It was that rare combination, a Canadian success story; a behemoth that introduced the newest technology to the world; a stock that soared above the $100 Canadian mark for years at a time; a staple item of portfolios in countries far and near. It was Superman, clearing tall buildings with a single bound. It was Nortel!
And then, faster than a speeding bullet, it seemed, Superman was exposed to kryptonite... lots of it! Just as quickly and just as decisively as it had risen, Nortel was a penny stock, a company teetering on the verge of bankruptcy, a financial invalid!
The company, now based out of Brampton, Ontario, has seen many incarnations in its century-plus history. Once it was known as Northern Electric, the manufacturing and supply unit of the Bell Telephone network, before branching out into sound systems for movie theatres in the 1920s, to Northern Telecom in the 1970s, trying to tackle the growing market for fibre optic cables, before focusing its attention on digital technology.
By 1995, Northern Telecom had shortened its name to Nortel Networks, aimed at dominating the world of public and private digital telecommunications networks. With technology becoming increasingly sexier in the 1990s, stock traders, hoping that Nortel would reap increasingly lucrative profits from the sale of fibre optic network gear, began pushing up the price of the company's shares to unheard-of levels despite the company's repeated failure to turn a profit. Under the leadership of CEO John Roth, sales of optical equipment had been robust in the late 1990s, but the market was soon saturated.
Still, those who had gotten in on the ground floor with Nortel stock (which now trades at bargain basement levels, still under the symbol NT in Toronto, under NRTLQ in New York) enjoyed the party when it reached $124 Canadian. Pundits worldwide noted that the company accounted for more than a third of the value of the stocks on the firms listed on the Toronto Stock Exchange, which made Nortel’s fall to earth just as dramatic as that of the Icarus character of Greek mythology when he flew too close to the sun.
With the loud burst of the 90's tech bubble in the early days of the 21st century, more and more was found out about what kind of ship was being run in Brampton, revelations which would prove the undoing of John Roth and, ultimately, his former company. In 2003, the law moved in, amid reports that all was not well with Nortel’s books. Investigators probed reports that millions of revenue dollars had been booked improperly during the untroubled days of the 1990s, large amounts being moved to later years, and the rest wiped from the books completely. Roth’s successor, Frank Dunn, was booked on fraud charges along with two of the underlings last year.
This winter, the company filed for bankruptcy protection in Canada, the U.S., and the U.K. It was the news that owners of the company’s stock needed like a hole in the head; the tidings caused NT’s price to plummet 79 per cent. Some cheery news came Nortel’s way in the form of a three-month extension of its bankruptcy protection in Canada – despite court papers that also showed that Nortel had been spending $1 million a month on corporate jets!
As was the case when Air Canada went bust in 2003 (protection from which it emerged reorganized 18 months later), Nortel may find itself de-listed as an active stock, providing the final blow for investors who still clung the idea that they could make money.
At the other end of the spectrum is an avowed penny stock, albeit one with big dreams. Montreal-based GIE Environment Technologies Ltd. aims its talents at treating petroleum and other organic soil and water contaminants. Instead of specifically information technology, GIE (which trades on the Venture Exchange under those three letters) carries a proprietary technology known as "bioremediation", which utilizes living organisms to remove pollutants from soil and water with minimal disturbance to the environment.
Environmentally-based technology companies such as GIE look to become hot properties as society’s focus shifts to what’s really important, like maintaining our air and water supply. Folks are hearkening to the idea that the company may be doing something right, and in February, with the release of record quarterly revenues, that message made its presence felt on stock markets. In a quarter when sales traditionally lag and fixed costs tend to point to losses, GIE rocketed up the charts with revenues topping $404,000 Canadian dollars, or 68-per-cent higher than the $241,103 reported in the same period last year. Net earnings for the three-month period registered better than $47,000, compared to a $4,000-plus loss in the year-before quarter.
On the day such tidings were announced, investors rushed right in; more than 2.49 million shares changed hands on February 12, driving GIE’s stock price 120-per-cent higher, to 5.5 cents Canadian. Best of all, that price is still in the lower regions of a 52-week range that peaked around 30 cents Canadian, and while there’s no guarantee against adverse news for this stock, bargain hunters can rest assured that, for now, it’s a company that doesn’t look too be heading in the direction of Nortel’s camp.
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