Archive for July, 2009

Nortel, a fallen Canadian icon, starts asset sales (Reuters)

Friday, July 24th, 2009 | Finance News

TORONTO (Reuters) –
Nortel Networks Corp and bidders for its wireless division were sequestered on Friday in a New York law office as the company, once a symbol of Canada's technological prowess, moved to complete the first stage of its own dismantling.

The court-supervised auction, which comes after a decade of decline for Nortel, involves its prized CDMA and LTE wireless technology assets, the latter of which includes technology coveted by the world's leading telecom-equipment makers.

"The carcass of one of the leading high flyers for much of the last decade and a half is now up for grabs, and to the victor go the spoils," said Carmi Levy, an independent technology analyst.

No winner in the U.S. court-supervised auction had been announced as of late Friday afternoon.

Levy said competing bids, reviewed by the debtor in consultation with the company's creditors and creditors committee, are likely complex and require time to assess.

"I'm going to presume that the court is taking its time ... to make sure that all I's are dotted and all T's are crossed and nothing is missed," he said.

The lead-up to the asset sale was quiet, with apparently little bidder interest until recent days, when European players entered the fray and BlackBerry maker Research In Motion said it wanted the wireless business for itself. RIM even told the Canadian government that keeping the technology in Canadian hands was vital to national security.

In its heyday, Nortel was the most heavily weighted stock on the Toronto Stock Exchange, with a market capitalization of more than $250 billion. It filed for bankruptcy protection in January after years of job cuts, cost-cutting and restatements of its financial results.

The assets up for grabs on Friday are seen as holding the key to the next generation of wireless transmission, potentially allowing broadband-like access for cellphone users once it is fully developed.

Nortel has extensive patents on so-called MIMO, or multiple input multiple output technology, a form of antenna technology.

If the technology becomes widely used in handsets, smartphone makers that do it best will be able to differentiate themselves from competitors, analysts say.


Last month, Nortel announced a "stalking horse" bid for its CDMA and next-generation LTE wireless technology businesses from Nokia Siemens Networks for $650 million, setting a floor price for the assets.

There are at least two other offers, including a $725 million bid from MatlinPatterson, a private equity firm that's also a major Nortel creditor. Sweden's Ericsson also came in at $730 million, according to a newspaper report.

Research In Motion also says it is actively pursuing the assets and is in talks with stakeholders to find a way for a "generous" offer to be considered. Earlier this week, it complained that Nortel had effectively blocked an approach valued at $1.1 billion.

Canada's government has come under pressure from politicians and even some of its corporate citizens to view Nortel's assets as strategic to national security, and to keep them in Canada by supporting RIM's bid.

The government has remained at arm's length for the most part, saying it will respect the court process to sell the former telecom giant's assets, even as officials research whether the foreign purchases of Nortel assets might be subject to government restrictions.

Finance Minister Jim Flaherty said on Friday it was right for RIM to ask the Canadian government to take a close look at the sale of Nortel.

Nortel, which under the name of Northern Electric Co produced telegraphic switchboards for military operations in the First World War, blames the economic crisis for derailing a long-running turnaround effort that began in 2005 and which was the most recent of several bids to revamp the once mighty company.

Toronto-based Nortel now employs about 25,000 people, a far cry from its heyday more than a decade ago, when its ranks were 90,000-strong.

"This is sad ending chapter to one of the most successful stories in Canadian industrial history," said Levy. "It really does leave a huge legacy for all of us."

Nortel's operations are divided about equally among the wireless business, the enterprise unit, which builds corporate networks, and the Metro Ethernet Networks unit, which makes Internet infrastructure and includes its optical and carrier Ethernet technology.

($1=$1.09 Canadian)

(Additional reporting by Wojtek Dabrowski; Editing by Frank McGurty and Rob Wilson)


Financials help TSX limp to higher close (Reuters)

Friday, July 24th, 2009 | Finance News

TORONTO (Reuters) –
Toronto's main stock index finished marginally higher on Friday as optimism over the economic recovery buoyed financial shares but did not extend to most of the other sectors.

