Nortel’s 2009 Prospects

By Mark Evans | Published: January 2, 2009

One of the comments on my ’09 predictions post earlier this week was my failure to talk about whether Nortel will survive in 2009.

In hindsight, I probably should have made survival one of my predictions but the reality is it’s a near-impossible thing to predict these Nortel’s continued struggles and the economic landscape.

As a flag-waving Canadian whose entrenched within the technology community, there is no doubt that I would like Nortel survive and maintain its status and the country’s flagship high-tech company. In an ideal world, it would be great if Nortel could right itself strategically and financially even it means becoming a much smaller company.

At this point, however, it’s difficult, if not impossible, to know whether Nortel can become viable any time soon. There’s just much uncertainty surrounding it. Will Nortel be able to sell the metro Ethernet business for enough to make a difference? Will carriers around the world start buying again? Will Nortel’s CDMA business be able to maintain its golden goose status for a few more years? Will Nortel ever be able to become a solid player in the enterprise market?

There are so many questions that still needed to be answered, which makes the crystal ball a little cloudy when it comes to predicting whether Nortel will survive or not.

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  • TongueInCheek

    re: your comments on CDMA business.

    With the rapid fall of Sprint, the very tight credit markets and low consumer confidence which could easily reduce Wireless ARPU, the majority of the Wireless market is at risk, not just CDMA. I think that Emerging Markets will continue to grow, while mature markets slowly evolve to 3G and 4G based on user demand. However, this will likely translate into a total market revenue decline.

    With Huawei being backed by the Chinese Government, it will be interesting to see what happens. I however think that 2009 could easily be a year in which we see some consolidation in the Wireless Equipment Providers market with the most likely candidates being Nortel and Motorola.

    The tipping point to get this started could be the decisions Verizon makes for their LTE infrastructure. I think they will choose 2 or 3 providers to mitigate their risk and keep pricing as low as possible through this competition.

    Ericsson and Nokia-Siemens are generally weak in CDMA which represents around 450 Million Subscribers. IF we assume that 25% of these subscribers evolve to LTE over the next 24 to 36 months, is that 100 Million user base enough to trigger either Ericsson or Nokia-Siemens to make a play on a current CDMA specialist? That's something I will be watching this year.

  • broadbandbill

    We ALL want to see Nortel ‘Survive and Thrive’ but I, for one, can’t see how; the math is just not there…–bb

  • mikez

    Wall St predicts 10 companies that won't make it through 2009, NT is on the list
    http://www.247wallst.com/2008/12/companies-that…

  • broadbandbill

    Well, do you agree or disagree? .. — (Fake) bb

  • protospherical1

    Now at around 2 cents extreme presplit, NT lost around 99% of its stock value this year alone …and the news is not getting better but catalyzing for the worse.

    A far cry from when last neared folding at 43 cents before the largest fraud settlement in their country to compliment their largest pension deficit, followed by endless contradictions.

    Who can believe what credible and transparent protected Nortel claims since their forecasts of single digit growth and $20 buying opportunity around a year ago to 3 to 5 year fixes 3 years ago, to downplaying folding after hiring bankruptcy lawyers today… like what ever changes there?

    Who can doubt unrepentant Nortel meeting a 52 week low with news they have bids for MENs, but they were delaying pondering these bids at twice the anticipated value… heh…sure…usually the most obvious is the most truthful here, what bids, talk after they are sold not before I say.

    With their transparency and credibility, we are forced to draw our own conclusions from the most obvious.

    What can they possibly do to make up for what analysts termed their “cash cow”/”gravy train” CDMA's decline alone. CDMA accounted for almost all their earnings (80-90% EBT)., that's right almost all! Given they were already losing money for a decade they had to resort to print billions in Nortel paper and selling off so many assets to just survive this long, Now with CDMA an area that accounts for almost all of their profits in decline, forget it, the death spiral has just dramatically accelerated to overkill as the stock nosedives.

    Add the exodus of customers leary they will be around, or suppliers being fed their downplaying researching bankruptcy and they must do something at some point, the most pressing question is just when.

    Who says they have another year or so paying interest given this rate of decline? Nortel? With their endless other contradictions and credibility?

    The Business Network indicates “inevitable bankruptcy” as per analysts and that shareholders will get zero like Mark Sue's targets. Moody's also warns like Altzman's score right off the chart, we hear increasing talk of folding right down to Nortel hires bankruptcy lawyers and delisting announcement:.
    http://watch.bnn.ca/#clip120371

    Will they fold before the 15th to preserve cash when over 100M is due or keep milking it to zero given they can not restructure lacking financing in this climate where a traditional bankruptcy is anticipated.

    Bankruptcy is overkill at this stage, They are lucky they survived this long with all their political and economic power. Analysts feel Nortel will not survive as Nortel hires bankruptcy lawyers. Ex Marconni's Binning at the helm after so many insider only CFOs where again perhaps the most obvious is the most truthful here.

