The company’s falling into bankruptcy proceedings is the ultimate progression of decades of flawed strategies, management hubris and a clubhouse full of disengaged directors.
With its Chapter 11 filing in a Delaware court today, Nortel is making its final journey as the company that once aspired to be a world-class technology player. It is unlikely to emerge as even a shadow of its current self, battered and weakened though it be.
This is the ultimate progression of decades of flawed strategies, management hubris and a clubhouse full of disengaged directors. This was a company which once boasted a market capitalization larger than all the Canadian banks combined. Today, start up t-shirt makers have a bigger cap. The stock once hovered above $125 a share in 2001 and 2002. Adjusted for its subsequent 10 to 1 consolidation, it closed at just under 4 cents (Canadian) on Tuesday. Trading was halted today.
We have commented about the failure of Nortel and the culture of boardroom arrogance that has now brought it to the steps of the Delaware bankruptcy court. We think of the arrogance of one-time CEO Paul Stern, the shuffling back and forth (with generous severance each time) in the CEO slot of John Monty from BCE -which created Nortel in the first place- and the huge misjudgments that saw the stock tank in the tech bubble, but still allowed then-CEO John Roth to make off with more than $150 million. We are reminded of the trophy directors who commanded amazing deference and respect in the business world but who seemed unable to figure out the most basic things of what was happening to the company under their noses. Then there is the string of accounting restatements and the alleged securities violations and criminal charges against previous management that shook shareholder confidence to its core and from which it has never returned. Most of all, we are thinking today about the tragedy of the human side at Nortel involving lost jobs and shattered careers in a company that had untold potential but in the end did not produce the boardroom leaders who could capture it or measure up to that trust.
More than a year ago, we proffered the thought:
With its history so steeped in scandal and its present still darkened by constant financial backpedaling, it needs to think through whether Nortel can go on being Nortel.
The company gave its answer today.