Try asking Nortel workers how incremental the layoffs feel.  In bankruptcy filings, there are rarely any golden parachute packages nor any great layoff packages for fired workers.

What is more amazing than the malaise we have been predicting all along at Nortel are two key factors:

1. Mike S. Zafirovski is STILL the CEO…. he needs to go. Period.
2. Why this stock is still trading?  It represents nothing more than a warrant that only has value if everything goes in Nortel’s favor.  With everything going against it for the better part of a decade, why should things change now?

Jon C. Ogg
February 25, 2009

If it seems a bit early in February to get Cisco earnings, it isbecause the quarter ended on January 24.  Here are the estimates fromThomson Reuters (First Call):

• For the past quarter due tomorrow, estimates are $0.30 EPS and $9 billion in revenue.
• The current quarter is expected to end with earnings of $0.29 EPS and $8.75 billion in revenue. 
• For the fiscal period ending July, 2009, estimates are $1.34 EPS and $37.15 billion in revenue.

This morning was a pre-earnings upgrade from Stifel Nicolaus to "buy"from "hold."  And AmTech Cut it last month to "neutral" from "buy."

We will give much more detail chart analysis, options expectations, and other color in our preview tomorrow.

We also saw Juniper Networks (NASDAQ: JNPR) get hit rather hard lastweek after giving cautious guidance.  Itlooks down more than 20% since its report last week. 

For whatever it is worth, Nortel Networks (NYSE: NT) was a dead competitor long before it filed for bankruptcy protection.

Keep in mind that these estimates may change slightly between now andtomorrow’s formal earnings report.  We will give a more detailedpreview tomorrow.

Our take is that if the company can convince Wall Streetthat it sees some light rays of hope for a recovery after this summer, than traders will jump on the stock. We think this is avery tough sell and would find it odd that even Cisco can buck theentire tech and telecom trend by making too aggressive of statementsfor what lies beyond summer.  It’s possible and the company has pulleda rabbit out of the hat before.  We just think it is still too soon.But the good news is that the stock could easily rally as long as theresults and guidance are just not atrociously worse than what analystsare looking for.

Jon C. Ogg
February 3, 2009

• Aegon (AEG) Cut to Sell at UBS.
• Apple (AAPL) Cut to Underperform at RBC.
• BHP Billiton (BHP) Cut to Neutral at Credit Suisse.
• Canadian Solar (CSIQ) Cut to Neutral at Broadpoint AmTech.
• Casella Waste Systems (CWST) Cut to Neutral at JPMorgan.
• JA Solar (JASO) Cut to Neutral at Broadpoint AmTech.
• M&T Bank (MTB) Started as Underperform at FBR.
• Nortel (NT) Cut to Underperform at CIBC.
• Red Robin Gourmet (RRGB) Cut to Neutral at Piper Jaffray.
• Suntech Power (STP) Cut to Neutral at Broadpoint AmTech.
• Trimble Navigation (TRMB) Cut to Underweight at JPMorgan.
• Waste Management (WMI) Cut to Neutral at JPMorgan.

Jon C. Ogg
January 15, 2009

Nortel in its release outlines its relationship withFlextronics.  The company said that it hasamended its arrangements with Flextronics, which it calls its keysupplier. This gives Nortel "confidence thatFlextronics will continue to maintain the supply chain followingcommencement of the proceedings.." in reference to the bankruptcy.

Nortel has agreed to purchase $120 million of existing inventory byJuly 1, to make quarterly purchases of other inventory, and hasagreed to terms relating to payment and pricing.  This amendment isgoing to be subject to Canadian court approval. Certain arrangements with Flextronics will terminate in July.Other arrangements between the Lextronics and Nortel are tocontinue under their amended terms.

According to Flextronics’ most recent annual report,  Nortel had beeninvolved in customer reimbursements and was listed as a key customerfor the combined Flextronics and Solectron operations.

Earlier this week there was a report that Flextronics would lay off about 150 people in its Louisville location.

Flextronics shares are trading off by 8% pre-market on very thintrading.  Shares closed at $3.00 yesterday and its 52-week tradingrange is $1.23 to $12.17.

Jon C. Ogg
January 14, 2009

We have called for the ouster of its CEO.  Mike Zafirovski is oneof our 10 CEOs to go in 2009.   Hedid not effect any real turnaround when he could have and has now run the ship into the rocks.

This filing comes only one day before interest payments were due.While Nortel had $2.3 billion in cash at its last report and while ithad cash enough to cover these payments, the Canadian telecom equipmentmaker has some serious pension issues, has nothing but losses going forit, and faces what seems like endless losses ahead. 

