Nortel forced to consider bankruptcy or bail-out
Published: 11 December, 2008
READ MORE: Nortel Networks
The mobile infrastructure market may be eagerly awaiting Alcatel-Lucent's turnaround plan, to be revealed tomorrow, but the French vendor's biggest CDMA competitor has troubles that make ALU chief Ben Verwaayen's job look like a walk in the park. Nortel has been considering full break-up and an 'ecosystem' model that would dramatically reduce its own investment in product development and sales, but now it is being forced to mull even more radical options, including bankruptcy or bail-out.
The WSJ report, citing people familiar with the situation, claimed Nortel was seeking legal counsel regarding bankruptcy court protection from its creditors, plus the possibility of aid from the Canadian government. This comes a month after the vendor announced plans to reduce annual gross costs by US$400m next year, with 1,300 job cuts, and a salary and hiring freeze until 2010. This came after Nortel's biggest net loss for seven years, US$3.4bn in the third quarter.
Nortel said in a statement that it was still executing on its plan, and that two weeks ago, debt rating agency Standards & Poor's had written: "Nortel should be able to maintain adequate levels of liquidity in the next 12-18 months."
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