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Nortel is probably going to experience a rally today based on news of a Wireless deal in China worth $280M. But they could experience a more sustained rally over the next two weeks as rumours fly around about their intended reaction to their plight.

Now, I have virtually nothing to substantiate these predictions, so please take them with a grain of salt:

1) I think that Nortel has put their Enterprise products & services group, which is profitable, in play. I suspect their goal is to sell it for some quick cash. I would expect this to get between $5Bn and $7Bn and would stem the tide of impending doom for several years. 2) I think that they’ll use part of that money to write down and shutter the Optical business. Beneficiaries of this will include Juniper and to a lesser extent Cisco.

I think that this puts the entire company very much in play for an acquisition by Cisco or Alcatel, except for one thing: cash in the bank.

So, this morning I bought Juniper and Nortel, and we’ll see what happens.

-Ian.

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