Nortel files for bankruptcy: What you need to know

Nortel files for bankruptcy: What you need to know

Summary: Nortel has officially filed for bankruptcy in a bid to be on "sound financial footing once and for all."In a statement, Nortel detailed its bankruptcy filing.

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Nortel has officially filed for bankruptcy in a bid to be on "sound financial footing once and for all."

In a statement, Nortel detailed its bankruptcy filing. And while it's unlikely that Nortel will garner new customers it has a lot of existing ones that may be worried.

Here's what you need to know:

  • Nortel has filed Chapter 11 bankruptcy proceedings and will restructure accordingly;
  • Nortel will continue daily operations as usual;
  • The company cut a deal with Flextronics, its contract equipment manufacturer, to maintain its supply chain. Nortel has agreed to buy $120 million in existing inventory by July 1. Nortel will also make other inventory purchase quarterly. Translation: Nortel has an inventory glut to work through. Flextronics has terminated some parts of its Nortel contract effective in July.
  • The company said it will continue to support its products and continue to invest in research and development.
  • The upshot is that not a lot will change initially under this bankruptcy proceeding for existing customers.

What's unclear is whether the company will be split up in parts as previous reports have noted. Nortel did say that it will "deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner."

Depending on its focus, Nortel is likely to unload a few divisions and seems to be eyeing bankruptcy as the most effective means to restructure. The company has been limping for years anyway.

Nortel CEO Zafirovski said:

"These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be.  I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers."

Topics: Legal, Enterprise Software

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7 comments
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  • a load of bull

    [i]I am confident that the actions we?re announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel?s dedication to delivering world-class solutions and services to customers[/i]
    This dude is speaking about 'double-digit productivity' ????
    It looks like hypocrisy has no limit!
    Linux Geek
    • They can do it

      They have had serious focus issues since the late 90's. Too many projects that do not support the core business. By dropping these projects (like the one in the news this past week where they were working on a 3D shopping environment for Lenovo; what does this have to do with networking?) and focusing, there should be an immediate gain.
      happyharry_z
  • Darwinism strikes again

    My first network administration was on Bay and old Wellfleet back in the 90's. Since that time they've seemingly made every effort to shoot their data products in the foot. In teh early days they provided the most bang for the buck though switches and routers that seemed over engineered in comparison to the competition. Some place along the line they became average and today Juniper is poised to kick them to the curb permanently in my opinion (with regard to data). Take a look at their on again, off again wireless solutions and third party intrusion system partnerships. What a mess. My opinion is that they leave the data networking arena and try to live off their phone prowess while Juniper attacks Cisco by offering a wide array of data products that are cheaper and perform as well or better. Put a fork in Nortel... they're done.
    AroundOmaha
    • I agree - probably toast

      Although it's a shame....

      I still have some Nortel boxes, but my Cisco stuff just runs, and that's the mountain Nortel has to climb, IMHO. Put out boxes that just run.

      But sure do hate to see them go down.
      Takalok
    • re: Darwinism strikes again

      It's not clear exactly when in the 90's you're referring to, but NT had very little to do with the quality of Bay Networks at any point in the 90's. They bought them in 1998 and it's safe to say that any bay routers from that period were the result of Bay Network Engineers and developers, not Nortel's.

      My understanding from people who still work there is that part of NT's problems lie in the underfunded pension, which they tried getting employees to leave almost a decade ago. My guess is they'll do their best to unload the pension during this reorg.

      That said, there are still lots of problems, and I know of some top talent that they let go, because the work they did didn't show up on a spread sheet.
      notsofast
  • Not Toast Quite Yet, I Think

    You're forgetting Nortel's core business - Telecom. I deal with these people everyday. They can drop the routing equipment any time and still have plenty to do.

    They have so many telecommunications switches in so many markets that they will have support business for the rest of time. I'm not talking about little router switches, I'm talking about their 75,000 + phone call capable switches. They are still supplying new and reconditioned parts to all these customers as well.

    They do have some big changes coming, though.
    L8erG8er
  • RE: Nortel files for bankruptcy: What you need to know

    Nortel data problems have always been marketing. They have no clue how to market. Also every time they have a layoff they get rid of the technical talent and not administration. I go back to the SynOptics days, Bay Networks and Nortel. They have never helped me get into businesses, they said it was not their job to promote my business. This mentality in my opinion is what has brought them down.
    DGILES1