What went wrong at Nortel?

With a market capitalization of more than $350 billion US nine years ago — more than the combined market values of Microsoft and Google today — few would have predicted Nortel Networks’s descent to penny-stock status today. The stock fetched just 12 cents at yesterday’s close on the TSX.

Founded in 1895, Nortel’s glory days were in the late 1990s when an estimated 75 per cent of the Internet traffic in North America was being carried on Nortel equipment.

Then came the tech wreck. Nortel issued more than $20 billion in shares to buy a slew of start-up telecom companies that turned out to be money losers, contributing to major writeoffs by Nortel in later years.

By 2001, Nortel was already dying. Nortel’s hiring binge in the 1990s took total employment to about 95,000 just as demand for its telecom gear was about to plummet as carriers slashed spending.