Nortel Networks: Bankruptcy

I used to ‘daytrade’ Nortel back during the heady days of the Technology Bubble, churning hundreds of thousands of shares a day. Nortel (NT.TO) was THE Canadian success story back then… the answer to Silicon Valley. Ottawa was a boom town thanks to Nortel and dubbed "Silicon Valley North".

The slide into the Abyss has been long, with a split adjusted high of $1245 a share in July of 2000 to yesterday’s close of $0.385. Eight agonizing years for shareholders of one of the widest held stocks in Canada.

After surviving the bursting of the Technology Bubble, a serious accounting scandal in 2003 revealed that the profits of the bubble years were nothing but a giant illusion.

Amazing really.

FUN FACTS:
Peak Market Capitalization: $366 billion (HUGE for anything Canadian!)
Peak Employment: 95, 000

Nortel Plunges on Report Bankruptcy Filing Planned (Update1): “Nortel Networks Corp., North America’s biggest maker of phone equipment, plunged in European trading after the Globe and Mail reported the company will file for bankruptcy protection as early as today.

The board met last night to deal with “a financial crisis,” the newspaper reported, citing people working with Nortel and its creditors. Nortel will file in Toronto and an undisclosed U.S. location, the Globe and Mail reported. The company faces a $107 million interest payment tomorrow, the newspaper said. David Silke, a Nortel spokesman in Ireland, didn’t immediately return a call for comment.

In German trading, Toronto-based Nortel fell as much as 5.93 U.S. cents, or 19 percent, to the equivalent of 26.07 cents, from the close of 32 cents in the U.S. yesterday. The stock traded at 30.8 cents as of 12:28 p.m. in Frankfurt. The stock lost 24 percent in New York Stock Exchange composite trading yesterday.

Nortel was working with Lazard Ltd. and law firm Cleary Gottlieb Steen & Hamilton on options, including a possible bankruptcy filing, people familiar with the situation said last month.

Since Chief Executive Officer Mike Zafirovski took over in 2005, the company has lost almost $7 billion. Nortel, whose predecessor was founded more than a century ago, has lost 97 percent of its market value in the past year as customers reined in spending and switched to newer technology from Cisco Systems Inc. and other rivals.

Zafirovski, 55, had sought to revive Nortel’s fortunes by cleaning up the balance sheet and reducing the workforce by 18 percent since he started. Demand for Nortel’s equipment, mainly based on older code division multiple access technology, has waned as customers move to faster systems.”