Nortel files for bankruptcy

Nortel Networks, North America's biggest maker of telephone equipment, has filed for bankruptcy protection as the global economic crisis continues to crush its already fragile business. ┬á The Toronto based company, and key sponsor of the 2012 London Olympic games, filed for US Chapter 11 bankruptcyÔÇö a ┬áprotection law that allows a firm to continue trading while it aims to sort out financesÔÇö a day before the firm was due to make a $107 million interest payment on outstanding loans. ┬á Nortel said it had been in the process of revamping the firm since late 2005, but that the recession had "compounded its financial challenges and directly impacted its ability to complete this transformation".  Crippled by an accounting scandal earlier in the decade, Nortel was forced into a series of earnings restatements and a succession of restructurings and asset sales; and with sales and margins down as challenges associated with the transition to new technologies, such as 4G wireless broadband, grow, NortelÔÇÖs chance of recovery continues to be viewed as dismal. ┬á┬á Although the company said that the bankruptcy protection was intended to help it ÔÇ£emerge from this process as a more focused and competitive company,ÔÇØ tight credit markets have made it harder to sell off parts of the business, and questions raised over NortelÔÇÖs viability have many customers delaying orders.┬á  Mike Zafirovski, NortelÔÇÖs chief executive, insisted on Wednesday that the bankruptcy filing would enable Nortel to be put ÔÇ£on a sound financial footing once and for all.ÔÇØ  "Nortel has enough cash to run its business this year and probably a good part of next year as well," said UBS analyst Nikos Theodospoulos, adding that a bankruptcy would give the firm "a better chance to preserve itself." ┬á