Nortel bankruptcy: A lesson for everyone

Nortel has filed for Chapter 11 bankruptcy protection, a move that comes as no surprise given that the only likely candidate to buy its business components (Huawei) ran afoul of government policy concerns. Nortel has, over the last decade, fallen from one of the giants to its current state of likely irrelevance.

While the proximate cause was the deferral in spending by carriers worldwide, which Nortel’s reserves simply could not handle, the true cause was a persistent refusal to deal with market conditions as they were. Nortel stayed with its core competences despite the fact that those areas were becoming core irrelevancies.

There is a lesson here for every other player in the telecom space: If you cannot promote service features and monetization you must inevitably be a player in a commodity market. Nortel will likely try to sell off additional business elements, and may even refocus on the enterprise, but unless it can become more strategic, it is unlikely to regain stability, much less stature. We are offering an audio brief on this as part of our new information product series; see New free information product from CIMI Corp.