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Ethernet equipment

Nortel Plunges on New Forecast

Nortel Networks Ltd. shares are down nearly 40 percent on the company's lowered outlook and the news that it wants to sell its Metro Ethernet Networks (MEN) business.

The MEN division includes Nortel's optical business and its carrier Ethernet work, including its Provider Backbone Transport (PBT) technology. (See Nortel to Sell Carrier Ethernet, Optical Biz.)

That's big news, but so is the lowered forecast. After predicting single-digit sales growth this year, Nortel is now saying its 2008 revenues will be 2 to 4 percent less than the $10.95 billion it reported in 2007.

Nortel shares opened down 21 percent this morning and have continued to fall. At press time, Nortel was trading down $2.07 (39.1%) at $3.23.

An early sign of trouble came last month with Nortel's second-quarter earnings, highlighted by soft CDMA sales. In reporting that news, though, Nortel had insisted it was still prepared to meet its 2008 targets. (See CDMA, Charges Knock Nortel.)

Nortel's MEN, which comprised 14 percent of 2007 sales, is arguably showing some promise. While PBT -- known as PBB-TE in IEEE circles -- remains an issue of debate, it's certainly piqued some interest. And while Nortel isn't leading the 40-Gbit/s optical market, it seems to be building a good reputation there. (See Nortel Rolls On With 40-Gig.)

— Craig Matsumoto, West Coast Editor, Light Reading

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inauniversefarfaraway 12/5/2012 | 3:31:49 PM
re: Nortel Plunges on New Forecast This didn't happen overnight. The best way to summarize what has happened (and will continue for much longer than tolerable) to Nortel is that this is the -long- culmination of rewarding bad behavior. It sounds simplistic, but this is it.
Doubtful that much will remain to sell for value. Nortel has always allowed desireable divisions to wither on the vine until sold at a loss. This is evidenced by the statement that funding for the "for sale" division will be maintained. They should instead consider bridge selling.
Even cheerleading analysts are referring to the division as the crown jewel, likely a desperate attempt to save their investment and get something for their shareholders. It is a contradiction in terms, only adding bad behavior on top. This will only prolong the agony.
It would be ideal to have a merciful end to this death rattle. However, the agony will likely continue with much denial and thrashing about.
Nortel brass is the only thing left in the company, since it hasn't managed to build on their heritage, what expertise do they have to sell? Is there another company that needs some weight loss? Who would wish Nortel onto a prospective suitor?
materialgirl 12/5/2012 | 3:31:41 PM
re: Nortel Plunges on New Forecast If Lehman Brothers can disappear overnight, so can NT!
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