Happy Anniversary, Nortel!

By Mark Evans | Published: January 13, 2010

Hard to believe but it’s nearly been a year since Nortel filed for bankruptcy protection – a move the company vowed would put it on more solid footing even if meant shedding thousands of employees and non-core assets. Unfortunately, this scenario failed to materialize as Nortel fiddled away for five months before deciding that selling everything was the best course of action.

With only two assets left in the cupboard – the stake in the Nortel-LG joint venture and the 3,000 or so patents – the end of Nortel (aka Canada’s flagship technology company) will come to an end with a whimper rather than a bang. At the end of the day, there will be lots of questions about what can only be described as a spectacularly disappointing process. Among some of the most intriguing questions are:

1. Why were some of Nortel’s assets sold at firesale prices? The GSM business, for example, sold for $103-million, or about 10% of its 2008 sales. The carrier voice and applications business, which had nearly $900-million in sales in 2008, has received a low-ball bid for $282-million from Genband. Another travesty is the court accepting a bid from Ciena that included equity while ignoring an all-cash bid from Nokia Siemens.

2. Why has the Canadian government done thing for Nortel pensioners, who will be left high and dry when Nortel disappears. Meanwhile, the U.S. government is been pro-active in seizing control of pension assets for U.S. employees?

3. Why did some employees in Europe – France and Germany – receive severance payments when North American employees got zilch?

4. Why the IRS allowed to register a $2.1-billion claim against Nortel assets in Canada?

5. What happened between Jan. 14 when CEO Mike Zafirovski declared a new Nortel would rise from ashes, and the middle of June when the board decided to throw in the towel. What changed?

6. Did the Canadian government get any guarantees from happy buyers such as Ericsson and Avaya to keep jobs in Canada before they were approved?

More: The Globe & Mail has a behind-the-scenes story about Nortel’s liquidation that paints the process as impressive accomplishment, which is strange given all of the above.

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  • henrylow
    There's a movement to radically change California government, by getting rid of career politicians and chopping their salaries in half. A group known as Citizens for California Reform wants to make the California legislature a part time time job, just like it was until 1966.

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  • 4merEmployee22
    What happened in HAITI was caused by a natural catastrophy!

    What happened with NORTEL was caused by a manmade catastrophy!
  • felixmk
    1. The GSM business was run into the ground by management. There is also a huge bonus for the execs in every business that gets sold, whether the price is good or bad. This is why GSM was sold for nothing and piecemeal.
    2. For some reason, the Canadian govt does not protect pensions as well as the US.
    3. Labor laws, next question.
    4. It was just a claim, next question.
    5. Mike Z realized, after filing bankruptcy, that he was living in a dream world of his own creation where lean six sigma and optimism would turn the company around.
    6. No guarantees.
  • fatzoff
    Is that Mike Z lying at the bottom of the pool????


    http://virtualglobetrotting.com/map/mike-zafiro...

    well one can dream
  • less
    Ah, I'm sure Mike's trying to get to the "bottom" of things both literally and figuratively. I imagine him doing research for his personal sequel to Jack Welch's bestselling books.
    Jack was okay, and all, but hardly scratched the surface of the 4e's--Energy, Energizers, Edge, and Execute Leadership - like Zack Welcher did.

    Energy - mock Cisco's, not NT's, wastefulness
    Energizers - Hackney's cutting through traffic like the proverbial knife, or accounting's earnings restatements
    Edge - cruising on the edge of bankruptcy for 5 solid years with one's head held high
    Execute Leadership - all just depends on what your definition of "execute" is

    Z spelled all things with 4e's. Just get a load of, say, LEEn SEx SEgma. That inspires all sorts of leading-edgy, energizing images in males' minds (i.e. all types, from alpha to Zeta), dunnit.
  • yes4aapl
    It's not nice what you said.
    Why would you say so?
    Complains about Nortel are lauder each month and there is no other way but investigate all the involved who milked millions of $$ and destroyed the company.
    We all know the saying that justice is slow but sure.
  • bankrupt_bob
    <<Nortel is the largest, and only global, company to seek court protection under CCAA to effectively liquidate its businesses.

