need — that couldn't be gotten from other companies with better financial and strategic positions. Z's guys have spent too much fretting over the deck chairs, not enough trying to figure out where the passengers want to go.

    Break it up – sell the piece parts (although what forward technology does NT have that is avaluable?) better for all the stakeholders especially customers and employees

  • NewBlue

    There's no way to tell whether Nortel would have done better or worse had Mike Z. not been named CEO. However, I did choose “Done Better” because I think it would have been tough to do worse.

    He just didn't understand the marketplace, his workforce, or the pig sty of a management corps he inherited. All he seems to have been aware of is process and bottom line, and his methods for addressing both have been disastrous. Lean Six Sigma is a joke, and his upper echelon technologists are ineffective in their roles. There are still too many slugs in management and attrition from the talent pool is not just lowering expenses but is also removing the top talent from the workforce. Those that can are leaving; those that can't are staying behind and will be unable to pick up the slack.

    It's a sinking ship that is taking on more and more water as it slides deeper and deeper into the deep, murky depths.

  • Mr. X

    I understand that some investors might be unhappy with the stock's price hitting lows. But I believe that these are just temporary moves due to investors misinterpreting, or overinterpreting what analysts are saying about the stock. Analysts cannot speculate about income to be derived from new projects/initiatives. So they base their analysis on what they see, which is an industry not doing so well at the present time, and Nortel not being well positioned in that perspective. But I believe Nortel is going through a repositioning and I do not pay too much attention to analysis.

    I'd say that many companies have to go through midlife crisis and some will come out better, some will not. I am very pleased with the latest announcements we have seen… the London Olympics contract, the Citi Field, the Canucks Arena, the purchases of Novera, Pingtel, Diamondware (everybody was yelling for NT to do something with it's cash at hand, remember?) , their energy-saving (Cisco-tax) propaganda, their “great” association with Microsoft, the LTE trials… All of this demonstrate (to me at least) that they are not sitting on their … and crying/complaining about the industry not doing so well right now. To me, it proves that they are fighting and do their best at moving this company to the next level, and I do like what I see. They might not be the biggest player, they might not look in great shape right now (to financial analysts), but I like to think that they will surprise us in the future. CDMA income might be going down but I think they'll be able to pull something off their new endeavours. If they can only fix that Monkstown strike situation quickly… it is not good for their reputation, even if their's not a lot of workers involved.

    I am also very pleased with the Web.Alive announcement of today. Doing conferences in a virtual world might be the next big thing. It really looks like “Second Life” to me but specialized for the business commucation world with integration to companies' telecom systems. Imagine how much companies would save using telepresence instead of travelling all over the world to have meetings (or even conferences) ?

    All in all, I bought 3000 shares at $5.54 today… I'll see where it gets me.

  • Shackled

    If John Monty brought back Nortel after one dumb*ss CEO almost drove it into the ground (Paul Stern), I'm sure he could do it again. Had it been him instead of Z I'm sure we'd be in a different position today.

    All I see from Z and his cronies is a bunch of hot air. His forced enthusiasm is getting old. I suppose if I was him though, knowing that my career is pretty much over, I'd be milking it for all it's worth right till the end too!

  • less

    “Perhaps the most important factor in the Edsel's failure, however, was that when the car was introduced, the U.S. was entering a period of recession.”
    A secular thingy

    “Sales for all car manufacturers, even those not introducing new models, were down; consumers entered a period of preferring less expensive, more fuel-efficient automobiles.”

    Nortel is greenest.

    “While the car and Ford’s planning of the car are the most often cited reasons for its failure, internal politics within the executive offices at Ford are as much to blame for the failure of the Edsel. Following World War II, Henry Ford II brought on Robert McNamara as one of the “whiz kids” to help turn Ford around.

    “McNamara left Ford when he was named Secretary of Defense by President John F. Kennedy.”

    What will Obama appoint Mike Z?

  • Observer

    Mark – nice posting. Now let the what-ifs begin. For the record, my vote was that Nortel would be in the same position if ANYONE else were CEO. Much of Nortel's resources (around $400M in cash) were taken up in cleaning up the books under Mike Z. Once Nortel revealed the accounting and financial fraud that went on they were legally bound to clean it up and this meant spending hundreds of millions of dollars on lawyers, accountants and software that could have been spent elsewhere. That money could have been used for acquisitions, additional R&D investments or anything else if the books were clean. So it wouldn't have mattered who the CEO was. We just live under a time of tighter rules and regulations that forced Nortel's hand under Mike Z.

