Nortel Networks Corp. (NT), which until recently was Canada’s largest company, is has hired bankruptcy attorneys to advise it in the event that its restructuring plan fails, according to The Wall Street Journal. Odds are fairly good of that happening which spells trouble for Alcatel-Lucent (ALU) and Motorola Corp. (MOT), which are struggling on their own.
Nortel, which also is seeking help from the Canadian government, announced a broad restructuring program on September 17 which included the layoffs of about 1,300 along with plans to sell its unprofitable Metro Ethernet business. At the time, Chief Executive Mike Zafirovski sounded an upbeat note, pointing out that
"we continued to see important, multi-year customer wins in key areas of our business." The company also predicted it would reap about $400 in cost-cutting savings in 2009.
Clearly, this was not enough. Nortel burned through $478 million in cash during the first ninemonths of this year. Buyers have failed to materialize for Metro Ethernet.
If Nortel files for bankruptcy, pressure will mount on Alcatel-Lucent to dump its struggling mobile phone business which until recently the company has said it wants to keep. Motorola,, which has been in trouble for so long that the good `ol days are a distant memory, is facing a potential downgrade from Moody’s on concerns about whether the company’s handset business will return to profitability in anyone’s lifetime.