Markets & Finance

Goldman Keeps 'Outperform' on Nortel

Goldman Sachs kept its outperform rating on Nortel Networks (NT).

Analyst Natarajan Subrahmanyan says he was looking for Q3 sales of $3.9 billion, which was recently reduced from $4.3 billion. Subrahmanyan says visibility remains low, as the company was planning to reduce costs so that it can breakeven at a quarterly sales rate well below $4 billion, compared to its previous breakeven sales level of $5 billion.

While Nortel believes fundamentals are stabilizing, there are a few data points that confirm broad sector stabilization. At 1.1 times forward sales, Nortel is approaching a trough valuation of 0.8 times, however, Subrahmanyan thinks potential large capital expenditure cuts from IXCs, RBOCs and a lack of visibility into 2002 will cause Nortel to trade sideways.

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