Editing Nortel (section)

=== After the Internet bubble ===

==== Accounting restatements ====

Frank Dunn presided over a dramatic restructuring of Nortel, which included laying off two-thirds of its workforce (60,000 staff)<ref>{{Cite news |date=2007-03-13 |title=How Dunn's misplaced optimism snowballed |url=https://www.theglobeandmail.com/report-on-business/how-dunns-misplaced-optimism-snowballed/article1357908/ |access-date=2024-01-31 |work=The Globe and Mail |language=en-CA |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131165438/https://www.theglobeandmail.com/report-on-business/how-dunns-misplaced-optimism-snowballed/article1357908/ |url-status=live }}</ref> and [[Write-off#Write-down|writedowns]] of nearly US$16 billion in 2001 alone. This had some initial perceived success in turning the company around, with an unexpected return to profitability reported in the first quarter of 2003. The black ink triggered a total of $70 million in bonuses to the top 43 managers,<ref>{{cite news | url=https://www.theglobeandmail.com/report-on-business/no-business-reason-to-release-nortel-reserves-court-told/article2309645/ | location=Toronto | work=The Globe and Mail | first=Janet | last=McFarland | title=No business reason to release Nortel reserves, court told | date=January 20, 2012 | access-date=August 22, 2017 | archive-date=March 4, 2016 | archive-url=https://web.archive.org/web/20160304210618/http://www.theglobeandmail.com/report-on-business/no-business-reason-to-release-nortel-reserves-court-told/article2309645/ | url-status=live }}</ref> with $7.8 million going to Dunn alone,<ref>{{cite news | url=https://www.thestar.com/article/1117383--nortel-trial-letters-show-nortel-execs-knew-they-were-getting-bonuses-fraudulently-crown-alleges | location=Toronto | work=The Star | first=Michael | last=Lewis | title=Nortel trial: Letters show Nortel execs knew they were getting bonuses fraudulently, Crown alleges | date=January 18, 2012 | access-date=September 6, 2017 | archive-date=November 9, 2012 | archive-url=https://web.archive.org/web/20121109035253/http://www.thestar.com/article/1117383--nortel-trial-letters-show-nortel-execs-knew-they-were-getting-bonuses-fraudulently-crown-alleges | url-status=live }}</ref> $3 million to chief financial officer Douglas Beatty, and $2 million to controller Michael Gollogly.<ref>{{cite news |url=https://www.ctvnews.ca/nortel-execs-were-getting-bonuses-fraudulently-crown-1.755569 |title=Nortel execs were getting bonuses fraudulently: Crown {{pipe}} |work=CTV News |date=January 18, 2012 |access-date=May 26, 2012 |archive-date=March 8, 2012 |archive-url=https://web.archive.org/web/20120308084047/http://www.ctv.ca/CTVNews/Canada/20120118/nortel-exec-fraud-trial-120118/#ixzz1jrHQEEzQ |url-status=live }}</ref> Independent auditor [[Deloitte & Touche]] advised audit committee chairman [[John Cleghorn]] and board chairman [[Lynton Wilson|"Red" Wilson]] to look into the suspicious results, who hired the law firm WilmerHale to vet the financial statements.<ref name="Nortel Nailed Coffin">{{cite web|title=Accounting scandal another nail in Nortel coffin|url=http://www.financialpost.com/story.html?id=2173704|access-date=July 7, 2014|url-status=dead|archive-url=https://web.archive.org/web/20100222095656/http://www.financialpost.com/story.html?id=2173704|archive-date=February 22, 2010}}</ref> In late October 2003, Nortel announced that it intended to restate approximately $900 million of liabilities carried on its balance sheet as of June 30, 2003, following a comprehensive internal review of these liabilities. The company stated that the restatement's principal effects 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. A dozen of the company's most senior executives returned $8.6 million of bonuses they were paid based on the erroneous accounting. 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. The accounting scandal hurt both Nortel's reputation and finances, as Nortel spent an estimated US$400 million on outside auditors and management consultants to retrain staff.<ref name="Nortel Nailed Coffin"/>

