CS First Boston Reduces Nortel Outlook

Analyst James Parmelee thinks the networking giant is headed for a slower-than-expected recovery amid pricing pressure

CS First Boston cut the estimates and target price on shares of Nortel Networks (NT ).

Analyst James Parmelee says management cited a more significant sales deterioration in the U.S. and weakness in select overseas markets. He adds that the new loss estimate reflects substantial pricing pressure in a business that had formerly grown at a rapid rate (i.e. optical). Parmelee notes the magnitude of price declines indicates the pace of recovery will be slower than formerly expected. He cut the $31.8 billion 2001 revenue estimate to $27.8 billion, and cut the $0.65 2001 EPS estimate to $0.20.

Parmelee also lowered the $36.6 billion 2002 revenue estimate to $32 billion, and the $0.85 2002 EPS estimate to $0.70. He cut the $40 target price to $25 and maintained his buy rating.

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