As Nortel Turns The Corner, Can It Stay Independent?

Stocks:  (MOT)(ALU)(NT)(CSCO)

Very few investors remember that Nortal traded for over $800 (split adjusted) in 2000. The shares are now at $26, a modest recovery from recently lows.

The press is beginning to pin the "recovery story" label on Nortel. Barron’s ran a cover story of the company’s emerging potential. Forbes recently wrote "Has Nortel Turned Around?" In the Forbes story, Nortel’s CEO, a former Motorola executive, said that the company is looking for acquisitions. It is an ironic comment, since Nortel should be on shoppping lists for several other companies

Nortel’s sales are over $10 billion. That makes it more than half the size of the recently merged Lucent/Alacatel. Nortel’s market cap to sales ratio is low at about one times, lower that Lucent/Alcatel and Motorola. And, if the company is turning around, it stock has not caught up. It trades well below its 52-week high of $34.30.

There are several companies that might find Nortel and attractive acquiisition. The list would be lead by Motorola, Cisco, and Lucent/Alcatel.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.