To improve its liquidity, in 2003 Nortel arranged a US$750 million credit support facility with [[Export Development Canada]].<ref name="2003-EDC">{{Cite press release | title = Nortel Networks Announces US$750 Million Support Facility with EDC and Details of Special Matters to be Considered at Upcoming Shareholders Meeting | publisher = Nortel Networks Corporation | date = February 14, 2003 | url = http://www.nortel.com/corporate/news/newsreleases/2003a/02_14_03_edc_credit_facility.html | access-date = December 9, 2009 | url-status = dead | archive-url = https://web.archive.org/web/20061228171135/http://www.nortel.com/corporate/news/newsreleases/2003a/02_14_03_edc_credit_facility.html | archive-date = December 28, 2006 }}</ref> Walter Robinson of the [[Canadian Taxpayers Federation]] denounced the line of credit, calling it "[[corporate welfare]] at its worst."<ref name="SunMedia-EDC2003">{{Cite news | last = McKibbon | first = Sean | title = Bailout Billion; Taxpayers to prop up mega-loser Nortel | newspaper = Winnipeg Sun | location = Winnipeg | page = 8 | publisher = Sun Media | date = February 16, 2003 }}</ref>

On April 28, 2004 amidst the accounting scandal, three of Nortel's top lieutenants—Douglas Beatty, CEO Frank Dunn and Michael Gollogly—were fired for [[financial mismanagement]].<ref name="reuters_2013">{{citation |url=http://ca.reuters.com/article/businessNews/idCABRE90E13720130115?pageNumber=2&virtualBrandChannel=0&sp=true |publisher=Reuters |date=January 15, 2013 |access-date=October 7, 2016 |title=Analysis: Nortel case spotlights Canada corporate crime record |first=Cameron |last=French |location=Toronto, Ontario |archive-url=https://web.archive.org/web/20161009000139/http://ca.reuters.com/article/businessNews/idCABRE90E13720130115?pageNumber=2&virtualBrandChannel=0&sp=true |archive-date=October 9, 2016 |url-status=dead }}</ref> They were later charged with fraud by the [[Royal Canadian Mounted Police|RCMP]].<ref name="NYT-ExecsArrested">{{cite news | last = Austen | first = Ian | title = 3 Ex-Nortel Executives Are Accused of Fraud | work = The New York Times | date = June 20, 2008 | url = https://www.nytimes.com/2008/06/20/technology/20nortel.html | access-date = June 25, 2008 | archive-date = September 24, 2015 | archive-url = https://web.archive.org/web/20150924044814/http://www.nytimes.com/2008/06/20/technology/20nortel.html | url-status = live }}</ref><ref name="Citizen-20080620">{{cite news | work = Ottawa Citizen | title = Top former Nortel execs charged with fraud | publisher = CanWest MediaWorks Publications | date = June 20, 2008 | url = http://www.canada.com/ottawacitizen/news/story.html?id=c0d441c3-223a-4855-b3ad-09f6144727fa | archive-url = https://web.archive.org/web/20130307140914/http://www.canada.com/ottawacitizen/news/story.html?id=c0d441c3-223a-4855-b3ad-09f6144727fa | url-status = dead | archive-date = March 7, 2013 | access-date = October 7, 2011 }}</ref> The trial began on January 16, 2012,<ref name="Gazette-20111003">{{cite news | author = Postmedia News | title = Nortel criminal trial to begin Jan. 16 | work = Montreal Gazette | date = October 3, 2011 | url = https://montrealgazette.com/news/Nortel+criminal+trial+begin/5496356/story.html | access-date = October 3, 2011 | archive-url = https://web.archive.org/web/20111202181937/http://www.montrealgazette.com/news/Nortel+criminal+trial+begin/5496356/story.html | archive-date = December 2, 2011 | url-status = dead }}</ref> ending with acquittals for all three.<ref name="reuters_2013" /><ref name="Globe-DunnTrialVerdict">{{cite news | work = Globe and Mail | title = Three former Nortel executives found not guilty of fraud | date = January 14, 2013 | url = https://www.theglobeandmail.com/globe-investor/former-nortel-networks-executives-acquitted-of-fraud/article7319241/ | access-date = January 30, 2013 | location = Toronto | archive-date = January 17, 2013 | archive-url = https://web.archive.org/web/20130117153458/http://www.theglobeandmail.com/globe-investor/former-nortel-networks-executives-acquitted-of-fraud/article7319241/ | url-status = live }}</ref><ref>{{cite news | url = https://www.thestar.com/business/2013/01/11/nortel_verdict_frank_dunn_two_other_executives_not_guilty_of_fraud.html | title = Nortel verdict: Frank Dunn, two other executives not guilty of fraud | location = Toronto | newspaper = The Star | date = January 14, 2013 | access-date = November 27, 2016 | archive-date = November 28, 2016 | archive-url = https://web.archive.org/web/20161128050413/https://www.thestar.com/business/2013/01/11/nortel_verdict_frank_dunn_two_other_executives_not_guilty_of_fraud.html | url-status = live }}</ref>