    “No one has ever done anything like this before. Everyday we were faced with a problem that had never been dealt with before,” Mr. Tay said. >>

    Now THAT's progress?!
  • 4merEmployee22
    Mr. Tay is one of the NORTEL lawyers who must have also agreed to the filing of
    Bankruptcy Protection. 'Wonder what is his take after all this fiasco? Millions$$$?
    Is he under the payroll of Nortel?

    CCAA stands for Company Creditors Arrangements Acts!!!

    Arrangements alright? What they've accomplished quick was the arrangements
    of big fat freakin' top exec bonuses!!! And forgotten about the retirees & pensioners!
    Like, as if, Who cares if one worked for 30 years or more with the company!
    Cut severances. ( like KEIP & KERP) these severances & employee benefits
    were contractually signed upon employment. Bargained, if you belong to the unions.

    It is a Federally enacted Acts and yet it was overseen by a Provincial Court?
    It is not a Provincial Act!!!! The Federal ( Canadian) government should have really look into this why it was allowed???? Why is it not in the Federal Court? May I ask?

    MISTRIAL!!!! Bankruptcy Protection rescinded!!!!! oooooooppppps!!!!!

    Yup! Why would a company sells one of its business units IF it was
    making profits ??? Instead of restructuring that unit? Why didn't NORTEL just
    put up a sign which says "UNDER NEW MANAGEMENTS"

    What have they Protected? They've protected the big fat freakin' bonuses for the BoD's and top execs! We say?

    Why were BONUSES tied with Bankruptcy??? Did the Devil made it this so?

    IT IS A HEIST!!!! or Grab for Cash lottery!!!
  • horace_grimswold
    The Globe & Mail article mentions that the lawyers, accountants, and bankruptcy do-gooders had never coordinated such a large scale, multi-national liquidation before. Always great to pat oneself on the back and give kudos to the guy in the mirror. Job well done, funeral parlor.

    Normally, bad companies dwindle to obscurity in small increments before going t!ts-up. By the time bankruptcy happens, the lawyers and accountants are left splitting up the breadcrumbs.

    Mike Zee managed to drive the entire freight train off a cliff, taking every boxcar and the caboose with him on the way down. That requires some REAL ineptitude.

    Did anyone give him feedback that he was bad at his job?
  • less
    Investors sold NT stock.
  • horace_grimswold
    Jesus Christ I was about to retort that the Board of Directors should hold the CEO and team accountable, but then I read their mandate and got lost after the 5th bullet point:

    http://www.nortel.com/corporate/investor/collat...

    Somewhere around point #9 comes making sure that the CEO is doing a good job. Note that the top couple of mandates surround shareholder matters. So CEO performance comes somewhere in the middle of their mandates between quelling shareholder riots and holding environmental assessments.

    Jeepers, no wonder Nortel went bankrupt.
  • less
    "Effective March 15, 2007"

    9. the approval of the annual or semi-annual goals and objectives of the
    Corporation and the Chief Executive Officer, and the assessment of the performance of the Corporation and the Chief Executive Officer against the approved objectives;

    10. the adoption of a strategic planning process that includes the periodic (not less than annually) review and approval of strategic business plans;

    At Nortel this equated to checking in once year, coming up with a "plan", restating earnings, and going to lunch on the revised company dime.

    In discharging its duties and responsibilities, the Board of Directors may conduct such examinations, investigations or inquiries, and engage such special legal, accounting or other advisors, at the expense of the Corporation, at such time or times and on such terms and conditions, including fees, as the Board of Directors considers appropriate.

    "Discharged", meaning first to go were in fact duties and responsibilites.

    The Board of Directors shall review and assess the adequacy of the mandate of the Board of Directors annually.

