Nortel Files For Bankruptcy Protection

According to Nortel, the company made the decision to file for bankruptcy protection with the unanimous authorization of its board of directors. Nortel said the filings will not interrupt operations and that it has $2.4 billion in cash on hand to fund operations during its restructuring process.

"This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner," Nortel said in a statement.

The filing follows a rough year for Nortel. In November, Nortel posted $3.4 billion in losses for the third calendar quarter and said it planned to slash 1,300 jobs, impose a salary freeze and continue its already-in-place hiring freeze. Nortel, Toronto, also said it would review its real estate holdings in a bid to cut costs.

The $3.4 billion quarterly loss was Nortel's biggest in seven years. It included a $3.2 billion expense—a $1.14 billion goodwill writedown combined with a $2.07 million deferred tax adjustment. Those results also included restructuring charges reaching about $50 million.

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Nortel has been on a downward spiral since President and CEO Mike Zafirovski took the helm in 2005, cutting roughly 18 percent of its work force and mounting losses of more than $4.5 billion.

Zafirovski joined Nortel to turn the company around and return Nortel it its early 2000s heyday, but the global financial crisis and recession compounded Nortel's financial challenges, inhibiting it from completing its transformation, the company said.

"Nortel must be put on a sound financial footing once and for all," said Zafirovski in a statement Wednesday. "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 that its people, technology and customer relationships show it ought to be. I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers."