According to the Wall Street Journal, telecommunications equipment maker Nortel is talking to lawyers about its strategy, including filing for bankruptcy. This is grim news for the vendor and the industry at large. Nortel has a lot of debt ($4.5 billion as of the last quarter), is facing continued pressure from emerging competitors such as Huwei, and the overall equipment industry is being pummeled by the global financial crisis. Nortel laid off 1,300 workers on Nov. 10, bringing its total layoffs this year to 2,500, and a spokeswoman says the company is still implementing its restructuring plan.
“Nortel is hard at work reshaping the business to even better serve our customers. There are those who fuel negative speculation, but there are many more who believe that Nortel has put in place the necessary plans to strengthen our financial footing and reset our cost base. Even just two weeks ago, Standard & Poor’s reaffirmed our credit rating stating “Nortel should be able to sustain adequate levels of liquidity in the next 12-18 months…”
Nortel is a viable partner for the long term. We have no debt maturity until 2011, and we are preserving and strengthening our cash position. On November 10th, we put in place an aggressive plan to bring down costs by $400 million with a minimum level of cash outlay. The goals we laid out on November 10th have not changed. We remain focused on executing a significant shift to our operating model and cost base to reflect the economic environment that we are now in. Our commitment is to remain an innovation-driven organization — delivering value to our customers for the long term.”
Nortel does have good assets, customer wins and technology, which means a bankruptcy filing could lead to a buyer swooping in to cherry pick the company without the burden of $4.5 billion in debt.