    I will go on record today and say Nortel will not survive in its existing format as a wholly owned public company. You can take that to the bank. The downgrade today by Lehman & every other investment bank is an effort to squeeze every company with a weak balance sheet in order to shore up their own reserves. Many companies will be squeezed come September and Nortel will be shorted by hedge funds run by these same investment banks. Expect the stockholders to lose all their equity while the bonds finally get called in (again by investment banks). The capital squeeze that is occurring will be unlike any other in modern banking or financial history. Expect many many bank and corporate failures. The era of leverage, debt and credit is coming to a crashing ending as it all unwinds.

  • Stalin

    It really comes down to discipline.

    The Gary's could have fixed NT but the Board was unwilling, would have been too drastic. Take a look at the early 90's, things were good. NT had just a couple of competitors and was FAT. It had no need to become a disciplined corporation.

    Late 90's was chaos and a free for all. Noone cared about actual business performance. MikeZ comes in to fix things with a huge ego but a total lack of will power. He changed the top level but the middle management is still the same. Top level are yes people. Middle people are still the FAT old school types who think that business will come to them based upon chartware, as opposed to market understanding. Nobody holds them to task. If I was a business leader at NT I would expect my reports to make accurate forecasts and keep them. That does not happen at NT. Not even close. The competition is not Cisco, but middle management and complacency.

    JackW would have fixed NT and so would have the Garys. NT's CTO blows a lot of hot air. Nothing he talks about has turned into $$ yet. Or even close.

    The market is 'soft'…..right go tell Cisco that! Their numbers disagree, as does the profitability of Micro$oft.

    Anaylists….funny people really since they cant seem to predict anything and base their ratings on emotion. That aside NT does not deserve a higher share price at this point in time.

    Did I mention NT lack total business discipline?

    Z is forced into plan B. 3 – 5 years for change and we are almost at 3 with little progress. Remember his BIG? We have not seen any growth of substance, yet Crisco seems to be able to do it. Business Transformation seems to be focused on bringing YES MEN into the inner circle. As previously discussed Crackney should be terminated for his violence against women. JackW from GE would have turfed him in a heartbeat.

    That is integrity and NT's prior 'ethics' advisor knew it and hence quit.

    Mike Z in his plan B is looking how to divest. There is no other option for him to save face and become a savior of the high tech world but who wants the various bits of NT? MS, MOT and the Germans have said no.

    These aquisitions were miniscule that were recently announced.

    Within 18 months you will see significant divestiture.

  • Just_lurking_by

    observer your comments are always so prophetic

  • less

    “Expect many many bank and corporate failures. The era of leverage, debt and credit is coming to a crashing ending as it all unwinds.”

    And the long-suffering proletariat will ultimately give Obama all the credit. Well, because they gave him their vote.

  • StillACurrentEmployee

    Nortel hit a low on October 10th, 2002 of $.43, or $4.30 split adjusted.

  • mr Zero

    mr Zero
    10 mill sign on bonus. nice sal. good perks. corporate jet. 500K pension after 5 years. nice job. all the issues are past regimes problems. so blame them. just keep talking about what I remember from my GE days. er. 6 sigma, process, manufacturing stuff. thats what will get us the top line. if it does not layoff people to get the bottomline. this is da life. I got that GE ring on my finger man.

    mr Hyper
    knows nothing. blow hot air. appear to know everything. hyper this hyper that. R&D what is that. Investment how do you do that.

    mr Temper
    beat up women. throw tantrums. my way or no way. I'll teach you how to run R&D (although I only know manufacturing)

    mr Moron
    metro metro metro. growing growing growing. need a new business unit. oh man! nothings making mone. ya move it all to CTO. oh its only optical now. lets keep it as a separate unit although before it was under Carrier. Heck I'll have to go back to GM. That positon is already taken Heck I might lose my job. No way. Lets just call it Metro Networks now that Ethernet is gone. metro metro metro.

    mr Low
    GSM a bust. UMTS a bust. CDMA in decline. WiMesh a bust. WiMax a bust. LTE oops forgot the A in it as its actually LATE. OEMs got bought out. almost on my way out. lets not rock the boat close to retirement.

  • less

    Cissyco on the other hand, has lost as much as 54 cents in the same time span thus far. From $24.76 to $24.22 (in an obvious downward secular trend thats set to last another 7 years.) Numbers don't lie: Whats better, +70 cents or -54 cents? Cmon, this is first grade math.

  • less

    Cissyco on the other hand, has lost as much as 54 cents in the same time span thus far. From $24.76 to $24.22 (in an obvious downward secular trend thats set to last another 7 years.) Numbers don't lie: Whats better, +70 cents or -54 cents? Cmon, this is first grade math.

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