Nortel mulls bankruptcy
- 11 December, 2008 08:02
Nortel has hired lawyers to consider whether it should seek bankruptcy protection, but the company says it has made no decision to do so.
It will instead follow the restructuring and cost-cutting plan devised last month.
"On November 10th, we put in place an aggressive plan to bring down costs by [US]$400 million with a minimum level of cash outlay. The goals we laid out on November 10th have not changed," the company said this morning in response to a Wall Street Journal story that the company was seeking legal advice to explore bankruptcy.
In that story, a Nortel spokesman is quoted as saying no bankruptcy filing is imminent. Its statement on Wednesday does not deny that it sought advice on bankruptcy.
The company says, "Nortel is a viable partner for the long term. We have no debt maturity until 2011, and we are preserving and strengthening our case position.
"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."
The statement says that two weeks ago, Standards & Poor's, which ranks credit ratings for businesses, said, "Nortel should be able to maintain adequate levels of liquidity in the next 12-18 months."
The company has suffered a major slide in profit over the past year, dipping into red ink last quarter. A year ago, Nortel had a net profit of US$27 million in the third quarter, which plummeted to a net loss of US$3.4 million. Between the same periods, revenues dropped 14 percent.
The company's market value, peaking at US$250 billion in 2000, is now close to 0.1 percent of that at US$275 million.
The game plan articulated last month resulted in laying off 1,300 employees, plans for selling its metro Ethernet unit and getting rid of facilities. The company revised its revenue projections downward for this year, from a range of a 2 to 4 percent decline to a firm 4 percent.
Among those laid off were some top executives, including CTO John Roese, Chief Marketing Officer Lauren Flaherty, Global Services President Dietmar Wendt and Executive Vice President Global Sales Bill Nelson.
Sale of the metro Ethernet division could be stalled by tight credit markets that might prevent interested buyers from being able to finance the deal.
The company has been trying to get the Canadian government to help bail it out, but the country's legislature has shut down until January, the Wall Street Journal says.