Depending upon how you calculate its operating losses and cash flow numbers, the firm should still have $1 billion or more in liquidity.  What that number is in reality is still an unknown.  What is known is that Nortel is the newest of the big implosions.  It likely is far from the last.

Jon C. Ogg
January 14, 2009

According to The Wall Street Journal. "China Mobile Ltd. (CHL), the dominant carrier, would be assigned the Chinese-developed TD-SCDMA standard. The global standards WCDMA and CDMA-2000 are to go to China Unicom Ltd. (CHU) and China Telecom Ltd., respectively."

While US and EU equipment and chip providers will not make money from the local Chinese 3G standard, they could make billions of dollars providing chips and infrastructure for the global standards.

In the chip business, Qualcomm (QCOM), Broadcom (BRCM), and Texas Instruments (TXN) are all likely to provide components for 3G handsets. Nortel (NT) and Ericsson are large providers of infrastructure components as is Nokia Siemens Networks .

Motorola (MOT) is a large supplier of CDMA-2000 components.

Many of those companies should make money on the new Chines build-out, unless China tries to push all of the business to firms inside its borders.

Douglas A. McIntyre

The geniuses in management is also may sell its carrier networks and its enterprise divisions.  Maybe it can plugthe pension gap and declining business operations for a few morequarters with the cash.

Also, this upcoming reverse stock split is nothing to be excited about unless you are a short seller.  How many reverse splits in the lastdecade have been a success for the stock?

Is it any shock that a former Motorola executive in charge of Nortelwould restructure this company into the dirt?  Hell no it isn’t.  IfCEO Mike Zafirovski wants to help Nortel, he’d pack his office upand sneak out between Christmas and New Years.  He is one of our 10CEOs TO GO IN 2009.  He can sell this division, he can sell more andmore.  He has waited beyond the business cycle and now the sale is worth too little to make a difference.

Nortel is also supposed to have held at least some discussions with theDepartment of Finance and Industry Canada about assistance.  For banks,there is a TARP.  We have joked about the auto bailout being a CARP.In Canada, there could be a NARP. 

Our viewpoint hasn’t changed.  The company has waited too long andburned too many bridges.  Nortel may easily become No-Tel, and that iswith unit sales or not.

Nortel shares were up more at $0.33 early this morning, but now thegain is only 12% at $0.28.  Today’s news is really only cause for agap-and-crap scenario. 

Jon C. Ogg
December 23, 2008

24/7 Wall St. looked at some of the largest and most well-known companies, reviewed their SEC filings if they are public, analyst reports, and media observations about their businesses and picked ten that probably won’t be around at the end of next year. That does not mean that their brands will disappear, but these companies will have been dissolved as the world knows them now or working though the court system in the hopes of getting Chapter 11 protection and a chance at survival.

1) Chrysler already says it will be out of business by early next year. But, what does that mean. It is unlikely that its largest shareholder, hedge fund Cerberus, is going to throw good money after bad in an economy where US car sales are dropping 30% compared with 2007 figures. But, the Chrysler brand could be around. So could the brand of its Jeep division. Foreign car companies like VW and Honda (HMC) would love to get well-known operations without the baggage of debt, UAW contracts, and dealer networks. Chrysler still has some popular models including it 300 series cars and it created the minivan. Jeep is regarded as the grandfather of four-wheel drive. Watch Chrysler Motors LLC go away and some of its products move into other hands.

2) Sirius XM (SIRI) has traded under $.10 down from a 52-week high of $3.89. Reuters has reported that "Sirius XM faces some $1.1 billion in debt in 2009. Of that, about $300 million comes due in February." In the current credit environment, that probably won’t happen. There is a theory that falling car sales will undermine the sale of Sirius subscriptions. The company says that it does no better than break-even in the first year it gets a new customer though GM. But, a shrinking subscriber based is not good news for the satellite radio company’s future. Sirius will be out of business, perhaps before mid-year. Who picks up the pieces? The logical choices are a healthy car company like Toyota or a satellite firm like DirecTV.

3) AIG (AIG) may be the biggest mess of all the financial firms that the federal government has bailed out. Uncle Sam has given AIG $153 billion in loans. The theory is that the money gets paid back by the huge insurance company selling assets. Investors don’t seem very sanguine about that. AIG shares trade at $1.60, down from a 52-week high of $60.04. Congress seems less and less enamored of having a lot of money sitting in troubled companies. Watch for the new administration to get frustrated quickly and appoint its own people to auction off AIG divisions. Better to get something back than keep writing AIG checks.

