Speculative investors look for a "cheap lottery ticket" need to look no further than Nortel Networks, (NRTLQ). Nortel filed for bankruptcy protection in January 2009, saying the economic crisis compounded its existing financial troubles, making a turnaround impossible. The company has been selling its operations piece by piece for the past year.
For 2009, Nortel earned $488 million, or 96 cents per share, reversing a year-earlier loss of $5.8 billion, or $11.64 per share. Revenue slid to $4.09 billion from $7.62 billion. NRTLQ is currently trading at $0.05.
With the Nortel (NRTLQ) garage sale nearly complete, the last major assets on the table are the 50.1% stake in the Nortel-LG joint venture and the 3,000+ patent portfolios, which includes the much-coveted LTE patents.
There is, however, another valuable asset that has escaped the spotlight: Nortel’s minority stake in Blade Network Technologies, which makes data center networking products. Nortel acquired the position in 2006 when it sold parts of its Blade Server Switch Business Unit to BLADE in return for equity in the newly-formed company. The assets contributed by Nortel included intellectual property and customer contracts.
Over the past four years, BLADE it had enjoyed significant success. In 2009, it posted record-high shipments of $79-million and enjoyed double-digit growth. Last August, it closed a series B financing round that valued the company at $240 million. In 2010, BLADE expects to have shipments of more than $100-million.
Nortel still has a viable brand. Given that, and the fact there’s been a lot of revolutionary changes in the industry, that could create new opportunities for service provider equipment vendors. Our feeling is a smart private equity or even an internal group of Nortel people could rebuild something that would in effect behave like a start-up but would have the Nortel brand associated with it with a NYSE price.
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