Is network gearmaker Nortel toast? The company has been in permanent-turnaround mode for years, with no end in sight. And while the company has $2.65 billion in the bank, it’s “overwhelmed with debt and burning cash,” RBC’s Mark Sue notes today:
Considering the worsening macro environment, Nortel’s challenged industry position, and concerns related to liquidity while the capital markets are basically closed, we think bankruptcy is a distinct possibility down the road. The world moved on while Nortel was stuck in restructuring mode, and the lack of financial flexibility means Nortel has to rely on asset sales to fund future operations.
Sue cut his Nortel (NT) price target to $0 from $1.50. The market ignored his advice, sending Nortel shares up 32% to 78 cents.
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