Wireless

Telecommunications equipment maker Nortel Networks is reportedly in discussions to sell two key business units, a move that may affect its ability to re-emerge from its Chapter 11 bankruptcy status, The Wall Street Journal reported.

Nortel, which filed for Chapter 11 bankruptcy protection in January, has received interest from competitors in its wireless equipment operation, as well as its unit that creates corporate communications networks, according to the Journal.

In September, the struggling telecommunications equipment maker raised the issue of finding a buyer for some of its assets, after it warned Wall Street its financial situation had worsened.

Avaya and Siemens Enterprise Communications are both reportedly interested in Nortel's enterprise networks business, while Nokia Siemens Networks may be interested in snapping up its wireless equipment unit, the Journal reported.

Although Nortel may ultimately sell those two business units, the Journal notes that a source informed the publication that it would be "very premature" to assume such a move would trigger the company's liquidation.

Previously, the company's chief executive had indicated the company would share its reorganization plan with investors in April or May.

Nortel Networks will be cutting an additional 3,200 jobs, or more than 10 percent of its workforce worldwide over the next several months as the company tries to survive a bankruptcy restructuring.

Nortel, which makes telecommunications equipment, had already announced 1,800 job cuts last year. The company currently employs about 30,000 people around the world. In the 1990s and early 2000s, during the telecom boom, Nortel employed about 95,000 workers. And at one point in 2000 the company accounted for one-third of the market value on the entire Toronto Stock Exchange, the Associated Press reported.

But the past several years have been difficult for Nortel as it has struggled to regain its footing in a changing telecommunications market. The worldwide recession has only worsened Nortel's problems. And the company filed for bankruptcy protection in the U.S. and Canada last month.

When it filed for bankruptcy protection, Nortel had about $2.4 billion in cash. The company hoped it could use the cash "to preserve its liquidity and fund operations during the restructuring process." But The Wall Street Journal reported earlier that court documents show Nortel has liabilities of $11.8 billion, but only has consolidated assets of $11.6 billion.

And just last week the company was dealt another blow when it was not named by Verizon Wireless as one of its suppliers to build the cell phone operator's new 4G wireless network that will use a technology called LTE or Long Term Evolution. Verizon plans to begin building the network this year and will aggressively deploy the speedier network in 2010.

Nortel Networks, once a high-flying telecommunications equipment maker, filed for Chapter 11 bankruptcy protection Wednesday.

Nortel has been struggling to regain its footing since the last economic downturn in 2001 and 2002, which hit the telecommunications industry particularly hard. But the recent credit crunch may end up as the death knell for the company, making it difficult for Nortel to fund its operations. At the same time, customers have also pulled back drastically on spending for the company's voice-only equipment.

For the past several months, Nortel's management team has been trying to cut spending. The company has also put some of its assets up for sale in an attempt to survive. But mounting debt payments and a steep drop in revenue appear to have caught up with the company.

The most pressing issue for the Toronto, Ontario-based company is paying the interest on its $3.8 billion in bond debt. Nortel faced a $107 million bond interest payment this week, The Wall Street Journal reported.

While bankruptcy protection doesn't always signal the end of a company, in today's economic climate, it could prove disastrous as the already-struggling company may find it even more difficult to convince customers to buy its gear. Carmakers used this argument recently when seeking a bailout from Congress. They said that customers would be unwilling to buy cars from companies that they feared wouldn't be around to service them.

Nortel has about $2.6 billion in cash, which some analysts have said could help it stay afloat until at least 2010. But as the company sinks deeper into trouble, many industry watchers believe that Nortel will likely be broken apart during Chapter 11 restructuring, with individual businesses sold off one by one.

In December, the New York Stock Exchange warned it would delist Nortel's stock if the company couldn't get shares to trade above $1 minimum. Nortel is currently trading at 32 cents.

Nortel's fall from grace was a result of a series of strategic missteps over the years that chipped away at the company's value.

In 2000, Nortel was worth about $250 billion. The company now has a market value of about $275 million.

Mike Zafirovski came on board as chief executive three years ago to help turn around the company. Initially, he had some success building profits from selling wireless gear to U.S. operators. Under his leadership, Nortel invested in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked, and phone companies started to pull back on spending, which resulted in a sharp revenue drop for Nortel.

In September, Nortel announced more cost-cutting and said it would sell some of its business units. But the company was unable to find a buyer.

Nortel isn't the only big telecommunications equipment maker to struggle. Alcatel Lucent, which has also been trying to get back on track after the telecommunications boom, announced a restructuring late last year.

Nortel is also expected to seek bankruptcy protection against creditors in its home country of Canada.