    The only question is when will they throw in the towel… when is the best time. And for who…

  • cwlh

    I think “…Canadian whose entrenched…” is a misprint for “…Canadian who's entrenched…”

  • AcrimoniousAl

    “Huawei being backed by the Chinese Government” could cause some commotion. However, it should be
    noted that Huawei may also be backed by Admiral Owens and his “investment group”:

    Bill Owens: Telecom Wheeler and Dealer

    “According to the Ottawa Citizen, ex-Nortel CEO Bill Owens is part of an investment group looking to buy a majority stake in Huawei’s fast-growing wireless handset business”

  • TongueInCheek

    “Will they fold before the 15th to preserve cash when over 100M is due…”

    Think about it for at least a minute. If any company in the world had a payment that represents 3.85% of their cash on hand, why would they declare bankruptcy to avoid that payment?

    That suggest is plain silly and obviously motivated by pure hatred. I highly doubt that Nortel will declare bankruptcy given virtually all analysts have assumed this payment within their cash use projections. Clearly you want to see them destroyed, but many of your comments and suggestions are beyond any form of basic business reasoning.

  • Nortel watcher

    TIC,
    I agree with you that no company considers BK as an option to avoid an interest payment equal to 4% of their cash on hand; however, the context in which Proto is making the statement refers more to the amount of time that keeping such monies will represent to NT as a lifeline.

    Consider Nortel is estimated to be burning $2M per day and hasn´t declared a quarterly profit in years, parting with $120M on top of what they are already parting with in their normal course of business & add to that the restructuring costs, it doesn´t seem so lighthearted anymore to cast it off as just 4% …..

  • protosphere

    I question whether this will be an effort to preserve cash, not that they will given they can finance in this climate to restructure with anyways.

    The will burn $250M this quarter and with a mass exodus of customers fearing they won't be around hiring bankruptcy lawyers do they really have a year of cash left with their costs? “hemorrhaging cash”.

    Analysts see what they term “doomsday” scenario as a traditional bankruptcy in the link above /not folding to restructure lacking financing.

    Being silly or motivated beyond basic business reasoning has been proven by optimists instead who accuse proven critics of hatred. We warned of CDMA hit, insolvency, and many other issues well before they transpired by this contradicting company we are not in live with.

    Nortel has lost around 100% of its value this year for good reason TongueInCheeks and hardly worthy of cheerleading no matter what lending suspicion to where the vested interest lies, for shareholder or employee who Nortel has not done well for in all fairness here.

  • protosphere

    I can not understand your post or what you are trying to say but everything you post evolves worsening bad news.

    Sprint like Verizon is cutting back.
    Nortel is no longer Verizon's largest supplier but Verizon is still Nortel's largest customer.
    Huawei is increasingly eating its pie latest news reports as are others.

    Nortel announced seeking to derisk LTE as they did long boasted WiMax. (LTE we maintined was a punch line having sold 3G/UMTS to migrate 4G customers from)

    Aging CDMA analysts called their “cash cow” or “gravy train” accounted for almost all their earnings/profit (80-90% EBT) and it is in seep decline going out to pasture. They downplayed this as they did folding hiring bankruptcy lawyers so as not to spook suppliers, somehow this does not seem honest to me.

    Above this…

    They can't even sell MENs to live another day and I suspect Carrier and Enterprise are on the auction block too.

    Even the bids for MENS that we questioned why stall if coming in at twice the value are now reported low balled in absence of a bankruptcy judge. This news lifted the stock from making new lows from 20 cents to todays 29 , still bad at around 2 cents extreme presplit losing around 100% of its value this year.

    Take a look at their stock chart to see what you “think” are “likely”, “easily”, “IF”, etc… and connect the dots amid ongoing news.

    I do not know what you were and are trying to project in optimism no matter what news prevails but does it does not strike me as truthful.

    They have not done well for shareholders or employees any favors so who else is now motivated to be optimistic with all that is undeniably before us? Optimists have not been correct over the years either. Sorry, time to say into the cornfield you go.

  • serge

    as some people say
    it is all a money Game, the Board of directors, the CEO’s they have all contributed to Nortel disaster while making Tons of Cash, pushing the company (the Public Money) into a Hole so deep that it will not be able to come out of it

  • yes4aapl

    TiC
    Read your reply to Proto once again and say what do you see in your behavior.
    I understand that you would have the upper hand if our cool estimations and speculations turned out to be just winning and hatred motivated posts.
    Nope
    Time and time again we provided most reliable information and speculations. We were protecting our interest as investors when you attacked as constantly with the names like terrorists, haters and other…
    and promoted NT stock and Nortel way of doing business.
    We explained it what the Jan 15 payment was all about.
    times 4 it saved Nortel $400 mill in 2009.
    You on the other hand showed your unfounded optimism, delusions and paranoia that we are here to destroy Nortel.
    Nortel lost the competition with Huawei and ZTE on top of losing public trust because mismanagement and frauds.
    It's your reply to your current post .

  • yes4aapl

    TiC
    Read your reply to Proto once again and say what do you see in your behavior.
    I understand that you would have the upper hand if our cool estimations and speculations turned out to be just winning and hatred motivated posts.
    Nope
    Time and time again we provided most reliable information and speculations. We were protecting our interest as investors when you attacked as constantly with the names like terrorists, haters and other…
    and promoted NT stock and Nortel way of doing business.
    We explained it what the Jan 15 payment was all about.
    times 4 it saved Nortel $400 mill in 2009.
    You on the other hand showed your unfounded optimism, delusions and paranoia that we are here to destroy Nortel.
    Nortel lost the competition with Huawei and ZTE on top of losing public trust because mismanagement and frauds.
    It's your reply to your current post .

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