CEO Mike Zafirovski’s hopeful tune about Nortel Networks Corp. sounded more off-key than usual yesterday after the telecom equipment maker filed for bankruptcy protection, marking what observers said could be the final chapter in Nortel’s long fall from grace.
Despite an extensive restructuring plan that included thousands of job cuts and a refocusing of the business, the former Motorola Inc. executive failed to work his turnaround magic at Nortel as the once high-flying firm finally succumbed to a changing industry and the ongoing financial crisis.
Nortel and its various subsidiaries sought protection from creditors yesterday in both Canada and the U.S. just before a $107-million US interest payment was due.
But while Zafirovski described the move as though it was just another phase in Nortel’s retooling, the decision to seek court protection followed a failed bid for a government bailout and has some observers speculating the storied Canadian company will ultimately be blown apart and sold off in pieces.
“We needed to act now while we have sufficient cash to fund our ongoing operations,” Zafirovski wrote in an e-mail.
“High debt levels, a high cost structure, and certain historic costs ... — compounded by the current economic crisis — significantly reduced our options.”