Ratings agency Standard & Poor's said on Thursday it had raised its outlook on Nortel Networks Corp. ((NT.TO)) to stable from negative, the latest in a string of positive news for the telecommunications equipment maker.
The New York-based agency, which also affirmed Nortel's "B" long-term corporate credit rating, said the revised outlook is based on expectations there will be no "material degradation" in end-market demand for telecoms equipment.
S&P said restructuring activities undertaken by Nortel, which has shed about two-thirds of its workforce since the peak of the tech bubble in 2000, have also lowered its cost base and enabled it to improve results.
"These measures, in addition to managements' apparent focus on improving working capital are expected to translate into positive free operating cash flow in 2004 and improved credit protection measures in time," the agency said in a statement.
The agency warned Nortel still faces a challenging market, high debt level and negative free cash flows.
It said this is offset partly by its strong market position, improving operating performance, and enough liquidity to weather the poor environment.
Nortel's stock closed up 38 Canadian cents, or almost 8 percent, at C$5.23 in Toronto on Thursday, its highest close since April 2002. That was the same month Moody's Investors Service caught many investors by surprise by stripping Nortel of its investment grade ratings.
Nortel was one of several communications equipment stocks to hit their highest prices in more than a year on Thursday amid investor optimism that corporate demand may be improving.
The stock made similar gains on Wednesday after Verizon Wireless, the largest U.S. wireless telecoms operator, said it had signed a three-year agreement to buy about $1 billion of Nortel's gear.
chart.etrade.com/cgi-bin/...&i2=Stochastic&i3=rsi&tic=3-month" style="max-width:560px" >