Nortel’s Market Cap Sinks Below $1-billion

By Mark Evans | Published: October 3, 2008

Nortel shares slipped to $2.01 earlier this afternoon, giving the company a market cap of less than $1-billion ($997.7-million to be exact).

To be things in contrast, Nortel had a market cap of $398-billion at the height of the telecom boom in September, 2000.

Question: Is Nortel ripe for the picking? Putting aside the $4.5-billion of debt and the money-losing businesses, does it make sense for someone to snap up Nortel given its declining value?

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  • Anonymouse

    At this point, any company wanting to buy Nortel would just wait for the final bell to toll… Once NT is bankrupt, the pieces will go at a discount.

  • upupup

    Any news on why it is slipping today?

  • protosphere

    The underlying factors to Its declining value might be exactly is why it may becoming less attractive to be bought.

    Trading at $2.01 or 20 cents presplit is less than half when they last neared folding.

    Who would buy a company heading to insolvency let alone during this economic climate.
    They were as lucky to sell UMTS as Lucent was to be acquired earlier.

    I am not sure the money losing business and debt can be put aside when assessing a buy. After all, who would pay to lose money, and what would they be buying even if they did have credible internal controls that are being monitored in repair by the SEC?

    1 billion sure sounds cheap for even 8 billion sales but what good are they losing money. To lose even more? And big bucks at that, billions is not chump change.

  • The Psychiatrist

    Amazing the way a manipulated stock price can trigger a dooms day scenario.

    In time this drop will end up exposing the reasons why it is currently trading at this level,it 's like shaking the twig as opposed to the tree.

  • Nortel-don't -go

    Does this mean Mark should maybe hold off on that new AAN newsletter??

  • Nortel investor

    Yaa.. It is a bloody miserable stock market. In the last year ten of trillions of dollars have evaporated in value. Each market around the world is down between 30 – 40 % and that on the really good stuff credit A and better.
    These guys should take a 100 mil and buy some stock back…

  • broadbandbill

    Can you give us some insights on the reasons why? Who's manipulating it?…–bb

  • Eric B

    Mike Z’s mantra from day one has been cost cutting. He focused on shedding non profitable business and instituted the six sigma programs. We never saw any real elements of aggressive growth and product diversification strategy to grow the top line. I believe he missed a huge opportunity to take Nortel fundamentally into a new direction, perhaps expansion into new industry or new business models. After 3 years now, we have a company that is still a cash burning engine with no profits insight and an industry with increased competition and huge uncertainty.

  • Clint

    Proto.
    Your reasoning is pathetically flawed.
    Let me simplify it for you.
    Yes NT is an 8 to 10 billion a year company in sales with huge installed bases all over the world which means sales, service, support, h/w upgrades and network expansion or s/w upgrades of existing NT gear with more NT gear.
    Now ..the company has a market cap less than a billion.
    They have a debt of what is it….4.5 Billion?
    They have something like 3.5 Billion in cash.
    If they take that cash plus sell their assets they easily cover their debt.
    A new company buying NT for 5 Billion..let alone the market cap of 1 billion would be gaining a huge advantage and it would be a STEAL.
    You get it?
    If someone else bought them it is no longer a money losing business.
    You get it?
    What the F**k are you talking about and where is your rational that if somebody bought NT for a billion (which is ridiculous) that it would not be a STEAL or a huge investment that would grow in favour of the purchaser.
    Let's hear it?

  • broadbandbill

    Actually, he did; Remember ‘Growth Imperatives’ known as IMS, WiMAX and IPTV (PR; March 10, 2006). Not a player in any of them. Furthermore, his grossly under-qualified CTO ran WiMAX straight into the ground (amongst other things)…–bb

  • Idea!

    Assuming Nortel gets 1.5B from selling MEN, it should spend 1B of that to buy all of its share from the market . Then Nortel can stop all kind of public trading in the market for couple of years! That will be fun to see.

  • protosphere

    They do not have $3.5B cash how did you selectively quote this when even Nortel anticipates around $2.6B tanking cash balance by now. Were you clueless to this or selectively misleading current cash balance with intent because there is quite a difference between 3.5 and 2.6B, more importantly the rate of decline you see in such a bargain.

    Are you neglecting their catalyzing death spiral, trading at less than today compared to when they last neared folding at 43 cents extreme presplit.

    Forward looking benefits are usually a motive to buying any business. Look how they must try and sell even more assets for even more layoffs if you can. All the sales in the world do no good if they can't afford operations, why do you think it is trading at 20 cents presplit headed to zero?

