Nortel Ponders Bankruptcy As NYSE Issues Stock Delisting Warning

While there is no imminent announcement, there is growing speculation that Nortel is actively considering a bankruptcy filing. In some ways it’s hard to believe a company that was once Canada’s largest could be headed to the deadpool. Nortel is taking on water fast having burned through $478 million in cash so far this year and with the current economic climate forcing U.S. carriers to pull back their infrastructure spending, there are no quick fixes on the horizon.

Nortel Networks Corp. has sought legal counsel to explore bankruptcy-court protection from creditors in the event that its restructuring plan fails, according to people familiar with the situation. The move comes as the Toronto-based company grapples with plummeting sales for its wireless gear and as the credit crunch hobbles the sale of key assets. – WSJ

With Nortel bruised and battered, it should come as no surprise that competitors now smell blood and are actively looking to pounce on the opportunity. For example, Huawei Corp. which is a low cost Chinese competitor to Nortel is now rumored to be looking for office space in Kanata. While Huawei may eventually be a potential buyer for Nortel’s Metro Ethernet Networks division, it is a clear sign that the vultures are swirling around the Nortel carcass.

Specifically, the company (Huawei Corp.) said it’s aiming for a long-term partnership with wireless communication technology companies, as well as universities and institutes engaged in advancing wireless communication research.

Perhaps most troubling of all, comes news by way of the New York Stock Exchange who has now officially notified Nortel that the stock will be delisted within 6 months if the share price can not stabilize over $1. With the current share price now hovering at .40 cents and trending down further, this may prove to be the final nail.

Can Nortel climb out of this chasm? While the tea leaves do not look promising, one can not dispute that Nortel’s best asset are its people, and the company still has some of the best minds in the networking business. Nortel did table an aggressive plan on November 10th to cut costs and restructure operations. While cutting costs can be done, gaining investor confidence and acquiring new customers in this climate is going to be a major uphill battle.

Related News:
Nortel Faces Delisting by NYSE
Nortel rival enters Ottawa market

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