4. On January 14 2009, Nortel,
a Canadian telephone
equipment maker filed for
Chapter 11 protection, one
day before deadline on a
$107M interest payment.
5.
6.
7.
8. It’s easy to blame this
bankruptcy on the
financial crisis.
9. However, recessions
are always
particularly hard on
companies which
have structural
problems.
35. One reason for this is
the incredible pace at
which digital
technology is
developed.
36.
37. Gordon Moore, one of the
founders of Intel recognized a
fascinating pattern
back in the 1960s.
38. Over time, the amount of transistors that could be put
on a circuit for the same price doubled every 18th month!
So for the same price you can buy something which
can store twice as much information, every 18th month!
40. The implications are enormous!
If the price/performance ratio
doubles in 18 months…
And then doubles again in 18 months…
And then doubles again in 18 months…
Then the price/performance is 8 times
better in only 4,5 years!
16 times higher in 6 years!
69. At its height, Nortel
accounted for more
than a third of the total
valuation of all the
companies listed on
the Toronto Stock
Exchange.
70.
71.
72.
73.
74.
75.
76.
77. Though the company
paid a huge price for
these acquisitions, it
failed miserably in
integrating them and
transforming its
business into IP
routing.
78. As a large and old firm,
Nortel never really
embraced the IP shift
in the marketplace.
79. And then the stock
market bubble burst in
2000-2001.
80. The recession was
particularly hard on
companies like Nortel,
which had paid
excessive prices for
firms which were never
really absorbed.
81. In 1999, Nortel paid $2.1
billion for Clarify Inc. This
firm was sold in 2001 for
only $200 million.
91. As Nortel’s competitors
(Cisco, Huawei, Ericsson,
Alcatel) kept pushing the
new technology further the
firm was essentially left
behind.
92.
93.
94. In 2004, an investigation
was launched into Nortel's
financial statements. The
agency accused Nortel of
manipulating its books in
2000, 2001 and 2003.
103. It was Moore’s law
and the permanent
revolution of digital
technology that
killed Nortel.
104. This is what pushed them
into making many
expensive acquisitions that
they, because of the
existing dominant logic in
an old established company
then failed to integrate.
105. Just like Polaroid, the
music industry and all the
other examples
mentioned, Nortel failed to
transform its business.
106. Under conditions of rapid
technological development
and fierce competition, this
eventually lead to the
bankruptcy of Nortel.