Is Nortel still breathing?

Little pieces of news on Nortel keep popping up as if there’s still life in the company. I actually went on their website yesterday to see if they had anything left. First the good news, they have a nice website. Now the bad news- the spin is still there but there is nothing of value to fight for.

To think that at its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange and employed 94,500 worldwide. In 2000, Nortel’s market capitalization hit $398 billion. The stock reached $124. Here’s an interesting historical fact- Bell Canada in that same year got out of Nortel by distributing it (94% of its stake) to its’ shareholders. Great market timing, wasn’t it? Anyway, Nortel became a totally independent global company and their future was good as gold.

As we well know, their yellow brick road became brown, then red, then real bloody.

It wasn’t just the bubble. In 2001, CEO Roth retired and Dunn came in. Call it accounting irregularities, sales not being real sales, or the market just saturated with gear, he slashed 60,000 employees. By 2002, Nortel’s market cap plummeted to less than C$5 billion. Nortel's stock began to evaporate. Dunn wrote down nearly US$16 billion in assets.

Then things went from worse to awful. Their accounting became suspect. By 2005 Nortel hit a high of $10.8B in sales but at a price; their loss was $2.4B. With government and court intervention with their accounting irregularities, there were 3 shots at restating their earnings from prior years ‘due to internal control weaknesses”. The writing was visibly on the wall when CFO Curries resigned in 2007. By 2008, Nortel’s stock target price was $0. In January, 2009, Nortel filed for bankruptcy protection and started selling off to foreign rivals.

What really got me was the speed in selling their body parts. In June, Nortel sold two wireless divisions to Nokia Siemens Networks (about about 10 per cent of Nortel). Within months, Nortel's CDMA wireless business and LTE access technology was sold to Ericsson, the Enterprise Solutions business unit was purchased by Avaya, the Carrier VoIP and Application Solutions unit was sold to Genband, the Metro Ethernet Networks unit was sold to Ciena, the Next Generation Packet Core Assets was sold to Hitachi Ltd. and the GSM business was sold to Ericsson and Kapsch.

Meanwhile, the 34,000 employee jobs in 2006 were eliminated to a team of liquidators and last year over 34,000 pensioners were suing the company for health, pension and long-term disability benefits. Early this year, a new $57-million agreement was reached that preserves benefits until the end of 2010 for roughly 20,000 pensioners. In the “fight till the last gasp”, let’s hope that Nortel can derive as equitable an arrangement as possible to all those hit hard by their demise.