Northern Telecom Ltd has taken an almost unprecedented battering over the past three months or so, but the company’s fundamentals are still seen to be thoroughly sound. Northern Telecom held a large-scale analysts’ and investors’ conference in Ottawa last Wednesday, which left analysts generally satisfied, Reuter reports. The have all the right products, said one New York analyst who is maintaining his neutral rating on the stock for the short term. They are positioning themselves to be one of the main pavers on the new information highway. But some analysts said the positive tone of the meeting was somewhat marred by the embarrassing mix-up over the deal with Nynex Corp. Analysts said they were pleased with NorTel’s plans to partition its switch software architecture, which will improve ease and speed when the company wants to update services. It took a $158m provision in the second quarter to cover the software initiative. Gerry Butters, president of the company’s US unit Northern Telecom Inc in Nashville, Tennessee, said last week that the baseline re-engineering is about 40% complete. The full re-engineering is due to be complete by 1994. I think they’re starting to do some of the right things. Particularly their partitioning of software will be a significant positive, DLJ Securities analyst Eric Buck said. But I think it’s also going to be a bit like turning an aircraft carrier – it’ll be slow. Danielle Danese of Salomon Brothers said she felt no one should disregard the company yet, although it could take some time for it to play catch-up in growth markets and complete its planned software revamp. They have to basically redesign 25m lines of software code, and that’s going to take a long time, she said. But I certainly wouldn’t write them off because if you look at the history, this is a company that takes big charges. They’ve had software problems before, too, Ms Danese added – the company took a $200m charge in 1988. Several analysts say they expect it to post a loss in its third quarter, and new president and chief executive Jean Monty has said only that the firm will be back in profit by fourth quarter at the latest.