4) Fannie Mae (FNM) and Freddie Mac (FRE) is two for one. They are both penny stocks, reflecting the fact that the Treasury has essentially taken them over, putting them into a conservatorship and pledging up to $200 billion to back their assets. With mortgage defaults rising, and home prices falling, that is not the end of the amount of money that the government will have to sink into the firms. Within a few months, the value of the common shares in the firms will be gone. The new administration may even decide that it does not need both companies. They can be replaced with some of their role going to the FDIC and the rest to one consolidated entity controlled by The Treasury Department which is already funding them.

5) Rite Aid (RAD) trades at $.35 down from at 52-week high of $4.16. The pharmacy company has over 5,000 stores and Wall St. does not expect it to be profitable in the foreseeable future. The chain is a roll-up of the original company and Brooks and Eckerd stores which it acquired. With a debt load of over $6 billion, the firm is likely to falter. Competitors CVS Caremark (CVS) and Walgreen (WAG) would be happy to pick up the pieces. Rite Aid recently announced poor quarterly numbers and cut forecasts.

6) The New York Times (NYT) has to repay $400 million in debt in the first half of 2009. It does not have the money. It plans to mortgage its headquarters, but it is uncertain what that will bring in an uncertain real estate market. The firm’s Boston Globe and regional newspaper operations lose money, so they will be hard to sell. NYT is controlled by the Sulzberger family which has super-majority voting shares. That won’t matter much when the company runs out of money. Another big media operation, perhaps News Corp (NWS) which owns The Wall Street Journal and The New York Post, will come in and auction off what it can and keep the flagship New York Times newspaper and NYTimes.com website.

7) Nortel (NT), the huge telecom equipment company, has already been mentioned as a firm which could file for bankruptcy. That may be a game to get creditors to cut down their demands. It could be that  a huge contraction in the industry which is also undermining the fortunes of competitor Alcatel-Lucent (ALU) is pulling Nortel under. Nortel keeps losing money and has cut about as many people as it can and still stay in business. With the need for its products and services falling as the recession grows. Nortel has a pension obligation which may approach $3 billion. Selling divisions in a poor credit market will be hard. A bankruptcy filing would let a court run an auction.

8) Pier 1 (PIR) trades down at $.32 from a 52-week high of $8.25. This holiday season will determine its fate. UBS recently made the comment that "We are increasingly concerned that a weakening macro environment will continue to weigh significantly upon sales at Pier 1 Imports and further undermine turnaround efforts at the chain.”  The retailer recently said that its same-store sales could fall as much as 18% during the current quarter. Long-term debt is $184 million. More losses mean debt service becomes a huge issue. No other retailer is likely to want the stores, so this is probably liquidation. The retailer’s latest earnings showed a widening loss and the company said it could be delisted.

9) Charter Communications (CHTR) has over $20 billion in debt. The cable business usually drives reasonable cash flow, but Charter has to upgrade its system to better compete with telecom companies. It does not have that money. Debt service is overwhelming operating income. Billionaire Paul Allen controls that company. The stock is down to $.15. Eighteen month ago, it was close to $5. Allen will get out while he can and sell to one of the other large cable companies. Charter recently said it is "exploring financial alternatives."

10) Hovnanian (HOV) shares are down by 70% over the last year. Recently, the shares have been as low as $1.70, putting the company’s market cap at $171 million. The housing downturn may actually get worse as unemployment and foreclosures rise. The costs of credit default swaps on the homebuilder are way. JMP Securities recently commented that HOV is a “bankruptcy risk” due to debt and exposure in the hardest hit real estate markets. A liquidation with Hovnanian would probably be an auction of land and unsold homes.

Douglas A. McIntyre

Stone Energy (SGY) Cuts production view for quarter. Drops to $8.47 from 52-week high of $73.96.

Nortel Networks (NT) falls to $.24 on concerns about bankruptcy against 52-week high of $16.07.

Take-Two Interactive (TTWO) Remarkably poor earnings and awful forecast. Sells down to $8.65 from 52-week high of $27.95.

Douglas A. McIntyre

Borders Group (BGP) No one buys books from stores anymore. Drops to $.56 from 52-week high of $11.67.

Neurobiological (NTII) Stroke drug trial gone wrong. Plunges to $.19  from 52-week high of $3.47.

Dixie Group (DXYN) No news, just selling. Off to $1.85 from 52-week high of $9.55

Douglas A. McIntyre