Embattled networking vendor, Nortel, has sought to reassure Australian partners after the company filed for creditor protection in North America, Europe, the Middle East and Africa.
The Toronto-based vendor filed for Chapter 11 in US bankruptcy court on Wednesday seeking creditor protection. In the US the Chapter 11 law is designed to give companies in financial trouble some time to organise a plan for paying off debts.
With Australian operations not covered by the move, as most creditors are located overseas, Nortel Asia vice-president carrier sales, Anthony McLachlan, was keen to stress local operations would continue as normal.
“We thought this was the most prudent thing for us to do for our business and our customers,” he said. “We have about $US2.4 billion in the bank, which is in line with previous guidance we have provided and allows us with enough operating cash flow to drive the foreseeable future.
“We embarked, over the last few years, on a business restructuring to get our business in line so we are continuing down that strategy. We are on track with what we said we were going to do in driving our operational focus and getting our portfolio alignment done. We continue to progress it but what we have found is with the current economic climate it has compounded some of the issues in some of the legacy financial aspects on our balance sheet – these are things that have been on our balance sheet for numerous years – and we have made a decision while we have funds to address those once and for all.”
Late last year, the vendor announced a $US400 million cost-cutting campaign that involved selling its metro Ethernet division, laying off 1,300 employees and shuttering facilities. Nortel rejected claims it was considering bankruptcy after a media report claimed it had hired lawyers to consider whether it should seek bankruptcy protection.
But despite the developments overseas, Australian partners have taken a positive outlook on the vendor’s prospects this year.
Distribution partner, Anixter CEO, Wayne Bogart, acknowledged the substantial impact a Nortel fall overseas could have on the Australian IT market, but said its business remained robust.
“The word got out quick and everybody is just a little concerned at the moment about the effect and if there is going to be an effect and when we will know,” he said.
“Other companies have gone through this before and they have come out of it fine. Nortel has lots of pieces of business so between their wireless business and their enterprise business today I don’t see a problem for us here in Australia. I’m sure there will be end users out there that won’t be comfortable and we’ll probably see that in the next few months that people will make decisions to go with other product lines because they are not comfortable.”