Nortel files for bankruptcy.http://apnews.myway.com/article/20090114/D95MVNI00.htmlJan 14, 9:46 AM (ET)By ROB GILLIESTORONTO (AP) - Technology giant Nortel Networks Corp. (NT) (NT) filed forbankruptcy protection in Canada and the U.S. on Wednesday, the first majortechnology company to file for protection during the global downturn.North America's biggest maker of telecommunications equipment has been dealingwith a sharp drop in orders from phone company clients. It filed for courtprotection in Delaware on Wednesday, a day before the firm is due to repay a$107 million interest debt on bonds.Creditor protection would give the company more opportunities to explorerestructuring options or sell off some of its assets. ...
Does Nortel's bankruptcy filing make common stock shares worth zero, or will shareholders retain their equity after Nortel's restucturing?
Canada’s technology icon is unlikely to emerge from bankruptcy protection The bigger they comeJan 15th 2009From The Economist print editionIN THE end the question was not if, but when. On January 14th Nortel,a troubled Canadian maker of telecoms equipment, filed for bankruptcyprotection, making it the first big technology firm to succumb to therecession. "Nortel must be put on a sound financial footing once andfor all," explained Mike Zafirovsky, its chief executive.It marks the end of a breathtaking fall. Nortel, a high-flyer duringthe internet boom, was once Canada's largest company, employing 95,000people worldwide and boasting a stockmarket value, at its peak, ofC$366 billion ($251 billion), accounting for more than one-third ofthe value of the entire Toronto Stock Exchange. Just before the filingthis week, its workforce had shrunk to 26,000 and its stockmarketcapitalisation to a mere C$191m ($156m).The immediate cause of Nortel's demise is the recession, which hit itparticularly hard. In November Nortel posted a third-quarter loss of$3.4 billion. Revenue in its core business, which sells switching gearto telephone companies, fell by 24%. But the roots of Nortel'stroubles go deeper. It never really recovered from the bursting of theinternet bubble in 2000-2001, followed by an accounting scandal in 2004.Will other big technology firms follow it into bankruptcy? Notnecessarily. Although its rivals are not doing too well, they arestronger. In December Alcatel-Lucent said demand for its productswould fall by 8-12% next year, and it would not make much of anoperating profit before 2010. Even Motorola and Sun Microsystems,embattled makers of telecoms equipment and high-end computersrespectively, should be able to make it through the recession,provided they are not taken over or broken up by their own management.Both firms have plenty of cash in the bank.Still, Nortel could become a model. Its filing was a "strategic move",says Richard Windsor, an analyst at Nomura Securities. With $2.4billion in the bank, Nortel could have limped along for a while. Butit went for bankruptcy protection now, he says, so it would not haveto do it in total desperation when the money had run out. Will itemerge in one piece? Probably not, says Mr Windsor. Its parts arelikely to be sold, perhaps to Huawei Technologies, a Chinese rivalwhich has been looking to boost its presence in North America for sometime. It is a sorry end for a once-proud Canadian technology icon, butthis way investors will at least get some of their money back.Copyright © 2009 The Economist Newspaper and The Economist Group. Allrights reserved.
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