    The board shall police itself once a year or so, thank you. Now get back to work.
  • fatzoff
    Not all investors some of us actually believed the lies that Nortel would rise from the ashes. Some of us bought more
    Myself included
  • bankrupt_bob
    From one dummy to another, how could we have been so naive as to "believe" in NT?!
  • less
    You did so of your own free will, though, I asume.
  • bankrupt_bob
    Free will influenced by something leaked into the air. A true weapon of mass destruction!
  • wasthere
    On this day of anniversary here's some news on Netas ; a food company gets ready for a bite.

    http://www.bloomberg.com/apps/news?pid=newsarch...
  • less
    Hm. Netas is Saten spelled backward...
  • wasthere
    ... and maybe a diminutive for NETworks-ASsholes ;-)
  • fishymcdonk
    No General Tao chicken for YOU!!!!!!
  • random123
    "Why did some employees in Europe – France and Germany – receive severance payments when North American employees got zilch?"

    France and Germany do have very strong employee protection. Whereas USA and UK prefer to leave power in the hands of the employers.

    This sounds bad at first, but it's why many companies set themselves up in USA and Britain. They prefer to invest there because the labour laws are so much in their favour. It means that more jobs to to Britain and USA as a result. Well, that's the principle anyway :)
  • 4merEmployee22
    (UN)HAPPY ANNIVERSARY indeed!!! January 14, 2009 is the 'Day of Infamy'
    for NORTEL.

    The HAITIANS could be RESCUED, but not the RETIREES & PENSIONERS
    of NORTEL!!! It's all about MONEY and am sure we can not take it with us
    to the ends!

    It's all one big HEIST after all!
  • less
    Said TD Securities’ Chris Umiastowski in June 2008:

    “We walked away with more confidence in the management team, and we heard a lot of detailed information that backs up management’s plan to dramatically boost operating margin.
    Aside from all of the details and plans presented by the company, we think that the most important takeaway is the overwhelming cultural change driven by Nortel’s new management team. We have never before seen Nortel possess such strong focus on profitable execution of its business plan, which we attribute to the GE culture brought in by Zafirovski and other members of the senior executive team."


    This Umiastowski - an expert, corporate shill, short seller, all of the above?


    December 19, 2008

    Citing tighter capital spending by carriers and concern about Nortel’s future among enterprise customers, TD Securities analyst Chris Umiastowski has downgraded Nortel to a “reduce” and suspended his stock price target.

    The suspension of the target price is based on the belief Nortel’s shares are “trading more like a call option on the successful outcome of a business transformation along with some asset sales. This situation is incredibly hard to value, and the stock price is naturally going to be highly volatile”.

    “Unfortunately, this will require cash, and would put the company closer to being in a cash crunch. It seems the only way out is to sell assets, which Nortel is currently trying to do (e.g. MEN business is for sale),” he wrote in a research report. “We believe that Nortel must either succeed in selling assets at reasonable prices, or face increasing risk of inevitable bankruptcy.”

    Umiastowski does not believe Nortel will file for bankruptcy protectionin 2009 but he’s concerned the company may not be able to sell its metro Ethernet business or other assets given the current market conditions.
  • 4XBS
    What has happened with Nortel is only a piece of the Big Picture. This was an attack on the MIDDLE CLASS , make no mistake about it . Ask yourself this question .. When ie: GM went bankrupt ... Dodge ...360 Networks ..what changed?

    Only the owners . Think about that ......

    The asset don't go away, they are valuable , and to boot they get sold at a huge discount , STOLEN FROM SHAREHOLDERS and then shortly after its business as usual except that the old owners are now left on the street holding an empty bag.

    I knew there was a problem in North America in the 90's when the public was brainwashed into investing in the stock market as a Whole or by individual Company. Ask yourself another question , if you had a GOOD business , why would you sell it?... Why is corporate America pushing itself onto the public?

    Because its on the verge of Bankruptcy ..

    All OF IT
  • 4merEmployee22
    You are very correct! Something was STOLEN FROM SHAREHOLDERS!!!

    They have legaly STOLEN our Retirement Allowances Plan funds too!!!

    Probably on the motion of the MONITOR... E & Y counsellings? Easy money
    divestitute. Those funds should have been held in a Trust Account!

