Nortel
Nortel Networks Corporation or Nortel is also known as Northern Telecom is an international public telecommunications and data networking equipment manufactured in Mississauga, Ontario, Canada. The owner of Northern Telecom is Bell Canada.
In the year 1895, it was founded in Montreal, Quebec as the Northern Electric and Manufacturing Company which is one of the oldest companies in Canada that performed a technology operation. Ontario-based Nortel Networks was one of the significant makers of telecommunications equipment in the world. They were a market capitalization of $250 billion and could have around 93,000 employees at the height of the 1990s.
During the dot-com boom in the year of 1997 till 2001, Nortel expanded their company rapidly. They start to get engaged with many companies that provide Internet technology to remain consistent in competition with others in order to expand the market of information technology.
In World War 1, Northern Electric, otherwise known as Nortel, had to produce the best telegraphic switchboard for the military. After the war ended, the company built electrical appliances such as an electric kitchen, washing machine, and toaster. Then, during World War II, Northern Electric also created a number of radios suitable for ships, aircraft, and tanks. They have set the radar for communications systems and electrical equipment, especially for the Royal Canadian Navy destroyers.
In 1957, a research and development (R&D) facility at Belleville, Ontario was established and they also created the Northern Electric Research and Development Laboratories in 1959. Northern Electric R&D Laboratories has opened an Ottawa facility in the year of 1961. A few technological achievements resulted in the 6,100 km Trans-Canada Skyway which is the longest microwave system in the world that went into service in 1958.
Another achievement is the Precision Satellite Tracking Antenna of 1966 or saw by Satellite Communications. But in that time, Northern Electric only produced in a small number of patents. In 1964, only 1 percent of its products that have been created were its own design and then by 1969, it grew to a mere 6 percent.
From 1997 to early 2001, Nortel enjoyed considerable success in its quest for the largest investment, in which their company entered the broader investment bubble but Nortel did not survive to record a profitable year based on generally accepted accounting principles (GAAP). All individual and conventional investors, including retirees, are optimistic that internet technology companies will never experience a decline in sales and drive up value.
The stock in Nortel grew rapidly but it was complicated and strange in accounting rules. Under Canada and United State GAAP, Nortel is not eligible to use pooling methods to acquire other companies. The pooling method shows that the acquisitions were treated as mergers and combine so that the company did not have to make an acquisition of the account for expenses. Pooling is rarely allowed for acquisitions in Canada as the merger has to involve companies of the same type and size.
In addition, Nortel is not permitted to avail of pooling under United States accounting law as it is not a self-reliant company. Therefore, Nortel is required to use the purchase method to reduce the value of the company’s acquired assets. As Nortel began to earn billions of dollars worth of companies, the reported revenue was to offset its profits.
Nortel soon entered into a long and painful climax of a corporate downturn in a company that filed for bankruptcy protection on January 14, 2009. In Canada’s history, Nortel is the largest company to fail. Nortel Networks was unsuccessful in its operations. This is because of a culture of arrogance that points to poor financial discipline, the loss of customers mainly through poor technological innovation and poor external business environment.
Researchers have found that Nortel companies have a structure that inspires poor management decisions, an incomplete way to adapt to market changes, customer needs and technological advancements. Management and Employees of these companies who are responsible for actions that are not personally responsible for their inefficiencies and are made to compensate for the losses incurred. The short answer is that their customers no longer have access to cash and capital from the public market to use Nortel products.
In June 2009, Nortel, which was recently ranked number one in the global telecommunications supply industry, announced that it would sell all its business units. It also means that 100 years of their operations will end effectively. As a result of this decision, shareholders, employees, and retirees suffered losses. However, executives of the Company received US$190 million in bonuses in 2009 and 2016. Nortel sold its assets for US$7.3 billion. They have distributed all of these assets to Nortel bondholders, suppliers and former employees in 2017.
So the conclusion from Nortel’s situation is that the company and all employees at the company should know better and learn more about corporate failures, root causes and potentially how they can be improved. Failure is complicated. It engages in a combination of various factors including poor business, strategy, board, and decision-making changes.
It is not just one factor but several factors that make some of the work had to break the company. Failure also occurred within a few years. Nortel had a fundamental problem that began before 1997. In addition, it took on some additional events between 1997 and 2008 that eventually forced the company to face bitter reality and seek bankrupt protection.