    And to call my reasoning “pathetically flawed” from over 95% of its value vs. posting happy talk with personal attacks insulting proven posters? May I suggest it is not my reasoning that is pathetically flawed, I even know their current cash balance better than you, and I do not lie.

    Revenues mean nothing with losing earnings, they have the largest pension deficit in Canada, their largest asset is an expiring tax credit, a multiple in debt/liabilities to rapidly declining cash, lousy credit rating and outlook, credibility, etc, does not fool the markets. The name of the game is earnings, show me the money for last decade, not exhausting assets/ selling Nortel paper to live another day because they can not sell Nortel product.

    People do not buy bankrupt companies. Its cap is around $1B from its peak of 400B, headed to become but a fond memory in the not too distant future… this is the pathetic reality of it all, not happy talk that its a “steal” of a deal when losing this much money this long and now this fast.

    They even bought losing revenues, No WiMax any more than LTE having sold UMTS orders declined 25% last quarter and customers can go on strike all at once on analyst said. CDMA that accounts for almost all their earnings in steep decline when already losing money for a decade, etc… It is endless and you claim it is not only a bargain but a “steal”. So why hasn't anyone stolen it yet Einstein? Hmmmm?

    …and you call my reasoning “pathetically flawed” claiming selling this tanker for a whopping $5B is a STEAL to lose more mega bucks… with a $1B market cap, sure.. try finding a buyer

    A multiple in debt & liabilities to cash, losing money at escalating rate with worsening outlook and endless contradicted aspirations. They can't even sell MENs let alone the whole car wreck.

    Don't expect me to respond any more of your vulgar and profane challenged posts. Your happy talk and accusations accompanying personal attacks on endlessly proven posters are beyond constructive debate or argument. Good bye Clit. One of us are pathetic and I do not believe it i me,

    As SCTV use to say into the cornfield you go … =)

  • Nortel investor

    IDEA
    Nice thought but won't happen. 65% of the shares are held by institutions, around 5 % by insiders, and some by me…..and i will never sell!!!
    Besides i think MEN is going to stay with Nortel and there will be a restructuring on how it will be handled. NO one is their right mind will buy MEN today. Even Warren Buffet, because he wants a minimum 10% DIVIDEND return per year. That division is not making anything right now so it's restructure and move foward…

  • Clint

    If somebody has deep pockets they can buy it.
    It's all about who buys it.
    Nothing more.
    Nothing less.
    Make no mistake.
    It will either be sold, chopped up or shut down.
    My money is still on it being sold.

  • Clint

    Check your facts photo…they do have at least 3.5 Billion in Cash. You would not know since you are just a basher. I have inside sources and they have publicly stated they have this much Cash.
    Thing is they have 4.5 Billion debt.
    Still, not too bad of a ratio.
    You sound you like have a language problem.

  • Nortel investor

    WOW
    THis sounds like a good time to go to the fridge and get a beer…..
    Just a few thoughts………..
    Nortel expects their cash to be about 2.6 B for 3rd Qtr. and 2.9B for Q4 but that was on Sept. 17th. before the banking crisis blew up. So now , who knows….. That is why i think MEN will never sell and it is restructuring time again…
    As for their pensions, they have made significant improvements over the last 3 years in this area…
    year 2006 it was $1,965 Bil deficet
    Q2/2008 it was $1,012 ' ' ' . So they are no longer on the honor roll for the worst pension plan deficet in Canada. Still have a ways to go, but considerable progress over 3 years.
    That's where cash has been going over the last 30 mths. is paying off the liabilities.

  • Nortel investor

    OK … a beer it is.

  • Eric B

    Understand that he pushed IMS, WiMax and IPTV, but my point is that we needed to perhaps expand into some other areas besides telecom. I believe by not having a good solid background in telecom hurt Mike Z's judgement.

    Same is happening with LTE, we are putting all our eggs in one basket. LTE is still 3+ years aways, and WiMax is already here.

  • yes4aapl

    Thank you Proto for your hard work and sharing your DD on NT with us.
    Chart does not lie.
    NT fell down from $1200 to $2!
    What is to argue about?
    When I said in 2004 that NT would be sold for 99 Cents evry one /loong/ wanted to kill me.
    Today it would be the dream price!
    $9.90 after rsplit.
    and selling the best assets for what?
    To resurrect CDMA?
    CDMA is dying of natural causes.
    Too bad that Mike Z decided to exit 3G.
    GM 20% market share model did not work for NT.
    GM Six Sigma kill innovation.
    Every farmer knows that there is time to invest_plant the seeds before the harvest.
    Mike Z failed many times on anything he tried!
    I don't understand why he is still in charge of 33k employees and $3 bill in cash company?
    Why CTO made so many wrong decisions?
    What is he doing? What is his success he can put on his new resume?
    Mike Z said at the beginning that he will risk his carrier by taking CEO position.
    He was right. He risked and he lost credibility.
    He will retire with shareholders money /and he knew that/
    and look Proto who is bashing you on this board.
    Clint and all his

    aliases

    * Realist
    * SexyBeast
    * Sexy Beast
    * Plastered
    * plastered
    * Limeoid.
    * Hogan
    * Daniel
    * JoeFriday
    * Clint
    Should we ask Clint why he posts with so many aliases?
    Nope, let him play the monkey games.
    Realist lol!

