Nortel files for bankruptcy

NEW DELHI, INDIA: Nortel Networks, a manufacturer of telephone equipment, filed for bankruptcy protection in the US, amid the global credit crunch and declining sales.

Based in Toronto, the company had more than $1 billion in assets and debt, according to Chapter 11 filing of its US subsidiary. It is reported that several of its Canadian affiliates will also seek court protection.

Nortel has lost almost $7 billion since 2005, leaving Chief Executive Officer Mike Zafirovski struggling for the funds to operate the company, especially in face of stiff competition from Cisco and Juniper Networks. A bout of of restructuring that included a heavy round of lay-offs did not help matters.

Sales have declined since Nortel sold its high-speed mobile-phone unit to Alcatel for $320 million in 2006. The company got rid of the division to focus on a newer wireless technology called WiMax.

It also faced turmoil when some investors filed suit against it for alleged manipulation of its accounts. Last year, Canadian police charged two of its former top executives with fraud for allegedly fiddling the company's books in 2002 and 2003.

The Bank of New York Mellon was listed as Nortel’s largest unsecured creditor in its role as trustee on more than $3.8 billion in notes. Nortel Networks Capital has more than 100 creditors owed $100 million to $500 Million, according to the filing.