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Saving Nortel Never Was Realistic, Says Former Exec

Jan. 14, 2010 marks the year anniversary of the beginning of the end for Nortel Networks.

That’s the day the once-venerated telecom equipment maker, a major source of tech jobs and R&D in Canada, filed for bankruptcy. (Expect a flood of “one year later” analyses over the next couple of weeks.) And it did so thanks to the collision of factors that created the “perfect storm,” John Manley, a one-time director and interim CEO at Nortel, told The Canadian Press in an interview published on Sunday.

Nortel’s financial problems became insurmountable in August 2008, Manley said. That’s when the global economy started to collapse, creating a domino effect: Nortel’s sales all but disappeared and the company started talking about selling its very-profitable Metro Ethernet Networks unit to help stave off bankruptcy. Up until August, “all of us maintained hope” that Nortel would survive, Manley told The Canadian Press. But, he said, “We always knew it was a long shot.”

By December 2008, Nortel’s sales pipeline had vanished because of the economy, Manley said.

Much of the reason Nortel declared bankruptcy stemmed from Nortel’s accounting scandal, for which Frank Dunn – the CEO Manley temporarily replaced – and several other executives were fired. Dealing with the scandal, regulators and class-action lawsuits ate up so much of the Nortel board’s time that vendor rivals including Nokia Siemens Networks and Alcatel-Lucent were able to grow more dominant.

And when Mike Zafirovski took over as CEO in late 2005, the chaos only continued, perpetuated by the recession. Zafirovski resigned in August 2009 (he still insists Nortel owes him $12 million).

Nortel spent all of 2009 auctioning off its various divisions and assets. Very few remain and it’s still unknown whether the company will operate as a much smaller version of its former self or close altogether. Manley said he doesn’t think another firm will take on the Nortel name because the brand is too “damaged” at this point.

“The Nortel we once knew is not going to rise from the ashes. That history has been written,” he told The Canadian Press.


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