Stock market

Nortel files for bankruptcy protection, plans to streamline but stay in business
CANADA STOCK MARKETS: Nortel files for bankruptcy protection, plans to streamline but stay in business



TORONTO - Telecommunications equipment manufacturer Nortel Networks Corp. filed for bankruptcy protection from creditors Wednesday, vowing to stay alive as a smaller company as it sells non-core businesses and restructures to deal with a plunge in business caused by the North American recession.

The move by the former kingpin of Canada's technology sector (TSX:NT) means Nortel will shed more jobs from its 30,000 employee global workforce and likely pin its future hopes on wireless technology, the fastest growing part of the telecom sector.

The bankruptcy filing will affect the company's debts and other operations, including sponsorships, but Nortel says it remains committed to sponsoring the 2010 Winter Olympic Games in Vancouver. The company is also a major sponsor of the 2012 Summer Olympics in London.

Long-suffering Nortel has been trying to restructure for more than three years and becomes the first major North American technology company to be forced into bankruptcy protection by the the global downturn and credit market crunch.

"Nortel must be put on a sound financial footing once and for all," president and CEO Mike Zafirovski said in a news release announcing the bankruptcy filings.

Nortel stock, which had been halted, lost two thirds of its value, dropping 25.5 cents to 13 cents on the Toronto Stock Exchange, in massive trading of more than 58 million shares..

North America's biggest maker of telecom gear has faced a variety of troubles since the telecom bubble burst eight years ago - including accounting problems that devastated its stock and led to criminal charges against former executives. Most recently, the slumping economy squeezed orders from its phone company customers and ate into its revenues, helping to produce mounting losses.

The company directly and through joint ventures employs about 30,000 people around the world, including 5,800 at Canadian operations in Ottawa and Toronto.

It plans to continue business as usual while it restructures, but job cuts are likely as it tries to lower costs and deal with a huge debt to remain competitive. Moreover, Nortel will come under pressure to assure customers it can stay alive and be able to supply their future technology and equipment needs.

"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," Zafirovski said.

In Ottawa, federal Industry Minister Tony Clement said Ottawa is willing to provide some financing through the Export Development Canada Crown corporation to help Nortel restructure and emerge from bankruptcy protection as a viable company.