Nortel ‘did not need to fall apart as it did’

Fifteen years ago this month, fall brought a blast of chilly news through the halls of what was then Ottawa’s largest technology company.

On Oct. 2, 2001, Nortel Networks announced it was chopping another 19,500 jobs from its global workforce in the wake of a whopping $3.6-billion quarterly loss. 

The cuts brought the number of layoffs at the once-dominant tech colossus to nearly 50,000, and with that bombshell came another announcement that raised more than a few eyebrows: CEO John Roth, who had said earlier that year he would retire, would be replaced by CFO Frank Dunn effective the following month.

While conceding that Mr. Dunn knew the company “inside and out,” an editorial in the Oct. 8, 2001 issue of OBJ argued that many outsiders would question his appointment.

“They will wonder aloud: isn’t Dunn part of the team that created this colossal mess?” the column read. “As CFO, Dunn was part of the executive team that didn’t bother talking to the treasurers at client companies that couldn’t possibly pay for US$100-million orders.”

Still, the editorial expressed guarded optimism, ending with the prediction that a “new focus, a tighter hold on purse strings should result in a stronger Nortel that will continue to play a large role in the global telecommunications market.”

As we now know all too well, things didn’t turn out that way. Already drowning in red ink, Nortel continued to rack up billions in losses over the next decade and finally filed for bankruptcy protection in 2009. In June of that year, its shares – once worth more than $124 – were de-listed by the Toronto Stock Exchange.

Assets sold off

The engine of the Ottawa tech community at its peak, Nortel gradually faded into oblivion, parcelling out its assets and selling them off to competitors like Ciena and Ericsson.

Its massive 370-acre former campus on Carling Avenue, which once housed half of Nortel’s 16,000 employees in the National Capital Region, is now property of the federal government and will soon be home to the Department of National Defence headquarters.

But on Oct. 2, 2001, no one knew what was in store for Nortel, including its thousands of workers in the Ottawa region.

“There was a lot of concern, and hope that Frank Dunn would be the fellow to lead us forward and break through the challenges ahead of us,” recalls local entrepreneur Brian Hurley, who in 2001 was a project leader of Nortel’s carrier IP business. “I think that at the time, (we) were still very optimistic about the likely outcomes, including myself.”

At that point, he adds, most people at the company still believed Nortel would recover.

“That was one of things that was great about Nortel and BNR (Bell-Northern Research, Nortel’s predecessor). It had a lot of very committed people who’d been with the company for a long time. When the uncertainty set in later, you could tell it was causing a lot of stress to a lot of people.”

Peter Becke, a former vice-president of business development at Nortel who had left the company earlier in 2001, says that although Mr. Dunn was “financially astute,” he was the wrong person to replace Mr. Roth. 

“He was not an inspirational leader,” says Mr. Becke, who now mentors young entrepreneurs and runs a private equity firm called Hello Ventures with former Shopify CEO Scott Lake. 

“Nortel had some amazing leaders, but every Nortel executive can remember who they were and what they did for the company. I would just say that Frank didn’t seem to be in that echelon of great leaders. It didn’t seem to me that was a positive, forward step. It didn’t seem to me that Frank was going to get the company back on track.”

He believes Nortel still had great products and world-class employees and could have rebounded under the right conditions.

“I would guess that with stronger leadership at the board level, at the executive level, the financial situation could have been dealt with and the future of the company may have been different,” Mr. Becke argues. 

“It did not need to fall apart as it did. The fact that so many of those business units became profitable, valuable assets for our competitors to buy and invest in suggests that we had options. They just didn’t materialize. Far lesser companies had a future. (Nortel) could have.”

Mr. Hurley, who went on to found two technology companies of his own after being laid off in 2002, takes a more philosophical approach.

“I don’t look to place blame,” he says. “I think everybody at the end of the day was trying to do the best job they could. Any technology company, you place your bets, you make your decisions … and sometimes those decisions aren’t correct. The outcome was not the outcome we all desired, but that’s what happened. I think everybody was working with the best intentions.”

Both Mr. Becke and Mr. Hurley prefer to focus on Nortel’s enduring legacy – the legions of talented engineers and tech wizards who went on to launch dozens of successful startups in the Ottawa region, many of which are still thriving today.

“We really had an amazing human capability at Nortel,” Mr. Becke says. “Many of those characteristics have transformed into other companies and other ventures. There was something about that time, during the good years, that really grew you as a leader, grew you as a person.”

Bittersweet memories

Mr. Hurley shares many of the same feelings.

“That camaraderie and the culture of Nortel and BNR still exists today amongst the people who worked there,” he says. “We all tend to help each other out.”

Now CEO of a software company called Purple Forge, he says his memories of Nortel are bittersweet.

“First and foremost, it’s pride – pride in the people, the technology, what we achieved as an organization and what we had the potential to achieve, and the challenges we overcame along the way,” says Mr. Hurley, whose attachment to the firm that employed him for 15 years still endures: He chose the name Purple Forge partly as an homage to BNR, which had a purple logo. 

“The second (emotion) would be there’s a sadness that it came to an end. And there’s the sadness (about) the negative way it affected some of the people who were no longer with Nortel.”

Mr. Becke’s connections to Nortel also run deep – his father and brothers all worked for the company at some point, and there is a hint of reverence in his voice when he reminisces about its heyday.  

“Back in those days that Nortel was growing, nothing was impossible,” he says. “There was nothing you couldn’t do. That created a world of achievement. You felt proud to be part of that. It wasn’t about arrogance – it was about pride. You were part of something really big.”