Nortel files Chapter 11

My how the mighty have fallen. Nortel shares once traded at over $124 each, yesterday fell as low as 8 cents apiece. Frankly they are likely overvalued at that. Please don’t misunderstand me I don’t believe the company is wothless, just that the current shares are likely to be effectively wiped out as Nortel goes through their reorganization.

For the employees it is business as usual. Those who are still there, about a quarter of the staff that Nortel had just a few short years ago, will carry on and to a large degree so will the company. Seeking bankruptcy protection allows Nortel to avoid making interest and other payments and plan a structured return. The plan will likely involve selling off assets and whole business units.

Nortel has good products and customer base, but I suspect that they will lose some deals due to uncertainty about the future. If you are spending millions on telephony you want to know that the vendor will be around to support their equipment.

I expect Nortel to survive, but it will be a much smaller shadow of its former self.

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