Nortel seeks advice to avoid bankruptcy

Network equipment giant Nortel has denied reports that it is about to declare itself bankrupt, instead saying it has sought advice on how to avoid such a fate.

The company made a loss of $3.4 billion in its most recent financial quarter, it revealed last month, due mainly to one-off charges. Demand did slow, however; revenue was down 15% to $2.3 billion.

Those results sparked bankruptcy rumours. The company has $1 billion of debt due in 2011 and, according to analysts, is woefully short of cash.

Nortel hopes to manoeuvre its way out of this pickle with further cost reductions – it has said it will add 1,300 redundancies to a previously announced round of job cuts – and by selling off part of the business. In September 2008, it announced it was seeking a buyer for its Metro Ethernet division – one of its most profitable.

However, a report in yesterday’s Wall Street Journal revealed that Nortel is considering its options in case these restructuring moves do not work.

The news that Nortel is seeking bankruptcy advice has seen shares in the Toronto-based company fall 20%. In total, the company has now lost 97% of its market value so far this year.

Further reading

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Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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