The [[United States Securities and Exchange Commission]] (SEC) also filed charges against them and four vice-presidents for civil fraud.<ref name="Citizen-20080620"/> On December 19, 2014, remaining civil charges from the [[Ontario Securities Commission]] and SEC were simultaneously dropped.<ref>{{cite news|last=Bagnall|first=James|title=Nortel allegations finally fade away, with no apologies and no blame laid|url=https://ottawacitizen.com/news/national/bagnall-nortel-allegations-finally-fade-away-with-no-apologies-and-no-blame-laid|newspaper=Ottawa Citizen|access-date=January 16, 2016|date=December 31, 2014|archive-date=January 7, 2016|archive-url=https://web.archive.org/web/20160107174902/http://ottawacitizen.com/news/national/bagnall-nortel-allegations-finally-fade-away-with-no-apologies-and-no-blame-laid|url-status=live}}</ref>

==== Owens and Zafirovski ====

After Dunn's firing, retired United States Admiral [[William Owens (Admiral)|Bill Owens]]&nbsp;– at the time a member of the board of directors&nbsp;– was appointed interim CEO.<ref>{{Cite news |date=2004-04-28 |title=Nortel fires CEO Dunn |url=https://www.theglobeandmail.com/report-on-business/nortel-fires-ceo-dunn/article1136462/ |access-date=2024-01-31 |work=The Globe and Mail |language=en-CA |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131165801/https://www.theglobeandmail.com/report-on-business/nortel-fires-ceo-dunn/article1136462/ |url-status=live }}</ref> Nortel Networks subsequently returned to using the Nortel name for branding purposes only (the official company name was not changed). Nortel acquired PEC Solutions, a provider of information technology and telecommunications services to various government agencies and departments, in June 2005 and renamed it [[Nortel Government Solutions]] Incorporated (NGS).<ref name="NGS">{{cite web
 | author = Nortel Government Solutions
 | title = Corporate Information: Nortel Government Solutions
 | publisher = Nortel Government Solutions
 | year = 2008
 | url = http://nortelgov.com/corporateinfo.asp
 | access-date = June 1, 2008
 | archive-url = https://web.archive.org/web/20080704173649/http://www.nortelgov.com/corporateinfo.asp
 | archive-date = July 4, 2008
 | url-status = dead
 }}</ref><ref name="N-PEC">{{cite news
 | title = Nortel to Buy PEC Solutions For $448 Million
 | newspaper = Washington Post
 | url = https://www.washingtonpost.com/wp-dyn/content/article/2005/04/26/AR2005042601432.html
 | access-date = January 11, 2012
 | date = April 27, 2005
 | first = Griff
 | last = Witte
 | archive-date = October 3, 2018
 | archive-url = https://web.archive.org/web/20181003155028/http://www.washingtonpost.com/wp-dyn/content/article/2005/04/26/AR2005042601432.html
 | url-status = live
 }}</ref> [[LG Electronics]] and Nortel formed a [[joint venture]] in August 2005, with Nortel owning 51%, to offer telecom and networking solutions in the wireline, optical, wireless and enterprise areas for South Korean and global customers.<ref>{{Cite web |title=Long-Term Potential In LG-Nortel Joint Venture |url=https://www.forbes.com/2006/06/16/nortel-networks-0616markets15.html |access-date=2024-01-31 |website=Forbes |language=en |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131165801/https://www.forbes.com/2006/06/16/nortel-networks-0616markets15.html |url-status=live }}</ref>

Peter Currie, previously the Chief Financial Officer of the [[Royal Bank of Canada]], was named CFO of Nortel in 2005, having previously served as Northern Telecom's CFO in the 1990s. Gary Daichendt, the former Chief Operating Officer of [[Cisco Systems]], was hired as president and COO, and was expected to succeed Owens as CEO. Shortly afterward, Daichendt appointed ex-Cisco [[Chief Science Officer]] Gary Kunis as [[chief technology officer]]. Both Garys were concerned about the overall direction of Nortel, especially when compared to Cisco, their previous employer. Just three months later, Daichendt resigned after both his restructuring plan and his suggestion that Owens and Currie leave the company immediately were rejected by the board of directors. Kunis quit shortly thereafter.<ref>[https://nationalpost.com/related/links/story.html?id=2180163]{{dead link|date=August 2010}}</ref> At the year's end, directors Lynton "Red" Wilson and John Cleghorn retired from the board.

