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.



Nortel Struggles Continue

Nortel stocks have plummeted after they annouced lower than expected sales for 2008.

It has seen its biggest declines since 1980 according to Jonathan Ratner article “Nortel faces tough timing as peers struggling too”.

“With softening demand and increased competition, Nortel may need to once again retool and refocus as it looks to find its position in a consolidating industry,” RBC Capital Markets analyst Mark Sue told clients.

After spending three days with the folks at ATT at the 2008 FOCUS Users Group, I got Nortel’s marketing spill which was all centered about going Green.

I am all for minizing energy use and saving resources, but something is seriously wrong when thirty minutes into the conversation all I am getting as a potential client is not how good the product is, not how much better it is than its competitors offering, not the features and how they’ll make all the issues I deal with on a daily basis go away but rather how much I will save on my electricity bill.

Nortel needs to go back to the drawing board, focus on the basics, be better than everybody else and then market it.