Nortel Networks (NT), a leading developer of telecom equipment, filed for bankruptcy protection today, before the company was to make an interest payment of approximately $107 million. We had already downgraded our rating to Sell on December 4th 2008 at $0.60, based on the company's debt level, disappointing financial expectations and general economic weakness that would impede any near-term improvements.
The company has been facing severe business challenges as a result of the global economic slowdown, increasing competition and reduced capital spending on the part of several of its major customers. Nortel's third quarter 2008 financial results were significantly below our expectations, and we believe 4th quarter reporting will also be a disappointment.
In addition, increasing cash burn rate and a highly leveraged balance sheet remain concerning. We do not find any near-term growth catalyst for the company at this juncture.
Read the full analyst report on NT.
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