Nortel's (NT) accounting investigation is on track, but it turns out the company's business isn't going as well as planned.The Brampton, Ontario, telecom gearmaker said Tuesday that it would need to
Of course, Nortel and its big networking industry peers have cut costs sharply in recent years as industrywide spending slowed to a crawl. Nortel's comments Tuesday suggest the company may have to look at further cutbacks. Going into the year, many investors and analysts viewed Nortel's strong product lineup in areas like wireless infrastructure and voice over Internet protocol, or VoIP, as a key advantage over rivals like Lucent ( LU), Motorola ( MOT) and Cisco ( CSCO). But those assumptions have been challenged by this year's less-than-bullish turn of events in the networking industry, where spending hasn't thawed in spite of widespread early-year forecasts. Moreover, Nortel's take on things has been muzzled by the accounting investigation, as the company hasn't been able to share its business outlook in anything but the most general of terms. Analysts forced to draw their own conclusions offer a rather dismal assessment. In a report to clients Tuesday, J.P. Morgan Chase analyst Ehud Gelblum reiterated his neutral rating on Nortel and offered his best guess at margins. "We believe Nortel is producing operating margins in the low-single digit range at best, and at worst 0% or slightly negative," wrote Gelblum.