Nortel Networks
 | |
| Company type | Public TSX: NT NYSE: NT |
|---|---|
| Industry | Telecommunications |
| Founded | Montreal, Quebec (1895) |
| Headquarters | Brampton, Ontario |
Key people | Mike Zafirovski, Vice Chairman, CEO & COO |
| Products | See [1] |
| Revenue |  $9.82 billion USD |
Number of employees | 34,150 (2004) |
| Website | www.nortel.com |
Nortel Networks Corporation, formerly known as Northern Telecom Limited and now familiarly known simply as Nortel, is a telecommunications equipment manufacturer headquartered in Canada. As of October 25, 2005, the corporation stated its plans to cease operations at its Brampton, Ontario campus, relocating head offices to other locations in the Toronto area. The Nortel complex is being sold to media giant Rogers Communications
History
In 1895, Bell Telephone Company of Canada decided to spin off its manufacturing arm to build phones for sale to other companies as well as other devices such as fire alarm boxes and street call boxes for police and fire departments. This company was incorporated as the Northern Electric and Manufacturing Company Limited. In 1900, the new company began manufacturing the first wind-up gramophones that played flat discs. In 1913, the company's headquarters and main factory was built in Montreal. In 1914, the company merged with Imperial Cable to form Northern Electric, co-owned by Bell Canada and the US company Western Electric. By the end of World War I, Northern Electric had become a major distributor of Western Electric appliances across Canada.
In 1922, Northern Electric started manufacturing radios. In 1928, it produced the first talking movie sound system in the British Empire for a theatre in Montreal. In 1949, an antitrust suit in the US forced AT&T/Western Electric to sell its stake in Northern Electric to Bell Canada. Deprived of its Western Electric tie, Northern began developing its own products. In 1953, Northern Electric produced its first television sets using tubes made by RCA.
In 1966, the company's research lab, Bell Northern Research, started looking into the possibilities of fibre optic cable, and in 1969, began work on digitizing telephone communications. Also in 1969, Northern began making inroads into the US market with its switching systems. In 1972, it opened its first factory in the US in Michigan. In 1975, Northern began shipping its first digital switching systems, one of the earliest such systems to be sold.
In 1976, the company name was changed to Northern Telecom Limited, and management announced its intention to concentrate the company's efforts on digital technology.
As Nortel, the streamlined identity it adopted for its 100-year anniversary in 1995, the company set out to dominate the burgeoning global market for public and private networks.
As Nortel Networks, the name that evolved after the 1998 acquisition of Bay Networks, the company re-engineered itself into an Internet communications business, offering complete solutions for multiprotocol, multiservice, global networking.
In the late 1990s, stock market speculators, hoping that Nortel would reap increasingly lucrative profits from the sale of fibre optic network gear, began pushing up the price of the company's shares to unheard of levels despite the company's repeated failure to turn a profit. Under the leadership of CEO John Roth, sales of optical equipment had been robust in the late 1990s, but the market was soon saturated. When the speculative telecom bubble of the late 1990s reached its pinnacle, Nortel was to become one of the most spectacular casualties.
At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX), Canada's largest. Nortel's market capitalization fell from CDN$398 billion in September 2000 to less than $5 billion in August 2002. Nortel's stock price plunged from CDN$124 to $0.69. When Nortel's stock crashed, it took with it a wide swath of Canadian investors and pension funds, and left 60,000 Nortel employees unemployed. CEO John Roth retired under controversy to be succeeded by former CFO Frank Dunn. Despite some initial perceived success in turning the company around, he was fired for cause in 2004 after being accused of financial mismanagement. Bill Owens then took over as the CEO, and was most recently succeeded by Mike Zafirovski.
In late 2004, the "Networks" was dropped, and the company is currently known simply as Nortel.
The financial scandal
Nortel shares soared in the late 1990s and collapsed in 2002 along with the technology bubble.
But Nortel then made good on a promise by former Chief Executive Frank Dunn to return to profitability in early 2003.
In late October 2003, Nortel Networks Corporation announced that it intended to restate approximately $900M of liabilities carried on its previously reported balance sheet as of June 30, 2003, following a comprehensive internal review of these liabilities (“First Restatement”). The Company stated that the principal effects of the restatement would be a reduction in previously reported net losses for 2000, 2001, and 2002 and an increase in shareholders’ equity and net assets previously reported on its balance sheet.
Nortel Networks Corp. unveiled details of additional accounting errors involving billions of dollars and said that a dozen (12) of the company's most senior executives will take the unusual step of returning $8.6 million, millions of dollars of bonuses they were paid based on the erroneous accounting as the telecom-equipment maker attempts to put this major financial scandal behind.