  • broadbandbill

    Eric B,

    “Other areas besides telecom’…is exactly what was represented to the CSO, CTO and CEO; a comprehensive SOA-based telecom software architecture that went way (WAY, WAY) over their heads…Now, the CTO is all SOA-friendly w/IBM giving away the store and smart money knows it. IDIOT!!!!–bb

  • Another Nortel Watcher

    Eric B,

    I agree with your main point. MZ and his cronies (including Richard Lowe) don't know much about current telecom beyond the buzzwords and what they read in the trade magazines and that's why they're floundering. They don't know enough to make the right strategic decisions and they don't know enough to maintain the respect of the tier-1 customer base.

    Nortel is dead unless these guys are flushed.

  • MyHeadHurts

    Food for thought… http://papers.ssrn.com/sol3/papers.cfm?abstract…

    A good analysis of the effect of reverse splits on companies futures.

  • Eric B

    good point Broadbandbill. I forgot about SOA.

  • more

    I hear PingTel is considering buying Nortel in a 10 for 1 reverse stock swap :-)

  • Observer

    Is Nortel ripe for the picking? Putting aside the $4.5-billion of debt and the money-losing businesses, does it make sense for someone to snap up Nortel given its declining value?

    It does but it won't happen. Few companies have the cash in this environment and cash is a premium so giving that up wouldn't be smart. All things change accordingly during crises. Nortel isn't insolvent like most financial companies and does have hard assets and future value. As the slowdown continues, there will be lots of value investors that come out of the woodwork at these levels. The economy will recover in a few years. Nortel would be wise to take more shares out of float just to cut down on the shorting/hedging community. Issuing all those shares for the settlement wasn't a good idea.

  • Observer

    In the first few days of each quarter, employee sales via the stock purchase plan occur. Most people usually take their free 15% gain and walk. Should be a bounce come Monday because of the bailout.

  • The Mole

    Expect the unexpected , nothing is certain in this world but the days of Nortel as is are gone . It's all 4 sale , sold as a whole the new owners (maybe Arab money ) will then split it up . Management Buy-out of Enterprise , MEN to Huawei or ZTE , Wireless assets to Ericsson . LG buyout LG-Nortel .

  • exnt

    I think we need to apply the “Britney Spears Rule” to Nortel. Remember when Britney was so obviously mentally ill that some publications stopped reporting on her, our of pity and/or ethics? Now that Nortel is below $1B, lets just agree that they are a pitiful company with horrible execs but a lot of decent working level people. Lets just stop the bashing, it's like kicking a dead horse. just an idea……….

  • Clint

    Hey Bobbing for apples.
    You and protountypical are just two bashers.
    Come out and say so.
    All you two can do is pine for NT bankruptcy so people can be thrown out on the street.
    You don't care about the people that work there.
    You two are a disgrace.
    Nobody takes you two seriously.
    You offer nothing concrete or reliable.
    Bottom line.
    Company does 8 to 10 billion in sales annually.
    Huge installed customer Bases.
    3.5 Billion in Cash.
    4.5 Billion in Debt.
    These are the facts.
    Anybody in their right mind can see what options they have, what leverage they have and what negatives they have.
    I personally think they still have too many employees. They need to get rid of the deadwood at managment levels and employees who make no contribution. Such as admin, paper pushers, SG@A, and engineers stuck on projects that are not currently making money or have an uphill battle to even make money in the future.

  • broadbandbill

    Do not recollect anyone ever say anything negative about Nortel’s engineers on this blog; they are the real world-classers…–bb

  • protosphere

    Name calling “bobbing for apples”, personally attacking “language problems”. impose mean spirited ill will towards employees, etc., is all unwarranted where I suggest you should assess your own cognition process.

    How can you say “I have inside sources and they have publicly stated they have this much Cash”. How can you post insults and bizarre fabrication contrary to popular knowledge claiming inside info.

