Canadian Telecom Colossus Nortel Files for Bankruptcy
Canadian Telecom Colossus Nortel Files for Bankruptcy
Sean Michael Kerner, a senior editor for InternetNews.com and a proud Canadian (so says his Bio), has written a commentary on the financial woes and bankruptcy protection filing of the giant telecom equipment maker. On January 14th Nortel filed for protection and reorganization in the US under Chapter 11. As Kerner points out, the $2.4 billion Nortel has for continuing operations is a mere shadow of the $366 billion value it once held on the Toronto Stock Exchange.
From Kerner’s article it seems that the anticipated demise of Nortel is a convergence of two distinct events. One of the culprits was the bursting of the telecom bubble as a consequence of the larger dot.com bubble bursting in the later part of the 20th Century and into 2001. The second reason was a huge accounting irregularity that forced Nortel to restate its financial statements for 2000, 2001, 2002 and the first and second quarters of 2003; for more on this see Kerner’s 2004 article Nortel Fires CEO Over Accounting. The lack of a quick response only compounded matters. I might add a third reason; the current global recession did not help the situation at all.
Kerner does not believe that Nortel can emerge from a reorganization and sees a break-up and a selloff of its most attractive business units to either Cisco, Juniper, Avaya, HP, or perhaps Nortel’s partner Microsoft. The New York Times reports that this opinion is back-up by Mark Sue, an analyst with a unit of the Royal Bank of Canada, who stated “I don’t think it’s going to exist”.
The New York Times gave a brief synopsis of Nortel’s accomplishments:
“During the 1990s, Nortel designed and built much of the fiber optic equipment that now carries most of the Internet’s data. Along with the company now known as Alcatel Lucent, it computerized the operation of telephone networks during the 1980s. Nortel pioneered the development of equipment and software that brought the world wireless phone networks.”
Kerner concludes his commentary on a somber and poignant note:
“The true lesson in all of this though is simple. It is execution as well as prudent financial management that is the key to the success of a technology business. It's a lesson that Nortel is learning the hard way.”
For more on this story see also CNET News, Nortel Files for Bankruptcy.
