Canada and the World
Current Events with a Canadian Perspective
Last update
19 November 2010
Canadian Telecom
Giant Nortel Collapses
Once a world leader in telecommunications technology,
a storied Canadian company has disappeared,
piece by piece, into the hands of foreign companies
The story begins in Brantford, Ontario in 1876, when 
Alexander Graham Bell (left)
invented the telephone. A dozen years later, the Bell Telephone Company began manufacturing
phone equipment in Montreal. That manufacturing arm of the company eventually became
Nortel Networks.
Nortel Engaged
in Cutting-
At its peak in 2000, wrote Andrew Wahl in Canadian Business Magazine (March 2009)
“Nortel was the world’s largest supplier of telecom equipment, earning revenues of
U.S.$30 billion and employing 94,500 people worldwide -
The company was spending around $2 billion a year on research and was producing the world’s most advanced communications devices. Nortel was a brilliant star in Canada’s technology sector, and then it crashed and burned.
Management Fumbles at Nortel
First there were some bad management decisions; at the height of the dot com bubble in the late 1990s, Nortel was buying up companies for top dollar.
When the telecom bubble burst in late 2000 the rapid decline began. Nortel’s market capitalization (it’s value on stock markets) plummeted from $389 billion in September 2000 to less than $5 billion two years later.
The price of the stock followed a similar plunge, from $124 per share to pennies. Investors and pension funds took a terrible hit as did the 60,000 Nortel employees who lost their jobs.
Then came the accounting scandals. Liabilities appeared on the books as assets and profits were reported where there were losses.
On October 15, 2007, CBC News reported that “Nortel Networks Corp. agreed to pay $35 million US to settle Securities and Exchange Commission accounting fraud charges over the company's financial accounting.”
Finally, in June 2009, the company announced it would not seek to emerge from the bankruptcy protected it had been granted six months earlier.
Nortel Assets on the Auction Block
Then the vultures started circling the carcass of the company and picking off the choicest bits that were left.
All that research carried out by Nortel engineers meant that the company owned a lot of very valuable patents that other businesses bought up, and many of these assets were being sold off to foreign corporations.
Ottawa Fails to Protect Valuable Assets
This is where the Conservative government comes in for a lot of criticism. First, Ottawa refused to try to bail out the company as it had done with General Motors and Chrysler.
Second, the federal government seems to have done nothing to help Canadian companies to buy up Nortel’s assets.
Research in Motion (RIM) is the Canadian company that makes the popular BlackBerry
wireless communication device. It wanted to buy Nortel’s Long Term Evolution technology,
which is a cutting-
There appears to have been a lot of back room squabbling among senior executives at both companies that Ottawa did nothing to smooth over, as reported in The Globe and Mail by Boyd Erman (July 2009).
RIM claims it was blocked from making a bid, Nortel claimed RIM refused to play by the rules. And, while the two bickered, the Swedish phone company Ericsson bought Nortel’s wireless business for $1.1 billion. Ericsson says it will keep 800 of Nortel’s staff on the payroll in Canada.
Avaya Buys Nortel’s Manufacturing Arm
A second large chunk of the Nortel empire, its manufacturing wing, has been bought by the U.S. company Avaya Inc. However, a competing bid was on the table that would have kept the company in Canada.
Writing in The Globe and Mail (September 18, 2009) Andrew Willis described a plan
“to create a Toronto-
Nortel’s Ottawa Campus Sold
The final chapter is recorded by the Ottawa Sun.
Nortel Networks sold its Carling Ave. campus Tuesday to the federal Public Works department for $208 million.
The building will be a new home for the Department of National Defence, says the president of the Union of National Defence employees.
Sources
“The Good, the Bad and the Ugly: Nortel Networks.” Andrew Wahl, Canadian Business, March 30, 2009.
“Nortel Pays 35M U.S. To Settle SEC Accounting Fraud Charges.” CBC News, October 15, 2007.
“Why are the Remains of Nortel so Interesting to RIM?” Boyd Erman, Globe and Mail, July 22, 2009.
“How a Made-
“Mr. Watson! Come here! I want to see you!”
The first words spoken over a telephone by Alexander Graham Bell to his assistant Thomas Watson on March 10, 1876.