Canada's Nortel Networks Corp., one of the world's largest telecommunications equipment manufacturers, filed for bankruptcy protection on Wednesday.
In a press release, the company said the global financial crisis had derailed its efforts to fix mistakes of the past and turn itself back into a profitable organization.
Nortel, based in Toronto, said it has applied for creditor protection under the Companies' Creditors Arrangement Act (CCAA) in Canada. A hearing by the Ontario Superior Court of Justice is scheduled for Wednesday afternoon.
The company's U.S. operations have also filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and its European units will make similar filings in Europe, the company said.
"The company's normal day-to-day operations are expected to continue without interruption," Nortel said in the press release.
The telecom-hardware manufacturer failed to conclude a deal to sell one of its divisions that was put up for sale in September, and had faced the prospect of paying US$107 million of interest on its debts on Thursday.
Some sources say the company has seen business dropping significantly as customers worry about its future. Analysts expect Nortel to lose significantly more business after the filing.
The company's already crushed shares plunged further in European trading early Wednesday as investors absorbed the development, falling to as little as the equivalent of 35.41 Canadian cents on the Frankfurt Stock Exchange, before inching back to 37.66 cents, down 2.9 cents from Tuesday's close. The shares were halted on the TSX and NYSE.
The filings on Wednesday could see what was once Canada's great corporate success story broken up and sold to foreign rivals.
Nortel's storied history in the telecommunications field dates back nearly as far as the telephone itself. The company was founded in 1895 as Northern Electric Manufacturing Company to begin selling telephone equipment to other companies as Canada built out its first telecom network.
Throughout the first half of the 20th century, the company's telecom gear business grew steadily, but Nortel also built telegraphic equipment used on the battlefields of the First World War as well as the first sound system in Canada for talking movies.
In the 1950s, the company developed electromechanical switches, a technology that would allow direct phone calls between cities. Nortel was an early pioneer of satellite technologies in the 1960sand helped build Canada's first cellular telephone networks.
Nortel's fortunes exploded with the dawn of the Internet and the introduction of increasingly sophisticated modems and cellular technologies. At its peak, this one company accounted for nearly one-third of the total value of the TSX, as the company was worth more than all six big banks combined.
(Xinhua News Agency January 15, 2009)
