Some Interesting Number-Crunching

Nortel investor,
I agree we need to know about the positive things or, at least, be reminded of them as you have done here. What gets me is why doesn't the executive leadership of the company buy shares given your outlook?

I thought Mike Z did invest a million at 19.00 a share and again at about 6.50... I think others have as well. Need to check out the insider trades for the info. Maybe he has run out of money....
What i would like to see them do is sell MEN for a Billion plus then buy 200 meg shares back, complete this restructuring, put some in LTE R/D and the bank..... I need some rest.. Thanks for the conversations guys..

Does anyone have updated info on the MEN divestiture or Nortel in general ? This credit crisis has got to be eating them alive.

Interesting article and chart but there is a few things missing in it that would distort the acurracy for this Qtr..
1. Nortel will pay LG 51 mil for performence goal acheivments.
2. Nortel will pay Flextronics 70 mil. to finalize their manufacturing biz. venture.
3. What about pension and benifet payments?
My expectations are they will post a loss of about .60 cents a share but reduce their overall liabilities from 12,470 mil to 12,250 mil.
I am also incouraged that the Future Uses Of Liquidity requirements will now focus on:
1. cash requirements for pensions, post retirement, post employment issues.
2. capital expenditures.
3. completion of restructuring.
4. preferred dividend payments.
These are buisness areas that can be controlled by Nortel as to the size of the payments needed to be made. All the other major liabilities issues that have accumulated over the past years that needed to be dealt with have been paid.
eg. restatement charges, legal and accounting fees, fines, New SAP systems,
lawsuits, divestiture of UMTS biz, to name a few.
I believe there are much better days ahead for Nortel now that they have a lot of the past sins of the company off their back......

What are you smokin man?
Much better days ahead?
Have you been guaranteed a job in the future NT?
WoW.

I don't smoke and am allergic to it.
In terms of better days ahead i will share with you my rationale.
Based on Q2 financials filed with the SEC, I do not see any major liabilities that have to be addressed other than the ones mentioned above in their Future Uses of Liquidity requirements for the next 12 months. That alone is very refreshing because over the last 30 months Nortel has been paying off huge bills that have impacted their ability to grow.
This Qtr. will be badly impacted because of poor sales, push out of orders and deliveries and of course the final payments to LG and Flextronics as discussed on the conference call. Cash bal. is expected to be 2.6 in Q3 and 2.9 in Q4 which i feel is strong.
I estimate their backlog to be about $4.6 bil. or so as it was 4.9 in Q1.
I expect them to announce a major order from the Chinese on CDMA
in the next while as they are rumored to get 17% of a 4 - 5 Bil. spend upgrading numerous city's in China. Nortel's possible share 600 - 800 mil. Also BSNL in India is about to announce winners of a 10 Bil. approx. infrastructure upgrade. I expect Nortel to get something here because of their improved cost structures and commitements to the Indian market.
I am not sure if the MEN sales will go through but if it dosen't it will sure shake some people up in order to improve that divisions profitability.
So with no major debt due till 2011, their liability's getting in order, some nice orders in the works, i feel better about the company now than i have in years.
The big wild card in all of this is the financial crisis mostly in the US but affecting everyone around the world and how that is going to play in industry and consumer spending.
I don't have a job guarantee at Nortel but would like to see the company suceed so i could at least get some of my money back.
After reading all the negatives on this site i though i would throw out some possitives for a change....

Well thought rationale - good to see. However, I think ongoing decline of revenue is going to continue to cancel out the positives. The decline is due to reduced spending in the market, increasing lack of confidence in Nortel as a supplier, and the lack of an executable growth strategy that is significant enough to make up for the decline in legacy businesses. It would be nice if you were right, but I don't think so.

I agree with you on the declines in the various areas but feel that they apply mostly to their US sales. Their revenue numbers from Q 2 for 6 mths are as follows.
6 mths 2008 6 months 2007
US 2,120 2,387 declined 267m
EMEA 1,225 1256 " " 31m
Canada 366 351 +15m
Asia 1371 718 +653m
CALA 298 333 Decline 35m
Based on the committments made to China and India over the last few years including having a full service R/D center in Bejing, i only expect the ASIA number to grow and the cost reductions acheived in these markets should make them more competitive in other areas.
I feel that the reason that they want to focus on Enterprize products is their joint ventures with Microsoft and IBM and the potential opportunities that would present against Cisco who have 65% margins in their area of business.
MEN offers leading edge tecknology and some nice orders but their sales have been flat for the last 3 years with small losses. So i think Mike Z. is demanding that the division starts turning sizeable profits or Nortel will use the money some where else. Even if their sales drop by 4% this year Nortel will still do 10.5 meg. Not bad in an ugly market. The big question mark will remain the banking crisis and liquidity over the next year though... It is going to be an interesting Q 3 conference call.....

