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Don't Fear Worst in Nortel Update

Not good news, but can't conclude it won't benefit from higher telecom spending.
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Management lowered full-year revenue guidance in Nortel's (NT) biweekly update today, and the stock is trading 7% lower to $3.50. The company said that third-quarter sales fell sequentially, and that it expects to see 2004 growth below the industry average.

While this latest update doesn't offer much to help Nortel regain its credibility with investors, I believe it's too early to conclude that the company won't benefit from the ramp in telecom spending that will materialize in the coming quarters.

As usual, I find myself restricted from trading Nortel when it pulls back like this. The stock is still trading below where it was when we first learned of the scandal, and I wanted to alert you readers I'd be buying 5,000 shares down here if my restrictions allowed.

Remember, this is a massive restructuring/turnaround story. This isn't the first bump in the road we've endured with Nortel along the way, and I believe that new CEO William Owens has the company on track to be stronger a year from now than it currently is -- and, I'm betting, less despised in the stock market.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long Nortel.