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Nortel holds ground after S&P cuts outlook

Nortel Networks' shares stay flat after Standard & Poor's lowers its outlook on the network-equipment maker from a "stable" rating to "negative."

Nortel Networks' shares stayed flat Thursday after Standard & Poor's lowered its outlook on the network-equipment maker from a "stable" rating to "negative."

While the debt-rating agency did reaffirm Nortel's single-A rating for its long-term debt, analyst John Tysall said weakened demand for telecommunications equipment is "more severe than expected, resulting in slower overall market growth and demand for Nortel's products."

Lending institutions around the world have adopted more stringent requirements for companies looking to raise additional capital as both the U.S. and global economies continue to sputter. Huge quarterly losses and inventory write-offs combined with concerns about how companies manage their debts have investors running for cover.

Nortel shares closed at $13.13. Earlier in the day, however, shares dropped to $12.80, just slightly above its 52-week low of $12.50.

"It's definitely not a good sign," said Charles Disanza, an analyst at Gerard Klauer Mattison. "Someone took a look at Nortel's balance sheet and realized that their (financial position) isn't too hot. You can't keep losing billions of dollar and still maintain a good credit rating."

In its latest quarter, Nortel posted a loss of $385 million, or 12 cents a share, on sales of $6.18 billion.

Earlier this quarter, it issued another profit warning, telling shareholders to expect a loss between 10 cents and 12 cents a share on sales of $6.1 billion to $6.2 billion.

The company announced plans for further layoffs, which would bring the total number of layoffs to 20,000.