It’s not every day that you see a company with a 127-year history in Canada dissolve before your eyes. Or is it? North America’s biggest maker of phone gear filed for bankruptcy protection in January of this year. I’m sure that in the current climate refinancing their debt is difficult but this downward spiral has been mounting.
Bankruptcy protection, at least these days, is nothing new. Nor is the mismanagement of Nortel, as recently as 2007 the company paid a $35 million fine to settle U.S. Securities and Exchange Commission claims that it was manipulating earnings from 2000 to 2003. Lately executives have been touting a renewed focus on stabilizing its customer and supplier base but one must follow the money.
The company had been hoarding cash leading up to its bankruptcy filing and had been slow to pay severance payments. After a fight that went to Ontario Superior Court, Nortel was allowed to pay $45 million in bonuses for close to 1,000 executive and nonexecutive employees (including the eight senior executives). With thousands let go you it’s not hard to think of how many current or former employees feel. The gravy train is coming to a halt. The fire sale has begun. The demise of Nortel is criminal, but many will say this is business as usual.
Only a matter of time until Nortel will be delisted from the TSX. Nortel was Canada’s most widely held and valuable company (one of the few “dot com” companies with real assets) worth over $350 Billion and employing 95,000. Now it’s worth a few hundred million and employs less than half that staff count! Pity.