A Nortel (NT) Tie-Up With Motorola (MOT): The Next Alcatel-Lucent
Nortel (NYSE: NT) and Motorola (NYSE: MOT) are in negotiations about putting together their wireless telecom equipment businesses. According to The Wall Street Journal "If consummated, the talks will create a joint venture that likely will have sales of about…
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Nortel (NYSE: NT) and Motorola (NYSE: MOT) are in negotiations about putting together their wireless telecom equipment businesses. According to The Wall Street Journal "If consummated, the talks will create a joint venture that likely will have sales of about $10 billion."
Nortel has total revenue of just over $11 billion, so half of its assets would go into the JV. But, Nortel has $3.8 billion in long-term debt and had operating losses in two of its last four quarters. The unit that houses Motorola’s network equipment operation had revenue of $2.7 billion last quarter, but its operating income fell to $192 million down from $223 million in the quarter a year ago.
Wall St. does not think much of Nortel. Its stock has fallen from a 52-week high of 31.79 to its current price of just above $11. Over the last year its shares have done worse than shareholder-bleeding Alcatel-Lucent (ALU). By comparison, Motorola’s stock performance has been excellent.
The telecom equipment business is not terribly attractive now. Not only has Alcatel-Lucent (NYSE: ALU) done poorly but the division of Ericsson (NASDAQ:ERIC) which operates in the industry has had a bad year as has the JV between Nokia (NYSE: NOK) and Siemens (NYSE: SI).
Desperation clouds the mind. Motorola wants to get shareholders, especially Carl Icahn off its back. Perhaps it will sell its largest operation, handsets, and get a good price. But, a merger of two weak operations yields no one any benefit.
Douglas A. McIntyre
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
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McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.