Andrew Wahl: A gloomy outlook for Nortel
- April 30, 2008 7:48 AM |
- By Michael Hlinka
Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).
Andrew Wahl is the Business Network's technology columnist. He is a senior writer at Canadian Business magazine.
(Listen to the original audio)
Stock market predictions are not my thing. But I'll go out on a limb here and tell you what to expect from Nortel Friday morning, when it reports its first quarter financial results: not a whole heckuva lot.
Analysts certainly aren't hopeful. Not one of 19 analysts who follow Nortel think it will report a profit. On average, they estimate a loss of 14 cents a share, and essentially flat revenue growth from a year earlier.
Of course, in a strange way no news is good news when it comes to Nortel. It doesn't do much for the stock price, though. It's down about 45 per cent this year already-and that's after the share value was cut in half last year.
The most investors can hope is that CEO Mike Zafirovski will report that telecom carrier spending is holding up well, despite the rocky U.S. and European economies. It's a tough business to be in right now.
Ericsson's results last Friday were solid, but the wins are not coming easily for Nortel. So while Zafirovski is restructuring Nortel to improve margins, and even rejigging its R&D operations, nothing is fueling growth yet. And that is the marker of a bonafide turnaround.
Now, Zafirovski did say this would take three to five years. But he's in year three now. And there are not a lot of signals that Nortel's engine is revving, leading some people, even potential customers, to question whether the company will be around five years from now. That's not good buzz.
Several analysts even want the company broken up, like Motorola's plan to spin-off its troubled mobile phone division. Others think Nortel and Motorola should merge in some way.
But Zafirovski is unlikely to do anything rash, despite how it could help the stock price in the short-term. Investors will just have to wait.
And you never know, happy surprises do happen. Celestica, another former Canadian tech star that nearly imploded, announced better-than-expected results last week. Of course, it doesn't sell telecom equipment. But with Nortel, you take your glimmer of hope wherever you can find it.
-- For the Business Network, I'm Andrew Wahl, in Toronto.
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