As Nortel turns the corner, can it stay independent?

Posted Dec 26th 2006 9:52AM by Douglas McIntyre
Filed under: Industry, Competitive Strategy, Cisco Systems (CSCO), Motorola (MOT), Nortel Networks (NT), Alcatel-LucentADS (ALU)

Very few investors remember that Nortel Networks Corp. (NYSE:NT) traded for over $800 (split adjusted) in 2000. The shares are now at $26, a modest recovery from recent lows.

The press is beginning to pin the "recovery story" label on Nortel. Barron's ran a cover story of the company's emerging potential. Forbes recently wrote "Has Nortel Turned Around?" In the Forbes story, Nortel's CEO, a former Motorola Inc. (NYSE:MOT) executive, said that the company is looking for acquisitions. It is an ironic comment, since Nortel should be on shopping lists of several other companies

Nortel's sales are over $10 billion. That makes it more than half the size of the recently merged Alcatel-Lucent (NYSE:ALU). Nortel's market cap to sales ratio is low at about one times, lower than Alcatel-Lucent and Motorola. And, if the company is turning around, its stock has not caught up. It trades well below its 52-week high of $34.30.

There are several companies that might find Nortel an attractive acquisition. The list would be lead by Motorola, Cisco Systems Inc. (NASDAQ:CSCO), and Alcatel-Lucent.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Tags: alcatel-lucent, cisco, motorola, Nortel

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Reader Comments (Page 1 of 1)

12-26-2006 @ 3:44PM

Roger Bauer said...

Interesting thought on Cisco being a potential acquirer of Nortel--the two have been rather bitter rivals over the years, and I'm not sure their cultures would mesh very well. Ditto for Lucent/Alcatel. I could see Motorola and Nortel making a good match however.

Roger Bauer
http://smbconsultinginc.com

12-30-2006 @ 2:19PM

asadvrtsd said...

What do you mean about cultural issue between Alcatel/Lucent and Nortel.
They are all former Telco hardware divisions (France Telecom), AT&T and Bell Canada, respectively.
The cultural difference is between Lucent and Nortel who were bitter rivals during the Telecom bubble (and lost on vendor financing to the same CLECs).