Here’s some food for thought when it comes to Nortel’s operating expenses: did you know that Nortel’s R&D to market capitalization ratio is 1.57? ($1.75-billion of R&D compared with a $1.12-billion market cap).
Not surprisingly, it’s the highest ratio of any company spending more than 10% of its market cap on R&D. #2 on the list is Advanced Micro Devices, which has a R&D/market cap ratio of 0.72 ($1.88-billion of R&D vs. a market cap of $2.6-billion).
Here’s the criteria used: U.S. and Canadian exchanges (no healthcare companies), market cap of more than $1-billion, sales of more than $5-billion.
I just don't see how NT can do business with the world with their market cap valuation like that. NT needs stock buyback with proceeds of MEN.
Another Nortel Watcher
I don't think it's a meaningful ratio. Market cap is not part of business operations.
yes4aapl
It's not a surprise for me I have been saying for years that R&D is just killing Nortel business! 13000 in R&D with 33000 all employees! Mike Z first plan was to streamline the proportion very much. I think I got a message in next few months, that his plan just backfired. R&D was stronger than new CEO!? I see that the stock will be gone /BK/ but R&D will survive. You don't have to be smart to know that Nortel's R&D was not only for NT! It's the research center for high tech Canada. I don't know why government would not support that R&D with money? Why shareholders have to pay for all of that? Why shareholders have to go BK just because of that? Owens was right about that but he did not expressed himself well about that. He said companies like Nortel supposed to be subsidize in part by NA governments! Too bad for Nortel. CSCO is highly profitable and did not need subsidies. Nortel's engineers can submit their resumes to CSCO. Why not? CSCO will survive another 5 years before Huawei kills CSCO as well. Huawei is very much supported by China, by the Gov. The problem is, Huawei does not operate in free market economy. Please correct me if I am wrong about that. So why NA is exposed to competition from China? I have no idea about that. I am not a politician.
Nortelhand
That is great!! Nortel's ratio is larger than AMD. And AMD is a company that has only lost about 60% of its value in the last year. I guess Nortel has lost over 80% of its value in the last year. Great job Mike Z!!! Oh but Mike Z is making a lot of money off Nortel, ride that pony right into the ground Mike. You won't have it much longer.
Canary in a Coalmine
Mark, R&D as a % of Sales is an often quoted metric, but R&D as a % of Market Cap is not a meaningful comparison. Wondering what you were trying to identify??
Market cap has many factors which the company doesn't directly control (stock price for example!) – on the other hand Sales is a number they can control.
R&D as a % of Sales is also not the greatest sign – looks like it will need to be reduced also…
Canary in a Coalmine
Mark, R&D as a % of Sales is an often quoted metric, but R&D as a % of Market Cap is not a meaningful comparison. Wondering what you were trying to identify??
Market cap has many factors which the company doesn't directly control (stock price for example!) – on the other hand Sales is a number they can control.
R&D as a % of Sales is also not the greatest sign – looks like it will need to be reduced also…
Food for Thought: R&D Ratio
Here’s some food for thought when it comes to Nortel’s operating expenses: did you know that Nortel’s R&D to market capitalization ratio is 1.57? ($1.75-billion of R&D compared with a $1.12-billion market cap).
Not surprisingly, it’s the highest ratio of any company spending more than 10% of its market cap on R&D. #2 on the list is Advanced Micro Devices, which has a R&D/market cap ratio of 0.72 ($1.88-billion of R&D vs. a market cap of $2.6-billion).
Here’s the criteria used: U.S. and Canadian exchanges (no healthcare companies), market cap of more than $1-billion, sales of more than $5-billion.
Technorati Tags: Nortel