[[Mike S. Zafirovski]], who had served as president and CEO of [[General Electric|GE Lighting]] and then as [[Motorola]] President and COO, succeeded Owens as president and CEO on November 15, 2005.<ref name="MW-Zafirovski">{{cite press release
 |title        = Nortel Announces Mike Zafirovski as President and CEO
 |publisher    = Nortel Networks
 |date         = October 17, 2005
 |url          = http://www.ccnmatthews.com/news/releasesfr/show.jsp?action=showRelease&actionFor=562714
 |access-date   = June 1, 2008
 |archive-url  = https://web.archive.org/web/20060225094836/http://www.ccnmatthews.com/news/releasesfr/show.jsp?action=showRelease&actionFor=562714
 |archive-date = February 25, 2006
 |url-status     = usurped
}}</ref> Motorola filed a suit against Zafirovski's hiring, alleging that his new position would break the terms of the [[non-disclosure agreement]] he had signed. Nortel agreed to pay $11.5 million on his behalf to settle the lawsuit.<ref name="SUITSETTLE">{{cite web|last = McMillan|first = Robert|title = Motorola, Nortel settle Zafirovski dispute|work = infoworld.com|url = http://www.infoworld.com/article/05/10/31/HNmotorolanortel_1.html|access-date = September 5, 2006|date = October 31, 2005|archive-url = https://web.archive.org/web/20051204150616/http://www.infoworld.com/article/05/10/31/HNmotorolanortel_1.html|archive-date = December 4, 2005|url-status = dead}}</ref> Nortel also paid out US$575 million and 629 million common shares in 2006 to settle a class-action lawsuit that accused the company of misleading investors about the company's health.

Currie stepped down as Executive Vice President and CFO in early 2007.<ref>{{Cite web |last=Bale |first=Chris |date=2007-02-07 |title=Peter Currie to Step Down as CFO of Nortel |url=https://taxgrotto.etaxjobs.com/2007/02/peter-currie-to-step-down-as-cfo-of-nortel/ |access-date=2024-01-31 |website=Tax Grotto |language=en-US |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131170347/https://taxgrotto.etaxjobs.com/2007/02/peter-currie-to-step-down-as-cfo-of-nortel/ |url-status=live }}</ref> In February 2007, Nortel announced its plans to reduce its workforce by 2,000 employees, and to transfer an additional 1,000 jobs to lower-cost job sites.<ref>{{Cite web |date=7 February 2007 |title=Nortel cutting another 2,900 jobs; stock jumps |url=https://www.cbc.ca/news/business/nortel-cutting-another-2-900-jobs-stock-jumps-1.636887 |access-date=31 January 2024 |website=CBC |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131170344/https://www.cbc.ca/news/business/nortel-cutting-another-2-900-jobs-stock-jumps-1.636887 |url-status=live }}</ref> The Securities and Exchange Commission filed civil fraud charges against Nortel for accounting fraud from 2000 to 2003; the fraud was allegedly to close gaps between its true performance, its internal targets and Wall Street expectations. Nortel settled the case, paying $35 million, which the Commission distributed to affected shareholders, and reported periodically to the commission on remedial measures to improve its financial accounting.<ref>{{Cite web |title=SEC.gov {{!}} SEC v. Nortel Networks Corporation, et al., Civil Action No. 07-CV-8851-LAP (S.D.N.Y.) and SEC v. Frank A. Dunn, et al., Civil Action No. 07-CV-2058-LAP (S.D.N.Y.) |url=https://www.sec.gov/enforcement/information-for-harmed-investors/nortel#:~:text=On%20October%2015,%202007,%20the,the%20unrealistic%20revenue%20and%20earnings |access-date=2024-01-31 |website=www.sec.gov |archive-date=January 31, 2024 |archive-url=https://web.archive.org/web/20240131170344/https://www.sec.gov/enforcement/information-for-harmed-investors/nortel#:~:text=On%20October%2015,%202007,%20the,the%20unrealistic%20revenue%20and%20earnings |url-status=live }}</ref>

