It has just emerged that telecoms and networking equipment giant Nortel has filed for bankruptcy.
The Canadian technology company employs over 300 people in Galway and has had an operation there since 1973.
It is understood the company today filed for Chapter 11 bankuyptcy in the US. The company never fully recovered from the major economic downturn of 2001 and 2002, made worse by the dotcom downturn.
In November, the company launched a major restructuring programme that would have reduced its headcount by 1,300 workers globally.
However, the recent credit crunch hit the company hard and despite selling assets, mounting debts and a steep drop in revenue has deeply affected the company.
In December, the New York Stock Exchange warned it would delist Nortel stock if the company failed to get its shares above the US$1 minimum level. At present Nortel shares are trading for just 32 cents a share.
Strategic mistakes have been made over the years, but it is interest due on a US$3.8bn bond debt that brought matters to a head. According to the Wall Street Journal, Nortel was due to make a US$107m payment on interest this week.
While Nortel has cash of US$2.6bn in the bank, the bankruptcy could see the company broken apart by the need to sell businesses off.
A restructuring programme in November launched by chief executive Make Zafirovski was aimed at recouping annual cost savings of US$190m.
However, the credit crunch and a sudden departure from infrastructure investment by telecoms operators exasperated Nortel’s decline. The company had been hoping to do well on the back of moves to next-generation wireless networks but averse financial conditions have curtailed investment by operators.
By John Kennedy