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Nortel (NYSE: NT), the communications equipment maker, is one of the largest companies in Canada. Like a lot of other firms that have a balance sheet full of debt, it will try to restructure what it owes to its creditors. If that doesn't work, it is looking at going into Chapter 11 and a lot of those creditors will not get what they were expecting when they made their loans in the firs place.
According to The Wall Street Journal, "The move comes as the Toronto-based company grapples with plummeting sales for its wireless gear and as the credit crunch hobbles the sale of key assets."
The news is telling. Being in the wireless business used to be a great position. Cellular systems were expanding rapidly. In many cases handsets were even replacing landlines. The opportunity for growth seemed nearly limitless.
But there have been signs that even a hot industry like wireless can be undermined by a recession. Nokia (NYSE: NOK) has warned that handset sales will be down next year. Global growth may slow to nothing even when emerging markets like China and India are figured in. Not so long ago, companies like Nortel and Alcatel-Lucent (NYSE: ALU) had reasonable prospects even if they were going through period of cuts to save costs and make product development and marketing more efficient.
The wireless business was considered one of the most significant global growth industries. Until recently that is.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-10-2008 @ 11:05AM
BHarrison said...
Quote from article: "it is looking at going into Chapter 11 and a lot of those creditors will not get what they were expecting when they made their loans in the first place."
In other words, there is STILL NO INTEGRITY in the market, is there. Where can an investor like myself have much, if any, "faith and confidence" in the markets . . . we simply have no idea as to which companies may wind up filing Chapter 11 or 7. Ownership of corporations changes so often now days that one has a difficult time know "who owns the various corporations . . . the financial entanglements are just too complex.
Congress has NOT DELIVERED on their promise of FULL DISCLSURES and TRANSPARENCY for the bail out monies, etc. Before I riks my principle investment monies, INTEGRITY MUST BE RESTORED to the FIs and the markets . . . otherwise will I lose 50% or 100% of my investments via Chapter 11 or 7 filings? I don't think so . . . a cash dollar in the hand is worth a lot more than stocks that may easily lose 50% or 100% of their value.
Heck the situation is so bad, as reported earlier today that the Treasury Note interest rate wen to "ZERO"; and many institutional funds are investing in that for "security" . . . . hmmmm . . . they don't trust the markets either, do they? And if THEY don't trust the market, I'm not going to be dumb enough to trust it, will you?