    They created an ESCROW Account to a guaranteed easy money pilage!
    How else?
  • less
    So DSL, online brokerages and Motley Fool were part of a conspiracy delicately timed with a planned economic crisis to plunder 100-year-old Nortel for a quick profit?
  • XPM_guy
    No, I think 4XBS' point is that the current financial system is geared to fleece small investors. Nortel just got caught up in the feeding frenzy and is being torn apart by it. The auto manufacturing companies and others, on the other hand, have emerged relatively whole under new owners - while their former stock holders are left with worthless paper. And for a double-whammy, that transfer of wealth away from the middle class has been financed in part by their taxes.

    At least, that's the gist that I got from 4XBS' post...
  • less
    I'm just not sure when and where I was "brainwashed" into trading stocks in the 90s. I opted for Nortel's "Balanced" over their "Stock Purchase" retirement plan and nobody complained, then opened a penny-ante online trading account on my own, mainly because banks don't offer me enough savings interest. To me its more rewarding, i.e. "safe", than playing the lottery.
    I bought all of 8 NT shares for fun, once, the profits of which more or less covered the trading fees. And this reminds me that many a company honcho loudly, vociferously bemoaned the fact the unwashed masses of rank amateur traders such as myself now had influence over the stock market to the extent that we could ruin their companies over a mere Internet rumor.

    Its implied that said (North American) honchos have taken to exploiting this added risk by ignoring their businesses, instead hyping rumors online and fleecing amateur investors for a quick buck. They grab the loot and retire rich, while the company and its stock tanks, bankruptcy ensues, and the cycle begins anon. (I can buy Chinese stock; is that any nobler or safer?)

    Virtually everything is fraught with some sort of risk - you buy a stock, it can tank. You sell it, it might rebound the next day. You ignore the market, you get rusty and lose money.
    You sit tight at Nortel, you have a job (but get rusty because you don't get training). You wait until it goes bankrupt, you lose out (because you lack skills). You file a lawsuit, you may or may not win.
  • I'm awaiting the post from hypocrites like Moose Chaser telling us all to "move on" and "shut down" this blog.

    It's no coincidence that hypocrisy and ignorance go hand in hand. In fact, they're dependent on each other.
  • Zhacknightmare
    The French Nortel staff threatened to blow up the Nortel facility. Hilarious but obviously effective.

    After Nortel filed the Nortel exec team were just a puppets with little control and no credibility at all. They were out of their depth and this was recognised by both the BOD and E&Y . It was too big an ask to get a new Mgmt team (who would want it anyway) and turn the ship around. The only option for E&Y with the limited skills of the NT Mgmt team was to wind it down.

    The Gores Siemens takeover failed because they would not give the Strangler & other Z bunnys a job. Hence the Avaya takeover and a makey up job for the boy Joel.

    I believe its great fun at Avaya as those who transitioned across are still looking over their shoulders.
  • scoop1985
    Does anyone know when the next CH11 deadline for "restructuring" plan is do?
  • 20centsorless
    Anyone have a perspective of how much risk is associated with waiting until 65 to collect on the Nortel Pension commitment vs taking the 65% now along with the remaining over the next 5 years. My assumption has been that with the recovery in the markets the viability of the fund has improved but I've not seen any reporting on this. Take the money and run certainly appears to be the approach of many but there is a penalty associated with this particularly depending on your view of your personal longevity. What I find really remarkable is the lack of analytical effort undertaken in looking at this by most potential pensioners.
  • 4XBS
    *Its organized crime
    ** Its Economic Warfare against Canada by control of our Government**

    ...Mexico below the USA and Mexico above the USA ...

    Less than 30 years away..
  • exNTII
    well with the USD going into the toilet, bankrupt economy and people, we might as well call North America, the United States of Mexico.
  • free_agent
    "Why were some of Nortel's assets sold at firesale prices?"

    Probably because the profits from those assets were quite small and/or the financial crisis causing it to be very difficult for companies to borrow money to finance acquisitions. Ultimately, because nobody could be found who was willing and able to pay more.

    As noted in the Globe&Mail, "In the case of Nortel, the company's auction leverage was particularly shaky because squabbling creditors in a variety of jurisdictions were scaring away potential buyers."

    "Why has the Canadian government done [nothing] for Nortel pensioners, who will be left high and dry when Nortel disappears. Meanwhile, the U.S. government is been pro-active in seizing control of pension assets for U.S. employees?"

