Nortel Sinks Beneath the Waves

January 14th, 2009 by · 2 Comments

According to various sources, nt will file for bankruptcy later today.    At one point back in the bubble, Nortel had a marketcap of $200B and was the largest company in Canada, and that number now looks likely to go the rest of the way to zero.  Speculation is that the company will be broken up in bankruptcy court and sold to competitors.  Who buys (or tries to buy) which pieces of Nortel will probably be a major source of news for the sector for several quarters to come.  My sympathies to the employees at Nortel, it’s going to be a long year up north.

I can’t say it wasn’t expected, but I really had hoped they would find a better solution.  The company still had lots of cash on its balance sheet, but apparently they decided that it was better to file now than burn through it.  It was a double whammy:  the credit crisis keeps them from accessing the credit markets, and the carrier spending slowdown hurts their revenues and increases their cash burn.  I can only assume Q4 will show massive operating deterioration, perhaps moreso than previously realized.  But still, some companies go down kicking and screaming, and some just say ‘oh well’ and jump off the cliff.

And now that the first one has gone under, the news will inevitably shift to who might be next.  I don’t much like speculating on misery, so I’m not going to try to guess today.

Of course, the reports *could* be wrong, they haven’t actually filed yet. {Update: now they have in fact filed.}

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Categories: Financials · Telecom Equipment

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2 Comments So Far

  • Government intervention?

  • wc says:

    I wouldn’t say that they just said ‘oh well’ and jumped off the cliff. They’ve been struggling on the edge for a long time. That said, I agree that they didn’t kick and scream. Even though they sort of are Canada’s ‘National Carrier’ (optical, of course), and sell better products than a General Manufacturer;)

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