The news keeps getting worse for telecommunications equipment maker Nortel Networks.

On Thursday the company received notice from the New York Stock Exchange that it faces delisting if it can't get its stock price above the required $1 minimum price tag in the next six months, The Wall Street Journal reported.

Earlier this week, the Journal reported that the company is seeking advice on bankruptcy proceedings.

While Nortel is clearly hurting as most companies these days are from the current economic crisis, the truth is that the company has never fully recovered from the bursting of the telecommunications bubble in 2001 and 2002.

The problem for Nortel is that its bread and butter products are ones used for building voice networks. Over the past decade phone companies have moved away from building networks exclusively used for voice toward converged networks that carry voice, data, and video using Internet technology. While Nortel has tried to keep up with the changing needs of the industry, it has fallen short.

A series of strategic missteps over the years has resulted in the company losing a great deal of its market value. In 2000, Nortel was worth about $250 billion. The company now has a market value of about $275 million.

Mike Zafirovski came on board as chief executive three years ago to help turn around the company. And initially, he had some success building profits from selling wireless gear to U.S. operators. He was investing in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked. And phone companies started to pull back on spending. This has resulted in a sharp revenue drop for Nortel.

In September, Nortel announced more cost cutting and said it would sell some of its business units. But so far it hasn't found any buyers for these assets. The company has about$2.6 billion in cash, which some analysts say should help it stay afloat until 2010.

Nortel isn't the only big telecommunications equipment maker to struggle. Alcatel Lucent, which has also struggled to get back on track after the telecommunications boom, announced Friday it is making cuts as it restructures its business.

Shares of Nortel were trading at 38 cents, down 2 cents, at midday Friday.

Nortel Networks, North America's largest maker of phone equipment, reported its biggest quarterly loss in seven years amid a worsening economy.

The company, which has been struggling to get back on track since the last economic downturn in 2001, said Monday that it lost $3.4 billion, or $6.85 a share, during the third quarter of 2008. This includes a $3.2 billion write-down on the value of part of its business as well as deferred tax assets.

Due to sharp losses in the third quarter, the company announced 1,300 job cuts as well as other cuts across the business. Specifically, the company plans to freeze travel, end salary increases, and consolidate upper management, which includes losing at least four top executives. CTO John Roese and Chief Marketing Officer Lauren Flaherty are among the executives losing their jobs.

Since CEO Mike Zafirovski came onboard in 2005, Nortel has lost more than $4.5 billion. And he has cut more 6,000 jobs, or about 18 percent of Nortel's workforce.

Nortel had been struggling even before the economy started to tank. The biggest problem for the telecom equipment maker is that much of the company's wireless sales are centered around an older technology called code division multiple access, or CDMA. This technology is used by Verizon Wireless and Sprint Nextel in the U.S., but it's not widely used outside the U.S. And as Verizon and Sprint move toward next-generation wireless technology, Nortel will have to compete with other suppliers for that new business.

And then there is the economy. Cisco Systems CEO John Chambers noted last week during his company's earnings call that it had seen a sharp decline in sales from September to October. Nortel's Zafirovski also noted that its customers had scaled back spending significantly toward the end of the quarter.

But unlike Cisco, Nortel was already in trouble before the downturn hit. And while Cisco can scale back slightly while it invests heavily in new markets, Nortel is being forced to hunker down and simply try to survive.

The company has already been trying to sell some of its businesses, including its Ethernet switch business. But as the economy worsens, analysts believe it will be even more difficult for the company to find a buyer who is willing to pay the price that Nortel had hoped it could get for the business unit.

Telecommunications equipment maker Nortel Networks announced on Wednesday that it has slashed its business outlook and is looking to sell some of its assets as the economy worsens.

Nortel said its revenue for 2008 will be about 2 percent to 4 percent lower than it was the previous year. Third-quarter revenue will be about $2.3 billion, short of the $2.66 billion that some analysts had expected.

The company blames its woes on phone companies and large corporate customers, which have been cutting back on their capital expenditures more than had been expected. Nortel CEO Mike Zafirovski said the company is conducting a comprehensive review of its business. And he said it is looking for a buyer for its metro Ethernet equipment business.

Meanwhile, Cisco Systems, which competes with Nortel in some areas, on Tuesday at an analyst conference reiterated its confidence in its long-term growth projections of between 12 percent and 17 percent. CEO John Chambers noted slower near-term growth, as customers tighten their belts, but even in the short run, Cisco still expects to grow 10 percent.

Of course, Cisco has diversified its business in different areas and has always been focused on Internet Protocol technology. It is also pushing video technology as a main growth area. On the other hand, Nortel's products are focused on telecommunications, a segment that has come under severe pressure lately.