Today in his final blog post, Nortel chief technology officer John Roese blogged:
| "Well, it's been an interesting 28 months here at Nortel for me. The company has announced today that it is moving to a business unit structure in which all functions and resources (other than a few corporate activities) will be decentralized and integrated into full business units. |
"With that change, the central CTO and R&D functions will be divided and moved into each BU and, as such, my role is no longer needed."
RBC Capital Markets Managing Director - Mark Sue emphasized in his research note today that Nortel's new restructuring plan will cost $130M in cash and save $190M on an annual basis.
 According to Sue, "The environment is getting more difficult forcing Nortel to moderate its outlook, retrench and protect its balance sheet. Nortel will eliminate its dividend on preferred shares and further move aggressively to cut costs by eliminating another 1,300 positions (5%). |
"Nortel reported 3Q08 revenues of $2.3B (-11.6% QoQ). For the full year, Nortel now expects to be at the low-end of their guidance range or -4% YoY. Nortel finished the quarter with $2.65B in cash."
Sue added, "There is no update on the sale of MEN. Gross margins were 39.2%, down from 43.1% in the prior quarter due to mix and lack of volumes. Orders in 3Q were $2.0B down from $2.2B in 2Q. Book-to-bill was 0.87 but MEN book-to-bill was 1.08. Deferred revenue decreased from $2.5B to $2.3B. A/R decreased -10% QoQ to $1.95B while inventories declined -6% QoQ to $1.7B."
Sue concluded his note, "Nortel sees fewer working capital opportunities as customers are sitting on cash. Nortel has total cash and investments of $2.65B and burned $144M in cash from operations during the quarter. Net debt/share increased from $2.37 to $3.25. During 4Q, Nortel expects to burn ~$250M in cash including ~$100M FX impact. For 2009, pension funding in 2009 may increase from the $250M in 2008 and restructuring will be $270M. Better earnings are needed to improve cashflow. Nortel believes they need $1B in cash to operate."
Nortel stock fell almost 20% today:
Related stories:
Nortel reports loss, plans layoffs
Analyst appears to pre-announce the imminent death of Nortel: Stock price target $0
Do you think the new restructuring plan will help Nortel?
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Down, but don't count them out...yet...
It looks once again like Nortel is in its death throes, but it seems like every time Nortel is about to die, it rises back up from the dead like a villain in a bad horror movie that simply can not be killed. I guess only time will tell in these tough economic times if Nortel has finally gotten a stake through the heart or not.
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