Do two weak operations combined make a strong one? Motorola (NYSE: MOT) and Nortel (NYSE: NT) are considering putting their wireless telecom equipment operations into a company that would have about $10 billion in annual sales. Motorola is already considering spinning off its largest unit -- handset. According to The Wall Street Journal, "if Motorola completes a deal with Nortel and divests itself of its handset business, it would be a much smaller company."
It is hard to see why the venture would work. In the same sector, the merger that created Alcatel-Lucent (NYSE: ALU) has been a first class disaster. The Nokia-Siemes telecom equipment operation says it has seen a slowdown.
Nortel's shares have fallen from a 52-week high of $31.79 to $11.07. The company has long-term debt of almost $4 billion and had operating income of only $63 million last quarter.
Otherwise, it is a swell idea.
Douglas A. McIntyre is an editor at 247wallst.com.
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