Nortel’s Market Cap is now below its revenues. Why?
On quarterly revenue of $2.36 billion, they lost $1.8 billion. To quote Lance, that’s like bending over to pick up a quarter and having 4 dimes fall out of your pocket.
For all you sports fans, that means that in order to break even Nortel needs to cut their costs by 40% and increase their revenues by 15%: a bitter pill to swallow. And as far as I know, very few companies are able to increase revenues while hacking off limbs in an effort to cut costs.
And now they want us to believe that this is plausible. If they pull it off, they oughtta win a Nobel Prize.
At the end of 2001 they had $3.5Bn in cash in the bank… and have been blowing through it with abandon. Nortel will likely need to be borrowing money soon. I don’t know, but if I’m them, I’m going to be thinking about calling Mike Volpi at Cisco…
-Ian.