Nortel deepens cuts and extends bankruptcy protection
Published: 11 February, 2009
READ MORE: Nortel Networks
Nortel has been permitted an extension of its period in bankruptcy protection to May 1, as it continues to battle to complete its radical restructuring.
The Ontario Superior Court of Justice in Canada allowed the extension from the original deadline of February 13. This will "provide Nortel with an opportunity to develop a comprehensive business and financial restructuring plan for consideration by their creditors and the Canadian Court," the company said. It also obtained a court order to postpone its annual general meeting, saying this would be a "distraction".
Some details of its rescue plan are becoming clearer, including deeper job cuts (and the perhaps belated axing of its corporate jets). According to a filing by Ernst & Young, the court appointed firm overseeing Nortel's bankruptcy, the company has a detailed plan to eliminate 30,000 jobs, though there is no indication of where or when these cuts will come. The last round of job cuts, last November, cost 1,300 jobs. Nortel entered bankruptcy protection with $4.5bn in cash, but this is burning up quickly, and was $2.4bn on January 31.
The sale of the jets and some real estate will save $1m a month. A leaner cost base will not only make it more viable, but also potentially more attractive to acquirers - either of the whole organization or individual units. Nortel has suspended its planned sale of its Metro Ethernet unit, saying this would enable it to take a broader view of the future for the whole company, though it is also likely - after the reported breakdown of talks with Huawei - to have failed to find a buyer at a reasonable price.
On the positive side, Nortel has announced enhancements for its Unified Communications portfolio, one of the remaining jewels in its crown because of its close alliance with Microsoft; and that it has 10 trials for the WDM-PON Ethernet access technology from its LG-Nortel joint venture. And it will retain its patents reward scheme, which pays bonuses to employees who file patents (and CEO Mike Zafirovski is not taking a pay cut, apparently).
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