How Long Can Northern Telecom Limited Survive Finance Essay

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Nortel Networks is a telecommunication equipment manufacturer. Its corporate life in 1895, Nortel produce the traditional phone in Canada, as few years after Alexander Graham Bell invented the telephone. Originally part of the Bell Telephone, it morphed into Northern Telecom and finally Nortel.

Figure 1: The telephone that born in Canada, 1894

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Major changes began at Nortel in 1997 as John Roth was elected to be the new CEO. He figured out that the market of telecommunication is shifting from voice to the internet. One of their great inventions is the frame-relay network equipment that has been used all over the world. In Malaysia, Telekom Malaysia has using the equipment for more than 10 years. It also was being used by the multinational companies, banks and insurance firm.

But what happen now, most of the equipments are already at the end of life, and many firm have been migrated to other networking technologies. Nortel equipments are not compatible with the new technologies. Because of that, many carriers are using the other equipment produced by the competitors and Nortel’s sales are decreasing.

Unlike other companies, notably airlines, that have used bankruptcy protection to renew their businesses, Nortel, which began this decade as one of the world’s largest makers of telecommunications equipment, is probably headed for liquidation, several analysts said. "I don’t think it’s going to exist," said Mark Sue, an analyst with RBC Capital Markets, a unit of the Royal Bank of Canada. Incident that happens to Nortel would be one of the biggest failures in the telecommunication industry.

Nortel had produced much of the fibre optic equipment that now carries most of the Internet’s data during 1990s. Nortel’s misery went beyond finances. In the market for interworking devices, Juniper and others proved to be more innovative and can perform better. Nortel have to file for court protection just a day before the due to make the debt payment for about US$107 millions. By doing so, it give the company more chance to look for the restructuring options or sell off their assets.

Nortel said in a release that it had been in the process of a turnaround since late 2005, but "the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete the transformation." "Nortel must be put on a sound financial footing once and for all," the president and chief executive, Mike S. Zafirovski, said in a statement. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry."

Tragedies that happen to Nortel make their customers queries about the continuity of support from the company. Nortel’s competitors try to exploit that uneasiness by offering Nortel customers attractive deals to the alternative equipments.

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