Goldman Keeps 'Outperform' on Nortel

Analyst Natarajan Subrahmanyan says he was looking for higher sales from the networking giant

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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