At Nortel, investigators ultimately found about $3 billion in revenue had been booked improperly in 1998, 1999 and 2000. More than $2 billion was moved into later years, about $750 million was pushed forward beyond 2003 and about $250 million was wiped away completely.
Five directors, step down. Nortel's board has faced criticism for allowing the company's accounting fiasco to go on and approving the bonus plans, but none of the five directors were accused of wrongdoing in a company investigation.
Already, Nortel's accounting problems led to the ouster of 10 top executives in 2004.
Nortel's filed with regulators its financial statements for 2003 and restated, for the ("Second Time"), its results from earlier years.
Securities regulators, the U.S. Securities and Exchange Commission , the Royal Canadian Mounted Police and the U.S. Attorney's office were conducting probes.
Today's business structure
Nortel now employs about 31,250 people worldwide.
Nortel Networks is a long established industry leader in delivering end-to-end carrier grade telecommunications network infrastructure and solutions. The company has decades of experience in delivering robust, fault tolerant, software architectures and the know-how to scale to millions of users and manage thousands of network elements. Nortel Networks has deep and broad experience spanning the key areas in telecommunications – optical transmission, wireless, voice, multimedia, and packet networking and associated services.
Nortel's service provider customers include some of the world's largest public network carriers, including wireline, wireless, and cable operators. Enterprise customers include small, medium, and large businesses and institutions, and span multiple sectors, including financial services, health care, education, retail, and Government. Nortel serves 9 out of 10 North American Fortune 500 companies, and worldwide, their installed base of products represents more than 50 million enterprise users.
As of October 25, 2005, the company relocated headquarters from Brampton, Ontario to Ottawa, the capital of Canada, and home of the company's largest R&D center. The Brampton offices were sold to media-telecom giant Rogers Communications for $100 million (CDN). The company has other key locations across Canada including also sales and support offices throughout Western and Central Canada, Quebec and the Maritimes.
The company expanded into the US in 1971. Today there are employees in over 100 locations in the US with R&D, software engineering, and sales centers in many states including California, Florida, Georgia, Maryland, Massachusetts, North Carolina, Texas, and Virginia.
Nortel has significant presence in Europe, Middle East, Africa, the Caribbean, and Latin America. Nortel delivers network infrastructure and communication services to customers in 17 countries across Asia including the People's Republic of China, Hong Kong, South Korea, Japan, Singapore, Thailand, Malaysia, India, Pakistan, Australia, and New Zealand. In addition, the company has 3 joint ventures in the People's Republic of China.
Nortel has long been a main equipment supplier to Bell Canada, a role similar to Western Electric in the US. A key product in the 1980s and 1990s was the DMS family (Digital Multiplex System) of switches. These switches replaced the old electro-mechanical and stored program control switches used in local phone networks and to build and expand long distance networks. The DMS family has evolved into the Succession platform which brings Voice over IP technology to the switch platform.
Key products for the Enterprise market include the Meridian 1 PBX and the Norstar key system. The Meridian 1 is aimed at large to medium-sized businesses. The Norstar key system is aimed at small business and branch offices and provides many of the same features as the Meridan 1 PBX.
On May 26, 2004, former Canadian Minister of Finance John Manley was named to the board of directors.
In March 2005 Nortel's recovery took a downturn when they posted a significant loss for the quarter.
In its report, filed March 18, 2005, Nortel reported a third-quarter loss of $259 million, or 6 cents a share, compared with a restated third-quarter 2003 profit of $131 million, or 3 cents a share.
On August 17, 2005 LG Electronics and Nortel signed a definitive agreement to form a joint venture that will offer telecom and networking solutions in the wireline, optical, wireless and enterprise areas for South Korean and global customers. Nortel will own 50 percent plus one share in the joint venture.
Corporate governance
Current members of the board of directors of Nortel Networks are: Jalynn Bennett, Manfred Bischoff, Robert Brown, John Cleghorn, James Hunt, Robert Ingram, John MacNaughton, John Manley, Richard McCormick, Ronald Osborne, William Owens, and Harry Pearce.
Former members of the board of directors of the company include: James Blanchard, Yves Fortier, Guylaine Saucier, and Sherwood Smith.
Employees: 34,500
Revenues: US$9.83 billion (2004)
Net Income: (US$51 million) (2004)
(Source: via Business Wire updated 24 August 2005 by company )
External links
- Nortel News - News from Nortel