Nortel Networks (NYSE:NT) has just been halted for trading on wire reports that the firm has filed for bankruptcy protection. It is no secret that the company has been in trouble. We noted before that the company was hinting at a reverse stock split. Things went from bad to really bad to just about the worst. This may completely wipe out the holders of common stock if past bankruptcy filings are any real judge of the future.
We have called for the ouster of its CEO. Mike Zafirovski is oneof our 10 CEOs to go in 2009. Hedid not effect any real turnaround when he could have and has now run the ship into the rocks.
This filing comes only one day before interest payments were due.While Nortel had $2.3 billion in cash at its last report and while ithad cash enough to cover these payments, the Canadian telecom equipmentmaker has some serious pension issues, has nothing but losses going forit, and faces what seems like endless losses ahead.
Depending upon how you calculate its operating losses and cash flow numbers, the firm should still have $1 billion or more in liquidity. What that number is in reality is still an unknown. What is known is that Nortel is the newest of the big implosions. It likely is far from the last.
Jon C. Ogg
January 14, 2009
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