TORONTO-Merrill Lynch has significantly lowered its estimate of how much cash Nortel Networks will have at the end of next year, citing concerns about Nortel’s wireless equipment division. Merrill said it now estimates that Nortel will end next year with just US$500 million in cash-a far cry from the US$4.9 billion that the manufacturer had at the end of June.
Merrill Lynch analyst Tom Astle wrote in a recent report, “We believe there is growing evidence of deferred (or even cancelled) spending, and that this market may be mostly delayed until 2004, leaving wireless in another dead zone.”
The wireless division accounts for nearly half of Nortel’s total revenue.
Nortel shares dropped 8 percent in Toronto yesterday to close down 7 Canadian cents to 76 Canadian cents, just above their long-time low of 70 Canadian cents.
Last week, Piper Jaffray analyst Edward Jackson wrote Nortel faces the “very real risk of a bankruptcy filing” because of the continued decline in its business.
Nortel Chief Executive Frank Dunn has dismissed reports of any looming bankruptcy. He said Nortel has “enough cash for this year, next and a solid balance for 2004.”
The company also announced personnel changes and a reorganization plan. Frank Plastina, metro and enterprise unit president, is leaving the company. Pascal Debon will continue to serve as president of its wireless networks division.
The infrastructure equipment maker named Sue Spradley president of its wireline networks, Oscar Rodriguez president of product and business strategy and investment, and Robert Burke head of the enterprise marketing unit. The optical networks business will be under Brian McFadden.
“As we continue to position Nortel Networks for profitability, the changes we are announcing today will result in an enhanced performance-driven business model that will ensure greater accountability and customer alignment,” said Dunn in a press release.
The company also outlined its wireless strategy focusing on what it described as “wireless data networks.” Debon described the new strategy as “univity,” meaning universal connectivity. Packetization, spectral efficiency, open platforms and scalable networks are the highlights of its strategy, according to a press release.
“3G is a new game with new rules,” said Debon.
