Nortel files for bankruptcy protection [telecom]

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TORONTO: Nortel Networks, the biggest North American maker of
telephone equipment, filed for bankruptcy protection on Wednesday,
after the downturn eroded its once high-flying business.

The filing came a day before the Toronto-based company was due to make
an interest payment of about $107 million.

Nortel and a number of its affiliates filed for Chapter 11 bankruptcy
protection in the United States, according to a court filing.

Its shares plunged more than 76 percent to 7.5 cents in electronic
pre-market trading.

"Based on this filing, the board of directors must believe that not
only is the fourth quarter bad, but that the first quarter is going to
be just as bad or worse," said Duncan Stewart, an analyst at DSAM
Consulting in Toronto.


Re: Nortel files for bankruptcy protection [telecom]
How the mighty have fallen.  Nortel was once Northern Telecom, aka
Northern Electric, the equipment supplier of Bell Canada in earlier
days, the Canadian equivalent of what Western Electric was to the U.S.
Bell System.

***** Moderator's Note *****

It's a sad day, to be sure. The "old world" wireline monopolies could
afford the best, and they were willing to pay for it, because it meant
less maintenance, more reliability, and a lot less training required
for the union work force (1). They got what they paid for; gold-plated
reliability that is, to this day, the standard for all the world: the
United States and Canada are the only places I've ever been where
customers pick up a telephone and dial a call without bothering to
listen for a dial tone.

N.E.T. once conducted an experiment: it installed a switch made by a
third vendor in a Boston-area location, to evaluate the
cost/performance ratio. The exchange was plagued with problems
throughout its lifetime, with everyone involved pointing fingers at
everyone else. Although the executives liked having a third name they
could drop during negotiations with Western Electric and Nortel, the
citizens who used the exchange were much less enthusiastic, and
eventually preasure from the PUC forced the transition to a Nortel

Suffice to say that the Baby Bells learned the hard way that the
Frying Pan you know is better than the Fire you don't: they stuck with
the Weco/Nortel duopoly thereafter. All would have been fine, except
for Nicholas Negroponte and his prophecy about the crossover of wire
and wireless.

Cellular penetration continues to erode the wireline customer base,
and cellular carriers contine to rake it in with bundles that include
long distance (it's cheaper to include it rather than bill for it),
while wireline competitors creek along with antiquated billing
systems, an expensive work force (cellular is pretty much all
non-union), and "big iron" exchanges that cost millions but can't
attract customers who have other choices.

Bill Horne
Temporary Moderator

1.) There is, of course, the sleight-of-hand game which AT&T played to
maximize profits, pre-1984. Prior to the breakup, when AT&T owned the
Bell System, Western Electric was a major profit center which could,
given the margin-of-return regulatory environments AT&T's subsidiaries
worked in, charge pretty much whatever it wanted for its
switches. AT&T would enjoy the profits from Weco, while the operating
companies told regulators they had no choice. That's another story,
for another time: suffice to say that Nortel had 20+ years to deal
with the change, and the company didn't keep up.

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