Better Research Mix Makes Nortel a Buy

Article Excerpt

NORTEL NETWORKS CORP. $20 (Toronto symbol NT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 436.9 million; Market cap: $8.7 billion; SI Rating: Speculative) is a leading supplier of voice and data equipment to telephone companies and other large organizations. After several restructurings, Nortel’s costs are now coming into line with its revenues. As part of this plan, Nortel will cut its research spending, from 17% of revenue in 2006 to 15% this year, which will help its profits. On the surface, that would seem to hurt its ability to develop new products. However, the cut reflects Nortel’s plan to spend less supporting older products. The company aims to devote 80% of its research spending on core and new products, up from 45% now. One technology the company has high hopes for is WiMax, a wireless system that is faster and covers more area than the current Wi-Fi standard. The outlook for WiMax is strong in light of rising consumer interest in…

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