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Fri, Jan 16, 2009 - Page 10 News List

Nortel files for bankruptcy protection

NY TIMES NEWS SERVICE , OTTAWA

A metal sculpture of the Nortel Networks Corp logo stands outside the company’s headquarters in Toronto, Canada, on Wednesday. Nortel has filed for bankruptcy protection after its financing dried up.

PHOTO: BLOOMBERG

Nortel Networks, the Canadian telecom equipment maker, filed for bankruptcy protection from creditors on Wednesday, but analysts said its troubles might be too severe for it to recover and survive.

Unlike other companies, notably airlines, that have used bankruptcy protection to renew their businesses, Nortel, which began this decade as one of the world’s largest makers of telecommunications equipment, is probably headed for liquidation, several analysts said.

“I don’t think it’s going to exist,” said Mark Sue, an analyst with RBC Capital Markets, a unit of the Royal Bank of Canada.

If Sue and others are correct, the end of Nortel would be one of largest failures in the telecommunications equipment business. During the 1990s, Nortel designed and built much of the fiber-optic equipment that now carries most of the Internet’s data.

Nortel’s woes went beyond finances. In the market for Internet-related equipment, particularly gear and software used by corporations, Cisco Systems and others proved to be more innovative and successful.

At the same time, Nortel faced increased competition in its traditional business of selling systems to telephone companies from both its traditional rivals and newcomers. Huawei Technologies (華為科技) of China has proven to be a particularly aggressive competitor, especially in emerging markets.

The bankruptcy filing was unanimously approved by Nortel’s board at a meeting in Toronto.

It appears to be an attempt to avoid US$107 million in interest payments that were due yesterday.

While the company has about US$2.4 billion in cash, that is rapidly depleting.

“Nortel must be put on a sound financial footing once and for all,” president and chief executive Mike Zafirovski said in a statement.

Without elaborating, Zafirovski, a former senior executive at Motorola, promised yet another revamp of Nortel.

Since the beginning of the decade, Nortel has started a series of overhauls that have included 16 rounds of layoffs.

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