A 1.81 percent gain in the index's heavily weighted financials group -- a big turnaround from the opening bell when it declined sharply -- was almost single-handedly responsible for propping up the index as most of its other sectors fell.

All five of the market's big banks and its biggest insurer dominated the heavyweight gainers list. The list was topped by Bank of Nova Scotia, which jumped 3.45 percent to C$45.33, and Manulife Financial, which climbed 3.44 percent to C$24.64.

Euphoria following the Bank of Canada's mostly rosy economic outlook on Thursday carried through to the financials on Friday on hopes that the group will benefit from better economic times.

"The financials will be one of the biggest beneficiaries as we would expect fewer nonpayments of loans and that the lending business will continue to get stronger," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"But overall today, it looks like a picture of a wait-and-see mode. The markets have really been on either side of zero."

The S&P/TSX composite index closed up 12.22 points, or 0.11 percent, at 10,687.90. It dropped nearly 1 percent early in the session, pressured by disappointing results from U.S. companies such as Microsoft Corp and Inc.

But in a show of resilience, the results did not have a lasting impact and the TSX focused on the economic recovery instead and edged to a six-week high.

"The market is limping to the finish line today," said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.

He said the market "deserves to pause here" after having rallied for much of July already. The TSX is up for a second straight week, a 3.1 percent gain to build on the previous week's 6.3 percent rise. Since its March low, the TSX has risen more than 40 percent.

"By any measurement that is a significant move and we would be surprised if it was to go significantly higher here," Chandler said.

Eight of the TSX's 10 main groups were lower. The utilities group was the only other sector to contribute a bit of support, nudging up 0.29 percent.

The index's big energy and materials groups fell 0.82 percent and 0.21 percent respectively.

Decliners included Suncor Energy, off 3.2 percent at C$35.54, and Petro-Canada, down 3.2 percent at C$45.44. Potash Corp, which was a strong advancer in the previous session, handed back some of those gains, falling 0.97 percent to C$103.58.

($1=$1.085 Canadian)

(Reporting by Ka Yan Ng; editing by Peter Galloway)


Buffett: I’m keeping my Goldman Sachs warrants (Reuters)

Friday, July 24th, 2009 | Finance News

NEW YORK (Reuters) –
Warren Buffett said he has no plans to soon exercise Berkshire Hathaway Inc's (BRKa.N) (BRKb.N) warrants to buy $5 billion of Goldman Sachs Group Inc (GS.N) stock, although he could make a big profit by doing so.

Berkshire got the warrants in September when it also bought $5 billion of Goldman preferred shares, which throw off a $500 million annual dividend.

The warrants let Omaha, Nebraska-based Berkshire buy Goldman common shares at $115 each at any time until October 1, 2013. With Goldman's stock having closed at $165.45 on Thursday, those warrants are worth well over $2 billion.

Buffett is sitting tight.

"We will hold the warrants," Buffett said on Fox Business Network. "Every instinct in my body tells me that we will want to hold those warrants until they're very close to their expiration date. The preferred pays us the dividend and the warrants are going to make us the money."

Goldman is the largest financial services company to exit the U.S. government's bank bailout program.

Earlier this week, it paid $1.1 billion to buy back warrants issued to the Treasury Department. The government said it got a 23 percent annualized return on its Goldman investment.

For a while, Goldman had looked like one of Buffett's lesser ideas, as its shares fell below $48 in November.

Yet its recovering stock price signals investors' belief that Goldman still deserves much of its luster as one of the world's most aggressive and profitable banks.

Buffett, the world's second-richest person, has had less success with a purchase of preferred stock and warrants in General Electric Co (GE.N).

Berkshire in October bought $3 billion of GE preferred shares yielding 10 percent and warrants to buy $3 billion of GE stock at a $22.25 strike price. GE shares closed Thursday at $11.95, leaving the warrants out of the money for now.

Class A shares of Berkshire rose $1,050 to 94,550 in afternoon trading on the New York Stock Exchange.

(Reporting by Jonathan Stempel; additional reporting by Steve Eder)