Nortel faces delisting from stock exchange

Telecommunications equipment maker's stock is in jeopardy of being delisted from the New York Stock Exchange as the share price trades below $1.

The news keeps getting worse for telecommunications equipment maker Nortel Networks.

On Thursday the company received notice from the New York Stock Exchange that it faces delisting if it can't get its stock price above the required $1 minimum price tag in the next six months, The Wall Street Journal reported.

Earlier this week, the Journal reported that the company is seeking advice on bankruptcy proceedings.

While Nortel is clearly hurting as most companies these days are from the current economic crisis, the truth is that the company has never fully recovered from the bursting of the telecommunications bubble in 2001 and 2002.

The problem for Nortel is that its bread and butter products are ones used for building voice networks. Over the past decade phone companies have moved away from building networks exclusively used for voice toward converged networks that carry voice, data, and video using Internet technology. While Nortel has tried to keep up with the changing needs of the industry, it has fallen short.

A series of strategic missteps over the years has resulted in the company losing a great deal of its market value. In 2000, Nortel was worth about $250 billion. The company now has a market value of about $275 million.

Mike Zafirovski came on board as chief executive three years ago to help turn around the company. And initially, he had some success building profits from selling wireless gear to U.S. operators. He was investing in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked. And phone companies started to pull back on spending. This has resulted in a sharp revenue drop for Nortel.

In September, Nortel announced more cost cutting and said it would sell some of its business units. But so far it hasn't found any buyers for these assets. The company has about$2.6 billion in cash, which some analysts say should help it stay afloat until 2010.

Nortel isn't the only big telecommunications equipment maker to struggle. Alcatel Lucent, which has also struggled to get back on track after the telecommunications boom, announced Friday it is making cuts as it restructures its business.

Shares of Nortel were trading at 38 cents, down 2 cents, at midday Friday.

 

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