Nortel gasps for breath after a decade of setbacks

By Susan Taylor

OTTAWA (Reuters) - Once the prize jewel in Canada's corporate crown, Nortel Networks Corp has finally taken refuge in a bankruptcy filing after years of struggling to catch up with a fast-changing industry.

A corporate icon with roots as old as the telephone itself, Nortel made prescient wagers on wireless and fiber-optic technology to become the country's biggest and most talked-about stock during the dot-com boom years.

But shares of the one-time high-tech titan, worth more than C$1,100 apiece in mid-2000, had been relegated to penny-stock status by the time Nortel announced its Chapter 11 filing on Wednesday.

"It's sad to see a Canadian flagship going down," said Amit Kaminer, an analyst at telecoms consultancy Seabord Group.

"It's going to be lonelier at the top for Research In Motion," the Ontario-based maker of the ubiquitous BlackBerry smartphone.

At its peak in 2000, Nortel reported about $30 billion of annual revenue and had a market capitalization of $250 billion.

Nortel, by far Canada's biggest R&D spender in fiscal 2007 with a $1.85 billion budget, owns a sprawling 2-million square-foot research campus in the Canadian capital of Ottawa and it's the city's largest private-sector employer.

But it has struggled to keep pace with game-changing shifts in a sector rocked by consolidation, low-cost Asian rivals and a sharp slowdown in spending by customers.

"The whole industry has been going through a severe restructuring that began in the mid '90s and Nortel is a casualty of that," said Eamon Hoey, senior partner and telecommunications consultant at Hoey and Associates in Toronto.

"It's not without some degree of criticism (for Nortel) -- they were not just caught in the downdraft."

RBC analyst Mark Sue raised key questions about Nortel's future in November, when he cut his stock target to zero in a report called "The Last One."

"Nortel has $2.65 billion in cash but is overwhelmed with debt and burning cash," he said at the time. "The world moved on while Nortel was stuck in restructuring mode."

Dubbed by some analysts as death by a thousand cuts, Nortel has slashed jobs from a peak of 95,000 staff to 32,000 today and shuttered offices and plants around the world.

FEELING VULNERABLE

Despite the filing, it looked like business as usual on Wednesday at the Ottawa R&D complex. The parking lots were full but only a couple of employees ventured outside into the extreme cold and snow during lunch hour.