Nortel (NT): A Hit To Global Broadband And Wireless

The capital spending boom born of growing broadband and wireless adoption rates may be coming to an end. At least, that is what an earnings warning from Nortel (NT) indicates.

Nortel is North America’s largest maker of telecom infrastructure equipment, and a drop in its financial fortunes means that cable and telephone companies are throttling their growth. Consumer spending problems may be catching up with the communications industry.

According to Bloomberg, "Sales will fall 2 percent to 4 percent in 2008, compared with an earlier target of growth in the low single-digit percentages, Toronto-based Nortel said today in a statement." Earnings for the next quarter will miss estimates.

If Nortel’s trouble traces back to the consumer, it means that sales of cell phones, wireless plans, and broadband services are likely to slip. So far spending on these goods and services has been a bright spot for the economy. That may be over and done with.

Douglas A. McIntyre