Nortel's Bankruptcy: A Sad Day for Employees and Canada

While not surprising given the speculation, it is still a stunning development that Nortel (NT) has, in fact, filed for bankruptcy protection.

The company made the Chapter 11 filing through its U.S. subsidiary in Delaware, while its Canadian units will seek court protection later today.

So, what now?

Are we looking at an asset sale to scrape as much value from Nortel for bondholders and other creditors? Or is there a possibility that Nortel could emerge from bankruptcy protection as a smaller, but viable, entity?

Here’s an excerpt from the Nortel press release:

Nortel made this decision with the unanimous authorization of its Board of Directors after thorough consultation with its advisors and extensive consideration of all other alternatives. This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner.

The Company commenced a process to turn around and transform Nortel in late 2005, and the Company made important progress on a number of fronts. However, the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation. Nortel is taking this action now, with a $2.4 billion*** cash position, to preserve its liquidity and fund operations during the restructuring process.

“Nortel must be put on a sound financial footing once and for all,” said Nortel President and CEO Mike Zafirovski. “These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be. I am confident that the actions we’re announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel’s dedication to delivering world-class solutions and services to customers.”

One thing I wanted to mention amid the news about Nortel’s bankruptcy filing is this is a sad day for Canada, the economy, our high-tech community and, of course, the thousands of hard-working Nortel employees.

What was once a shining star within the telecom world has crumbled amid bad strategic decisions, extreme competition, a bleak economy and changes within the industry that Nortel failed to capitalize on.

For employees, the bankruptcy protection filing must be a bitter pill to swallow. After living through years of restructuring and cost-cutting, I’m sure most Nortel employees continue to fight the good fight on the hope that somehow Nortel would be able to find its way again.

Many of them were emboldened by CEO Mike Zafirovski’s confidence that Nortel was on the rebound but that optimism and a brave face weren’t nearly enough to resuscitate Nortel.

It must be terribly disappointing for Nortel employees to look back at the leadership - or lack thereof - provided by John Roth, Frank Dunn, Bill Owens and Zafirovski. If better decisions had been made perhaps Nortel wouldn’t have found itself in its current dire straits.

For more on Zafirovski and his legacy, the Globe & Mail has a story, “Mike Z: Nortel’s last, best CEO?”

Comments

[Mafeking:]

I agree. I worked for Nortel in the heady dot com 1990s when Roth talked up the company and walked away with milions. So did Dunn who - it appears - fiddled the books to ensure his bonus. The next two CEOs were equally dismal, but perhaps a smidgen more honest.

But none of the CEOs were able to do the right thing for whatever reason. Instead of facing reality they were always hopeful Nortel would / could return to its former glory.

I predict Huawei is going to pick up a lot of the intellectual property at fires sale prices and this sorry chapter of Bell Northern Research a.k.a. Nortel will be at an end. And all the excellent employees and the great IP they developed will be scattered to the wind.

Jan 14 03:17 PM

[lickety split:]

good riddance to this great american style pump and dump scam that is nortel.. may it RIP.. as for the engineers and the people who there did the honest and real work, i hope you can stay on with the emerging entity (if the entity is an honest shop) or get picked up by a quality tech outfit like IBM or intel or a quality Chinese shop that is peddling a more non-corrupt form of capitalism (like Huawei).

Jan 15 12:44 AM

[Ken wheeler:]

Thats what greed gets you. I have been selling Nortel equipment
for years . They are so hard to work with it was like pulling
teeth to get support . Key cod this Key code that just another
way to limit sellers good going now no one wan't to deal with
them nickle and dime you on everything may it RIP all i can
say is good by Nortel Hellow AVAYA

May 27 11:05 PM