Contrarian Investing Association

The rise and fall of Nortel Networks (NT) is a classic story of why valuation matters. Just five years ago, Nortel had 95,000 employees. Today, the company has about 35,000 with plans to cut another 1,100. During the tech boom, its stock price became grossly overvalued based on every analytical measure. The madness of the crowd ignored logic and let greed take over. In the short run the market is a voting machine; in the long run it is a weighing machine. The stock price of Nortel has plummeted over 97% since its bubble peak. Valuation matters.

The rise and fall of Nortel Networks (NT) is a classic story of why valuation matters. Just five years ago, Nortel had 95,000 employees. Today, the company has about 35,000 with plans to cut another 1,100. During the tech boom, its stock price became grossly overvalued based on every analytical measure. The madness of the crowd ignored logic and let greed take over. In the short run the market is a voting machine; in the long run it is a weighing machine. The stock price of Nortel has plummeted over 97% since its bubble peak. Valuation matters.