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Telecommunications Nortel files for bankruptcy protection - UPDATED
Telecommunications Nortel files for bankruptcy protection - UPDATED | Nortel files for bankruptcy protection - UPDATED |
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| by Stuart Corner | |
| Thursday, 15 January 2009 | |
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CEO Mike Zafirovski is putting a brave face on the situation. In a press release headed "Nortel commences comprehensive business and financial restructuring," he said: " Nortel must be put on a sound financial footing once and for all. 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." He added: "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." However Canada's Globe and Mail newspaper, which broke news of the move, said analysts had speculated that it would result in Nortel being broken up and its various business units sold off at fire sale prices. Zafirovski told the paper: "A break-up is not a top priority for the business. On the contrary, it's to be able to come out the other side as a nimbler, more focused, successful technology company." This might prove extremely challenging in the current climate. The Globe and Mail reported that "sources say the company has seen business dropping significantly as customers worry about its future, and analysts says Nortel can expect to lose significantly more business after the filing. In addition, suppliers to the company must now decide whether to continue doing business with Nortel and under what conditions. More than $1 billion of outstanding receivables may never get paid if the company fails to emerge from bankruptcy protection." Nortel has already put in place arrangements to ensure continued provision of services from one key supplier, outsourced equipment maker, Flextronics. It has agreed to purchase $US120 million of existing inventory by July 1, 2009 and to make quarterly purchases of other inventory and to terms relating to payment and pricing. Other suppliers might not be so favoured. Meanwhile, in the Asian Region, Nortel says it is business as usual. CONTINUED |
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