Nortel Files for Bankruptcy

Unfortunately Nortel was unable to do what it needed to do to stay in business and has filed for bankruptcy, as I noted in a post 4 months ago. Nortel Struggles Continue.

The century-old company, North America’s biggest maker of phone gear and worth about $250 billion at its peak in 2000, fell victim to reduced spending by customers such as Verizon Communications Inc. and competition from Cisco Systems Inc. The company made the filing a day before a $107 million interest payment was due and was granted protection in Ontario Superior Court today.

Chief Executive Officer Mike Zafirovski came to the company in 2005 tasked with turning around a business weighed down by a $3.2 billion accounting fraud and ensuing customer losses. Instead, Nortel has lost almost $7 billion since he took over as the company’s competitive position deteriorated further.

“Nortel must be put on a sound financial footing once and for all,” said Zafirovski, who insisted the company will continue to meet the needs of its existing customers.

The future survival of Nortel, however, is far from certain. Companies that exit the bankruptcy process often emerge in smaller form and are frequently acquired in part or whole by larger suitors looking for a good deal.
“Nortel still has valuable assets,” said analyst Ronald Gruia of the market-research firm Frost & Sullivan. “They are probably going to wait until they have their house in order before they do a disposal.”
Even if the company remains independent, Nortel is unlikely to recapture any semblance of its glory days. The networking industry, jolted earlier this decade by the rise of low-cost Asian vendors, is intensely competitive. What’s more, the phone industry has undergone massive consolidation, giving the few remaining carriers greater leverage over their suppliers.

Sources:

MarketWatch
CBS NEWS Canada

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