Nortel Networks Corp. (NYSE: NT) is trading higher today on news reports that it has received three offers worth nearly U.S. $1 billion for the company’s Metro Ethernet unit. What is interesting is that the company is apparently still trying to determine whether its best route to profitability would be to sell more of the company.
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