Nortel announced plans in February 2008 to eliminate 2,100 jobs, and to transfer another 1,000 jobs to lower-cost centres.<ref name="CBC-200802-jobcuts">{{cite news|work=CBC News |title=Nortel cutting 2,100 jobs |publisher=Canadian Broadcasting Corporation |date=February 27, 2008 |url=https://www.cbc.ca/news/business/nortel-cutting-2-100-jobs-1.735974 |access-date=June 1, 2008 |url-status=dead |archive-url=https://web.archive.org/web/20080606023743/https://www.cbc.ca/news/business/nortel-cutting-2-100-jobs-1.735974 |archive-date=June 6, 2008 }}</ref> As part of the reductions, Nortel shut down its Calgary campus in 2009.<ref name="CBC-200805-Calgary">{{cite news|work=CBC News |title=Nortel to close Calgary operations |publisher=Canadian Broadcasting Corporation |date=May 27, 2008 |url=https://www.cbc.ca/news/canada/calgary/nortel-to-close-calgary-operations-1.727467 |access-date=June 1, 2008 |url-status=dead |archive-url=https://web.archive.org/web/20080531001026/https://www.cbc.ca/news/canada/calgary/nortel-to-close-calgary-operations-1.727467 |archive-date=May 31, 2008 }}</ref>

During its reporting of third quarter 2008 results, Nortel announced it would restructure into three vertically-integrated business units: Enterprise, Carrier Networks, and Metro Ethernet Networks. As part of the decentralization of its organization, four executive positions were eliminated, effective January 1, 2009: Chief Marketing Officer – Lauren Flaherty; Chief Technology Officer – John Roese; Global Services President – Dietmar Wendt; and Executive Vice President Global Sales – Bill Nelson. A net reduction of 1,300 jobs was also announced.<ref name="PR-Nortel2008Q3">{{cite press release
 |title       = Nortel Reports Financial Results for the Third Quarter 2008
 |publisher   = Nortel Networks
 |date        = November 10, 2008
 |url         = http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100248517&locale=en-US
 |access-date  = November 11, 2008
 |url-status     = dead
 |archive-url  = https://web.archive.org/web/20091224082619/http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100248517&locale=en-US
 |archive-date = December 24, 2009
}}
</ref> As its stock price dropped below $1, the [[New York Stock Exchange]] notified Nortel that it would be [[Listing (finance)#Delisting|delisted]] if its common shares failed to rise above $1 per share within 6 months.<ref>{{cite news|url=http://www.bizjournals.com/triangle/stories/2008/12/08/daily53.html?ana=from_rss|title=Nortel gets delisting warning from NYSE|date=December 12, 2008|work=Triangle Business Journal|access-date=December 14, 2008|archive-date=April 16, 2012|archive-url=https://web.archive.org/web/20120416045041/http://www.bizjournals.com/triangle/stories/2008/12/08/daily53.html?ana=from_rss|url-status=live}}</ref> Rumours continued to persist of Nortel's poor financial health, amid the [[late 2000s recession]], and its bids for government funds were turned down.<ref>{{cite news |url=https://nationalpost.com/rss/story.html?id=2164470 |title=Who killed Nortel? |work=National Post |date=January 9, 2009 |access-date=August 14, 2010 }}{{dead link|date=March 2018 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

There is suspicion that industrial espionage and knockoff Asian products brought down Nortel or at least accelerated its demise. An extensive analysis by University of Ottawa professor Jonathan Calof and recollections of former Nortel executive Tim Dempsey have placed the blame mostly on strategic mistakes and poor management at the company.<ref name="nationalpost.com">{{Cite news |last=Blackwell |first=Tom |date=February 20, 2020 |title=Did Huawei bring down Nortel? Corporate espionage, theft, and the parallel rise and fall of two telecom giants |work=[[National Post]] |url=https://nationalpost.com/news/exclusive-did-huawei-bring-down-nortel-corporate-espionage-theft-and-the-parallel-rise-and-fall-of-two-telecom-giants |access-date=October 17, 2023 |archive-date=18 October 2023 |archive-url=https://web.archive.org/web/20231018113715/https://nationalpost.com/news/exclusive-did-huawei-bring-down-nortel-corporate-espionage-theft-and-the-parallel-rise-and-fall-of-two-telecom-giants |url-status=live }}</ref>