Nortel Networks: The Canadian Telecommunications Equipment Giant’s Accounting Controversies
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Code : GOV0042
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Region : Canada |
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Nortel's Background NortelNetworks Corporation started its corporate life in 1895 asNorthernElectric andManufacturingCompany Limited. Itwas formed when Bell Telephone Company of Canada decided to spin-off its manufacturing unit formaking equipments for traditional phone companies and other devices such as street call boxes and fire alarmboxes for police and fire departments. The company changed its name in 1976 to Northern Telecom Limited and decided to concentrate its efforts on digital technology. At its centenary celebrations in 1995, the company adopted a streamlined identity as Nortel and began its journey to dominate the global market in the field of public and private telecommunication networks. The company was renamed as NortelNetworks after the acquisition of Bay Networks in 1998... Nortel’s Problems In 1997, Nortel underwentmajor changes after John Roth (Roth) became the company’s President and CEO. Roth understood that themarketplace of communicationswas shifting fromtelephone technology to the Internet. To adapt to this change, the company was dramatically restructured and some estimated that Nortel’s equipmentwas carrying about 75% ofNorth America’s Internet traffic during the closing stages of the 1990s. The company also went on a buying frenzy and in 2000 alone it bought 11 companies at a total cost of $19.7 billion... |
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The Future Owens has forecasted higher 2005 sales for Nortel. He is also of the opinion that although the process of restatement had affected the company’s performance, he expects such impact on the company’s results as a temporary phenomenon. Analysts like Technology Business Research is also of the opinion that in spite of all the difficulties the company remains a viable competitor. Its customer base continues to be loyal and during the last sixmonths of 2004 it had signed expanded contracts with Sprint, Verizon,AT&T andALLTEL...
