Nortel files for bankruptcy protection

Former technology titan Nortel Networks filed for bankruptcy protection today, a move that will likely see what was once Canada’s great corporate success story broken up and sold to foreign rivals.

Nortel’s board of directors was meeting last night to deal with a financial crisis, as the economic downturn translates into a sharp drop in orders from phone company clients. The telecom-hardware manufacturer failed to find buyers for a number of divisions that were put up for sale in September, and faces the prospect of paying $107-million (U.S.) of interest on its debts tomorrow.

Opting for creditor protection marks an incredible fall from grace for the telecom manufacturer. Nortel easily qualified as the country’s largest company at the peak of the tech boom in 2000, with a CDN $366 Billion market capitalization and over 95,000 employees.

While still North America’s largest telecom equipment maker, Nortel’s shares were worth a total of just $192 Million yesterday, and the company has only 26,000 staff after a series of layoffs over the past eight years. Nortel stock that soared to $1,231 at the peak of the tech bubble – reflecting a recent consolidation in shares – closed yesterday at 38.5 cents on the Toronto Stock Exchange.

Canadian mobile industry blog WirelessNorth sums it up nicely:

Bad news for Canadian innovation in telecom. We could have been a contender.

Nonetheless while the stock holders, the bond holders may be wiped out, the human capital is still here. Time to start some new companies, unshackled by the past. It’s a new world out there with many new disruptive opportunities and our engineering vision talent will be needed as much as ever.