Word is NT have been a huge boat anchor to the MEN business (particularly the new booming optical opportunity presented by 40G/100G). Apparently if this business was with a viable institution they would be doing much better, with much better margins. Apparently the MEN executives wanted out of Nortel. That doesn't say much about NT? Apparently MEN only started selling 40G this year in the spring, so the three year comment is really not relative to the current situation.
The cash cow at NT is CDMA, to this day. Without that business they are out of business, regardless of how well the enterprise division does or what the perception is of that division. NT will not keep CDMA since it is not going to be the behemoth it use to be and year after year it will decline, except in China where they want the business.
The rumour about Eric buying CDMA is viable, but I think that is all they would want.
Let's say this about NT. If you were a betting man would you actually put money on them given everything that has happened. There has been no turnaround there. Layoffs and selloffs continue/increase. Sure they are still a 9 to 10 billion a year in sales giant, but to really believe they can turn the corner you either have to be an eternal optimist, an employee with a golden parachute and some inside guarantees or an idiot. Certainly not a realist. It is a huge gamble to have faith in them. Could it pay off. Sure. Will it? Like I said, you plays your money you takes your chances.

I agree with you on all your points on the 40/100g opportunities and with a investor by themselves MEN would probably do OK. That division certainly has been posting more wins than any other group lately. That said I feel that management wants to see the division more profitable and is prepaired to make them so or move them. Maybe short sightness on their part but who knows...
CDMA will do well in China and India for the next few years with services of course. I think those governments will continue to reward company's like Nortel for their investment there. Hopefully LTE should kick in by then. From an operations stand point and concerning the reduction of their liabilities, i think they are in a better poition to survive now than ever before. As for layoffs they still have to execute on the final stages of their 2007 and 2008 restructuring plan which will mean more staff reductions or transfers. This is suppose to be concluded mid to late next year.
Even with running 10 billion a year sales and with no large liabilities to deal with until 2011 i feel they have a good chance to turn the corner and start posting some decent returns. Their major concern still has to be consumer spending and industry inferstructure upgrades that will be significantly restricted because of avaiable liquidity over the next year..
Yes they are a gamble but i though it was safe with Lehman Bros, AIG, Washington Mutal, etc.... One thing is certain these days....there are no sure investments it seems..

NT are going to sell their Long Term Evolution Business. Somebody else with money will make it popular or buy what is left of it in a few years. They are apparenlty well ahead of the competition at this time but when it becomes viable in a few years, they won't be ahead anymore. They'll be behind as usual because of the way the execs and BOD handle the pancake mix. One big thing you are failing to mention here. NT has more DEBT than A/ The market cap of the company B/ Cash in the bank and C/ The combined worth of all their assets.
That in itself is very disturbing. They are carrying a large mortgage. I was told their situaton is analogous to someone owning a home that has a 4.5 billion dollar mortgage, but the owner can barely make his monthly mortgage payments to the bank so much so that the interest charges for the monthly mortgage cannot even be paid and the 4.5 billion dollar debt keeps growing. That is what might be happening to NT today? What adds to their debt. Poor economic conditoins. Cost cutting by the competition they cannot compete with. Outsourcing. Layoffs. Inability to get rid of overpaid execs, managers and employees in many cases while not rewarding and recognizing the competent ones enough.
If Nortel sold everything they have they probably still could not pay off their current debt. How many successful companies operate like that. Sure they do the 9 to 10 billion in sales and have huge customer installed bases of all kinds all over the world, but shrinking with the wrong strategy means sinking with the wrong strategy.
Simple as That.
For the sake of NT employees it would be good if you are right, but I think you are wearing rose coloured glasses for whatever reason?

If Cash-to-Debt Ratio is an important measurement for you, then perhaps you should take a look at IBM. The data from their 2007 Annual Report shows:

(expressed in millions of $)
Short Term Debt - 12,235
Long Term Debt - 26,066
Pension Liability - 3,258
TOTAL - 41,559

Cash - 14,991

Looks pretty ugly doesn't it based on that one single measurement. Of course there is a bigger picture, unless it is about Nortel.