Many observers, however, think liquidation makes more sense than reorganization for the Toronto-based company, which employs 3,000 people in Richardson.
Nortel filed for bankruptcy Wednesday morning, declaring itself the most recent victim of the global economic downturn.
The news created fresh uncertainty for employees at Nortel, which has been restructuring since 2005 and has already cut its Richardson head count by 600 over the past year. But workers at other local telecom companies have less reason to worry.
"Many companies are feeling economic pain, certainly, but with consumers and businesses cutting back less on telecom than other products, this industry will probably fare better than the economy as a whole," said Barbara Lancaster, president of the telecom consultancy LTC International.
"The problems that led Nortel to file for bankruptcy are confined to Nortel and a couple other equipment makers that were spun out of big telephone companies. Some of them never figured out how to be independent businesses, and it looks like it may be too late for Nortel to do that."
Nortel once ranked among the tech industry's highest-flying companies. It fell hard when the tech bubble burst, though, and has never recovered.
Its shares lost more than 90 percent of their value between August 2000 and August 2001. The decline slowed after that, but it never stopped, even though Nortel stopped paying dividends and took other steps to conserve cash.
Nortel shares were trading at 32 cents when the New York Stock Exchange closed Tuesday.
Investors expect the bankruptcy filing to wipe out stockholders altogether and cost bondholders most of their money, too. Nortel bonds were trading around 20 cents on the dollar Wednesday.
As for employees, they know they face layoffs, but they don't know the numbers or the timing. A liquidation of the company could result in almost anything, but Nortel's stated plans for reorganization don't offer much more certainty.
"We are not announcing any changes in employment connected with this announcement at this time," said Jamie Moody, a spokeswoman.
"However, our costs still need to come down. As part of our comprehensive restructuring, we do expect that there will be further layoffs."
Major layoffs at Nortel would be the first big cuts along Richardson's Telecom Corridor since the stock market tanked last fall.
Records from the Texas Workforce Commission show only a handful of layoff announcements since October. The largest of those came in October, when Cisco Systems said it would eliminate 129 jobs in Richardson. None of the other layoffs involved more than 100 jobs.
Layoffs aside, many companies have responded to the recession by cutting back on hiring.
Texas Instruments, for example, announced a near hiring freeze this fall, and it has yet to reverse that policy. It announced a voluntary retirement plan last month.
"Companies are definitely being cautious with head count and all their other costs, but this is nothing like what happened during the dot-com bust, and I don't think we're going to see anything like that this time around," said Bill Sproull, president of the Richardson Chamber of Commerce.
"Most tech companies learned a lot of lessons back then, and they have spent the past decade building organizations that are better positioned to withstand downturns. ... I don't think Nortel is a sign of things to come."
Source : DallasNews
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]
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