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Old 15th January 2009, 18:34   #1
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Default Nortel files for bankruptcy! Edit: Now Avaya

What is happening! Things seems to be falling all around us!!!

Source: Nortel files for bankruptcy: Impact on Indian IT, telecom

Nortel has filed for Chapter 11 bankruptcy protection. Nortel Networks is North America’s biggest maker of telephone equipment. The company said operations are expected to continue without interruption and added that it has sufficient cash on hand to fund ongoing operations. Nortel is one of the larger clients for most Indian IT companies. Indian companies that would be impacted are Sasken, Infosys and Wipro. US’s telecom company Nortel filed for Chapter 11 bankruptcy protection. How will it trickle down to Indian IT and telecom companies?

Impact on Indian telecom companies:
Nortel has filed for Chapter 11 bankruptcy protection for its US and Canadian subsidiaries and the Nortel Asia head clarified that it does not impact its Indian or Asian operations. Under Chapter 11 bankruptcy protection, creditors cannot ask for their money back, for a while, and operations are expected to continue normally. Nortel has said that it has enough funds to run normal operations.

Nortel is the main supplier for Reliance Communication’s optical equipment. It wouldn’t be impacted because it’s one of Nortel’s best performing divisions — there have been reports that this division might be sold off and reports say Ericsson, Nokia and Siemens are in talks with the company. So, Reliance Communication wouldn’t be impacted even in case of this possible sale.

Bharti Airtel's contact centre solution services are provided by Nortel, and that is unlikely to be affected as Bharti has other players like IBM too in that division.

The only company that could be impacted to an extent is BSNL, to which Nortel provides its east and south zone GSM network service. BSNL was also in talks with Nortel to give to it its new USD 63 million GSM line tender. In case Nortel faces a cash crunch, BSNL would be forced to go the Chinese players who had bid for the tender and could face difficulties due to security concerns.

Impact on Indian IT companies:
Nortel is a major player, which gives accounts to major IT players. When contacted for Nortel’s impact on the company, IT major TCS declined to offer comment, and reports are mixed on whether TCS’s exposure to Nortel is minimal or big.

From the bankruptcy documents, however, we understand that the company’s receivables to Infosys stand at USD 2.9 million; to TCS, it stands at USD 2.9 million while it is USD 3.1 million to Wipro.

Wipro’s relationship with Nortel started in 1991. 10-11% of its revenues come from the telecom OEM space. Wipro said that Nortel contributes to close to USD 25 million of annual revenues, but it’s close to 1-2% of the quarterly run rate. In that division, Wipro employs close to 400-500 employees and added that since it runs mission-critical projects with them, there could be some impact.

The general sense while talking to Infosys was that it knew Nortel had been an ailing company for a year and they had been trying to trim down their exposure. So it’s not a substantial hit for them.

Sasken is going to be hit. The management spoke to us and said Nortel was one of their top-five clients and the exposure is less than 10%. They did not comment on how the guidance is likely to pan out but one key thing is: Sasken had substantially cut down on its guidance in Q2 — from 25% to 10% — owing to the telecom and semi-conductor space dragging on its performance. Sasken says they have to Nortel and for now, it’s business as usual.

Last edited by HappyWheels : 15th January 2009 at 18:35.
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Old 15th January 2009, 18:50   #2
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This was expected for a while. Their market share was eaten up by Avaya, Cisco and other newer players. This is a business failure, nothing to do with recession.
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Old 15th January 2009, 19:23   #3
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Default a very sad fall - example of bad management

I was in Canada last year working for Nortel as a contract employee, I could hear people talking about Nortel being the pride of Canada & how it fell from its heights. Many people lost their lifetime savings when the shares crashed.

Before the recession in early 2000, Nortel invested a lot of money on optical technology & after the recession there were few issues of corruption at the very high level. The company never recovered from this & also low cost vendors Huwaei started eating into the profits.

cheers:
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Old 19th January 2017, 23:05   #4
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Default re: Nortel files for bankruptcy! Edit: Now Avaya

As many might know, when Nortel went bankrupt, Avaya bought it and absorbed all the employees.

Today Avaya filed for bankruptcy. This is probably the first time that the biggest player in any particular industry is going bankrupt.

http://www.avaya.com/investors/usa/n...pr-us-170119a/
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Old 20th January 2017, 11:31   #5
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Default Re: Nortel files for bankruptcy! Edit: Now Avaya

Ah ... the corporates.
So easy to declare bankruptcy and "restructure the loans".
I wonder how do they manage to get new lenders to pay off the old lenders?
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Old 20th January 2017, 11:49   #6
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Default Re: Nortel files for bankruptcy! Edit: Now Avaya

Quote:
Originally Posted by alpha1 View Post
I wonder how do they manage to get new lenders to pay off the old lenders?
Easy... Avaya bought the bankrupt Nortel to get all their customers. Now Microsoft/Cisco can do the same to Avaya to get all their customers and then channel them into their products. Microsoft badly needs the enviable customer base Avaya has, and they have the money.

Last edited by Samurai : 20th January 2017 at 11:51.
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Old 23rd January 2017, 09:13   #7
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Default Re: Nortel files for bankruptcy! Edit: Now Avaya

Turns out Avaya was not making profit ever since Silver Lake Partners and TPG Capital bought them in 2007. Since they did LBO, Avaya was paying too much on servicing the loan. They even ate into the pension plan of Avaya employees. Financially, Avaya was being mismanaged all along. Since it was a private company, there was not much scrutiny by the industry.

Read all about it here, in the comments section. It is very illuminating:

https://news.ycombinator.com/item?id=13454251
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