Raytheon vs Nortel
Two companies taking similar actions that are obtaining very different resultsWhat is happening to the debt position?Nortel Networks engaged in several acquisitions in 1998. The effect on their income statement was staggering. Despite $17.575 billion in revenues (a $213 million increase from 1997), Nortel's net income before taxes was negative $537 million. ROE was negative 4.64% compared to the industry average of 13.8%. Acquisitions, mergers, and partnerships have become a major strategy of many companies in the telecommunications industry. Nortel frequently participates in acquiring other companies in order to expand their business units, products, and lines. In 1998, Nortel's largest acquisition occurred when they acquired Bay Networks for an estimated US$9.1 billion. In looking at the 1998 financials (I mention these because of the large dollar amount spent on acquisitions that year), Nortel's Debt/Equity ratio was interesting. Looking at the balance sheet, total liabilities increased by $1.1 billion (15%). The Statement of Cash Flows shows that Nortel repurchased approximately $1 billion of outstanding stock. Looking at these two numbers, one would expect the debt/equity ratio to increase but
In an earnings release earlier this year Lucent sited as one of the problems their decline in networking sales because they didn't properly forecast the demand for optic networking. Potential investors in Raytheon have to ask themselves "what kind of future does a company that's very dependant on government defense have"? It's a very real possibility that Raytheon is a cash cow that has matured and runs the danger of going further south. 05% higher than the industry average. The term I like to use when discussing beta is volatility. Let's look at the chart for just the past year. The opposite is true of those who don't meet expectations. Raytheon's past year revenue growth is 373. 5% Nortel 06/1999 09/1999 12/1999 03/2000 06/2000 Estimate EPS $0.
Common topics in this essay:
Actual EPS,
Nortel Networks,
Cash Flow,
Lockheed Martin,
Bay Networks,
Raytheon Potential,
Wall Street,
Electronics GM,
Flows Nortel,
Secondly Nortel,
cash flow,
net income,
market cap,
stock value,
bay networks,
industry average,
operating earnings,
book value,
optic networking,
market cap value,
cap value,
past revenue growth,
06/2000 estimate eps,
raytheon heavily involved,
income cash flow,
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