POLITICS - Nortel Networks Corp., once Canada's top technology titan, filed for bankruptcy protection (again!) today. Nortel said today that the company and its various subsidiaries would seek protection from creditors with filings in Canada, the United States and Europe.Nortel was scheduled to make an interest payment this week of approx. $107 million USD and has about $2.4 billion in cash and equivalents on hand, but is seeking protection from creditors because of tight credit markets.
The company said bankruptcy protection will "allow Nortel to deal decisively with its cost and debt burden" while it continues to restructure and maintain its expects its day-to-day operations.
Shares of Nortel were trading down more than 70% this morning at about 12 cents on the TSX. The value of the company's stock has fallen by more than 96% over the past year.
Once a high-tech darling, Nortel's shares were valued as high as $1,100 in mid-2000, when the company was at the zenith of its success, once the stock is adjusted for a consolidation that took place in late 2006.
Nortel has spent the past several years trying to rebound from an industry-wide downturn and a massive accounting scandal that resulted in multiple earnings restatements and a major shareholder class-action lawsuit, which has been settled.
At the same time, Nortel has faced intense competition from North American and European rivals such as Alcatel-Lucent, as well as low-cost Asian vendors such as Huawei Technologies. The company has also suffered as telecom companies scale back spending on the high-quality/high-speed equipment that Nortel makes.
The American recession has exacerbated Nortel's problems, putting its business is under pressure and its liquidity is deteriorating.
In September 2008, the company revealed plans to put its Metro Ethernet Networks unit up for sale. Two months later it reported a $3.4 billion quarterly loss, cut its 2008 outlook and announced another 1,300 layoffs, or about 5% of its staff. It also said it would freeze salary increases, cut back on consultants and review its real estate portfolio.
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