Nortel UK goes into administration to save itself
Business as usual at stricken comms vendor
Nortel UK, and most of the comms giant's European operation, has gone into administration a day after its Canadian parent filed for bankruptcy protection.
The company said yesterday that its US and Canadian businesses were seeking Chapter 11 bankruptcy protection. The UK firm will be overseen by overseen by Ernst and Young.
A press statement from Nortel Networks UK said:
On a global basis, adverse economic conditions have made the current capital structure of Nortel Networks Inc. unsustainable and it is imperative that the Group addresses its financial position and the legacy costs burdening its balance sheet, to overcome current challenges and reposition itself for the future. The Group concluded that the best way to effect this transformation was to undertake a restructuring process.
Nortel has 30,000 staff around the world and 2,000 in the UK.
Darryl Edwards, Nortel's Europe, Middle East and Africa, was scheduled to hold a webcast at midday today with Alan Bloom and Stephen Harris of Ernst & Young to tell staff what the decision meant for them.
According to the internal email from Edwards seen by The Register, the move into administration is designed to allow the root-and-branch restructuring of the company and its finances. "Nortel plans to emerge from this process as a more focussed, financially sound and competitive Company", it says.
The mail also said: "This is the start of a new journey for us and I'm counting on your patience and continued cooperation."
It is hoped the move will not have much impact on day to day business at the firm.
Nortel businesses in the following countries will be subject to the same reorganisation process: Austria, Belgium, Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Netherlands, Poland, Portugal, Romania, Slovenia, Spain and Sweden. Denmark and Saudi Arabai, under UK ownership, are also included. There will be differences in each country based on local employment and other laws. ®
As an ex-employee (and pensioner) of Nortel I find it so sad that the company has got into this mess. When I worked for them (we were taken over) there were a predominance of US rather than Canadian senior execs who managed by Powerpoint. I taught for a year their Quality Improvement programme only to find that many (not all) of the guys at the top couldn't care about it - several joined British Gas/AA after leaving Nortel curiously . Great products, some amazingly clever staff - Harlow, the inventors of fibre optics in STC days had more PhDs than Cambridge University it was claimed - but when I worked there the awful management laid the foundations for what the current management has inherited.
Nortel are an 'Official Partner' so Vancouver will suffer too.
Corporate finance is too much smoke and mirrors. Nortel somehow kept hold of cash and held their debts, but are very much in 'negative equity' and have been for some quarters.
To claim to have $2.4 Billion in cash, then run for bancruptcy protection when a $107Million bill is due does not ring true. No-one with $24 grand in the bank would be able to claim they could not pay their $1K mortgage that month.
It's in the shareholders interest to break up the company, and I'm surprised it's not been pushed before. While the company continues to trade, it's merely delaying the inevitable - no-one wants to buy it as a going concern - and eating up shareholders cash. No-one will offer anything for the good bits from the business (perhaps Optical division) until they can pick it off the scrap-heap from the administrators for a song.
Canada has no "Chapter 11"
"The company said yesterday that its US and Canadian businesses were seeking Chapter 11 bankruptcy protection."
Not to put too fine a point on it, but "Chapter 11" is purely an instrument of the USA. Canadian bankruptcy applies quite a different process. Having never been bankrupt in either of those sovereign nations I can't clearly describe those differences. But I do know they are different.