    Probably because in the US, the PBGC would have to make up much of the shortfall, so the PBGC is aggressive in bankruptcies. That is, the politicians did not need to act; there is a permanent bureaucratic staff to do this.

    "Why did some employees in Europe – France and Germany – receive severance payments when North American employees got zilch?"

    Probaby because France and Germany have strict employment laws with teeth.

    "What happened between Jan. 14 when CEO Mike Zafirovski declared a new Nortel would rise from ashes, and the middle of June when the board decided to throw in the towel. What changed?"

    It became clear that Nortel could not raise any significant financing during the financial crisis.

    "Did the Canadian government get any guarantees from happy buyers such as Ericsson and Avaya to keep jobs in Canada before they were approved?"

    Not that anyone has heard of. And it's hard to imagine something that we be more frightening to potential buyers. Although in practice, selling divisions is likely to retain more jobs than shutting down due to running out of cash.
  • exNTII
    not to mention under the table deals to hire Nortel execs.
  • free_agent
    As far as I can tell, hiring execs of the acquired company is *always* part of the deal. But in the end, that isn't a large part of the price.
  • protosphere
    Seems to be a consensus into the ongoing underhandedness and lack of transparency here as the most obvious.

    We hear no mention of the upcoming fraud trials on both sides of the border, and they have not gone away.

    Insurance is also big business and Nortel pours enough legal fee money out to rewrite the laws of physics ...this is why I suspect. Expensive legal theatrics and loophole artists that prove more powerful than our courts and laws.

    Otherwise. they would have been tossed on their ear under chapter 7 during the worse economic climate to have got even less.

    "Nortel is the largest, and only global, company to seek court protection under CCAA to effectively liquidate its businesses.
    “No one has ever done anything like this before."

    Last stab at bonuses to get more were also a motivator by these ultimatum artists.
  • protosphere
    1. Assets were perhaps not sold at fire sale prices considering only revenue with no mention of earnings, ever...as there were none.

    2. Canadian government done thing for Nortel pensioners unlike the U.S. is puzzling, ya. Does Nortel have more clout or protection here?

    3. Why did some employees in Europe – France and Germany – receive severance payments when North American employees got zilch?
    Perhaps they protested louder, had contacts, needed them longer, or perhaps their laws were different but Nortel broke UK law and paid them nothing so far too.

    4. Why the IRS allowed to register a $2.1-billion claim against Nortel assets in Canada? Why the IRS settled for peanuts is even more astounding relative to the size of claim ...and where big business creditors gained from this!

    5. Mike Zafirovski declared a new Nortel would rise from ashes, and the middle of June the board decided to throw in the towel. What changed? Nothing, they still lied with zero credibility. Still had to viable plan...earnings were on more rapid decline too.

    6. Did the Canadian government get any guarantees from happy buyers such as Ericsson and Avaya to keep jobs in Canada before they were approved? I don't know but the taxpayer/EDC sweetened the deals with their $300M unsecured loans just to take these units ands make big business creditors gleeful. =)

    ___________________________________________

    Strikes me as big business favoritism by the who knows whos ...to the who knows what with Notell =)

    Hardly good news for employees and shareholders than prioritized creditors or last stab at bonuses to get the most they can as a true performance based motive for once. =)
  • less
    Mhm. I hear neither "Everybody Wants to Rule the World" nor "Come Together" playing; its Bob John's "Sad Eyes" and the Bosse's "Downbound Train" echoing through them Richardson labs, vacated like so many Haitian shanties - to "make Nortel a leaner, more focused company", 'twas promised.
  • bankrupt_bob
    So MANY questions, so FEW answers. A FAR better chance of winning the lottery than getting any... answers, that is.
  • NortelEmp
    The article certainly has a "way to go" slant to it, which is stomach churning. It seems like the lawyers, accountants and executives are patting themselves on the back for manipulating the system and squirming out of huge financial obligations, and then rewarding themselves millions in the process.
  • bankrupt_bob
    Bring back cruel and unusual punishment!
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