TORONTO — Nortel Networks Corp. spent years ringing up multiple rounds of layoffs as it tried to fix big problems in its business. But it couldn’t ward off the recession.
The telecommunications equipment maker filed for bankruptcy protection in Canada and the U.S. on Wednesday, becoming the first major technology company to take that step in this global downturn.
The filing came a day before Nortel was due to make a debt payment of $107 million.
Facing a sharp drop in orders from phone companies, Nortel used the bankruptcy filings to buy time to explore restructuring options such as selling off assets. Some help already is coming from the Canadian government.
The Toronto-based company said in a release that it had been in the process of a turnaround since late 2005, but “the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation.”
“Nortel must be put on a sound financial footing once and for all,” Nortel’s chief executive, Mike Zafirovski, said in the statement.
As of its last quarterly filing, Nortel had $4.5 billion in debt and $2.4 billion in cash. Nortel said Wednesday its cash position remains $2.4 billion, but it did not immediately reveal its total assets or its debt load.
During the 1990s telecom and Internet boom, Nortel had more than 95,000 employees and a market capitalization of $297 billion. At one point in 2000 it accounted for one-third of the market value on the entire Toronto Stock Exchange.
After the dot-com bust, Nortel had problems of its own: an accounting crisis that sparked shareholder lawsuits, regulatory investigations and the firing of key executives, including chief executive Frank Dunn. By the time stock trading closed Tuesday, before the bankruptcy filing, Nortel’s market value was just $155 million. Its workforce was down to about 26,000 people.
Lisa Pierce, an analyst with Forrester Research, said Wednesday that Nortel now can expect to lose more business to competitors such as Cisco Systems and China’s Huawei Technologies, which already have been gaining share.
