STOCKHOLM, Sweden, and TORONTO-In the aftermath of their quarterly earnings report, the stocks of both Nortel Corp. and Ericsson AB plummeted, highlighting the struggles of the major players in the telecom equipment space.
Nortel Networks, which has wobbled during the past year with downgrades to near-junk status, saw its shares drop to a 20-year low of 88 cents per share.
Nortel’s misfortune came in the wake of the announcements by two major European operators to pull the plug on their third-generation technology investments in the German market. Spanish carrier Telefonica Moviles and Finnish operator Sonera Corp. seemed to have yielded to Germany’s market leaders Deutsche Telecom and Vodafone Group plc.
Ericsson dropped to junk status on the action of rating body Moody’s Investors Agency, confirming the fears of some analysts that the leader in 2.5G and 3G contracts is feeling the pressures of a contracting world economy.
“This action by Moody’s does not affect the underwriting agreement from the banks nor the commitment from our largest shareholders,” said Michael Treschow, the company’s board chairman. “We are fully committed to maintaining a very conservative financial profile, and the underwritten rights offering is an important element of this strategy.”
