The rise and fall of Nortel

A century old telecom titan begins liquidating operations

For better or worse, Nortel as we know it is coming to an end. This week Avaya reportedly offered $500 million for the company's enterprise business, while the wireless assets will go to Nokia Siemens Networks for $650 million. The sad demise comes in spite of a history of ups and downs.

Northern Electric and Manufacturing begins business in 1895.

Northern ships the first digital switching system in 1975, ushering analog voice networking into the computerized digital era.

Northern Electric changes name to Northern Telecom in 1976 to consolidate its global operations under one umbrella brand.

The DMS-100 digital switch creates a global telecom giant in 1979. The switch, which supports up to 100,000 lines, is popular with carriers and widely installed, helping Northern gain worldwide recognition.

Now known as Nortel Networks, the company buys Cisco router and switch rival Bay Networks for $7 billion in 1998. Nortel, however, fails to build IP prominence and the buy is ultimately considered an expensive bust .

Nortel spends another $16 billion in 2000 to acquire four more companies, including Alteon Networks, just before the dot-com bubble. This, along with the Bay Networks purchase, begins to unravel the company.

Nortel lays off 55,000 between 2001 and 2003, cutting its workforce to less than half of the 94,500 employed in 2000. The company will never see growth again.

CEO Frank Dunn and two other executives are fired after an accounting scandal in 2004. The company starts financial restatements going back years and lays off another 3,200. Bill Owens takes over as CEO, but his tenure lasts only 18 months, marked by more restatements, continued decline and the rapid departure of two high ranking, ex-Cisco executives .

Nortel names former GE and Motorola exec Mike Zafirovski as its new CEO in 2005. Zafirovski cleans up the accounting mess, cuts expenses and restructures the company, but the damage is already done.

Nortel lays off another 5,300 between 2006 and 2008; company now employs less than 30,000. Even a high-profile partnership with Microsoft around unified communications cannot inject much promise into the company's plight .

The company files for bankruptcy in January 2009 and by June, Nortel announces that all business units are for sale as it admits its attempt to recover falls short. Alteon Web Switching goes to Radware for $18 million – Nortel paid $7 billion for it -- wireless to Nokia Siemens , and others are being offered at lowball prices.

What will ultimately become of Nortel? Will the name survive? What will customers do – or have to do?

Copyright © 2009 IDG Communications, Inc.