    Relative to yes4's endlessly proven insight, the market begs to differ with you claiming we are “just 2 bashers” than proven critics at 20 cents presplit over the years you argue with us stalking us everywhere we post and personally attacking with many IDs..

    Your claim is false and misleading yet again:
    “3.5 Billion in Cash.
    4.5 Billion in Debt.
    claiming “These are the facts”

    These are not the facts, even your colleague above has even corrected you with $2.6 to $2.9B cash by end of September as per Nortel. So who at Nortel fed you 3.5 because I do not believe you?

    $3.5B minus 2.6 is almost a cool billion, get your facts straight before you post.

    I don't know who your “inside contacts” are at Nortel but they have not provided you with reliable information or you mislead with intent, neither of which is not good for readers to remotely take what you claim seriously unethically cheerleading this dog like a relentless Nortel-holic over the years..

  • protosphere

    Nortel's engineers are top notch indeed, yes… this is true

    Even John Chambers highly praised Nortel's engineer to the hilt a few years ago on in an interview with Report on Business. He also stated at the time there are plenty yesteryear darlings that are simply gone today.

    I agree, their engineers they keep axing are not the bad guys.

    However I have my reservations about the execs in their crazy levelsthat are still there Owens termed “difficult to find” and the media termed “remaining silent under their counsel's advise” with fraud trials looming as the green team struggles and endlessly contradicts to what they are fed by god knows who in this mass orchestrated epic =)

  • protosphere

    “Nortel expects their cash to be about 2.6 B for 3rd Qtr. and 2.9B for Q4 but that was on Sept. 17th. “

    Ummmm nope. you misread or mis-state here, They expect between 2.6 and 2.,9B cash at the end of Sept/Q3. Not that this will increase by year end! That is wrong/false!

    “Pavi Binning, the company's chief financial officer, said Nortel's cash balance at the end of this month could be as low as $2.6-billion, or about $400-million less than at the end of June.”
    https://secure.globeadvisor.com/servlet/Article…

  • Nortel investor

    Hey protosphere
    Glad your back.
    I don't pay much attention to newspaper articles because of possible misinterpretations but i do to Nortel Press releases prior to conference calls namely “Nortel announces preliminary view of 3rd Qtr. and revised full year 2008 outlook”. If you go to the 4th paragraph of the release on page 1, it will confirm what I said… You can still retrieve that data as it is archived on their web site.
    Since Sept. 17, credit situations around the world have drastically tightened so i would not be surprized if Nortel's Q4 Cash numbers come in lower than 2.9 B because of delivery push outs, etc.
    Hopefully they can do the numbers they said …..

  • The Psychiatrist

    Name calling “bobbing for apples”, personally attacking “language problems”. impose mean spirited ill will towards employees, etc., is all unwarranted where I suggest you should assess your own cognition process.

    proto- take your medication like the Dr. presrcibed.

    You want to talk about cognition?

  • protosphere

    Thanks Nortel Investor, I found it., you are right.

    http://www2.nortel.com/go/news_detail.jsp?cat_i…

    Nortel says:
    “the Company expects its cash balances at the end of the third and fourth quarters to be between approximately $2.6 billion and $2.9 billion. It is anticipated that the third quarter cash balance will be closer to the lower end of the range due to previously expected one time payments and operating performance, with improvement in the fourth quarter ending balance. “

    I wonder if they are anticipating MENs sale as I can not see operations contributing so dramatically with CDMA decline.

    In light of this,. and my doubt in their ability to fire sell MENs too, I doubt they will making the higher end any more than $20 was a buying opportunity 2 years into this 3 to 5 year fix.

    I generally disregard anything they say since downplaying revisions on a restating a restated restatement that doubled estimates with a green CEO who violated contract signed on several written occasions while joining a company struggling to regain credibility. =) If cash comes in even lower than this come Q3, that too would not surprise me and, …well… yikes. =)

    Thanks again.

  • Nortel investor

    Hey… no problems…
    I don't think they would consider any MEN deal here either as it will take months to arrange and close and i do not think they are prepaired to give that division away at a discount. So it will probably be some adjustments…
    I would think on Sept. 17 they would have a pretty good idea of what backlog they will ship for their sales number of 2.3b. They already have 2.5 months of sales done so it will depend on the final 2 – 3 weeks of book /ship biz…
    Well lets all hope for the best…

  • eject

    hear customers are sidelining nortel from optical deals now.

    time to look for that eject button before this hits the ground. its not too far away.

    I guess when the execs talk about putting the light out, they mean it literally.

  • eject

    hear customers are sidelining nortel from optical deals now.

    time to look for that eject button before this hits the ground. its not too far away.

    I guess when the execs talk about putting the light out, they mean it literally.

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