Nortel shares slip on downgrade after 2Q report

Jefferies & Co. analyst George Notter on Monday cut his rating on the network equipment maker's shares to "Hold" from "Buy," warning that he is concerned about the company's ability to meet expectations in the face of an eroding market for wireless equipment.

The Canadian maker of telecommunications and network gear on Friday reported a wider loss. The company also cautioned that a weak economy, increased competition and lower spending by certain customers would mean a challenging business environment ahead, although it stood by its 2008 outlook for revenue growth in the low-single-digit percentage range.

Nortel has been hard hurt by a pullback in network spending by Sprint Nextel Corp., which uses a wireless standard known as CDMA for its networks.

In a research note, Notter said "it's hard to see how Nortel still hits projections" given the company's reliance on the profitable CDMA market and unlikely prospect that other parts of its business could make up for lost Sprint revenue.

The analyst cut his earnings estimates for the company to 30 cents per share from 45 cents for 2008. He lifted his 2008 revenue estimate to $11.1 billion from $11.05 billion, but cut his 2009 revenue estimate to $11 billion from $11.5 billion.

Shares of the Toronto company fell 33 cents, or 5.1 percent, to close at $6.19 Monday. The stock fell $1.12, or 14.7 percent, to $6.52 Friday.