Blackberry’s woes reminiscent of Nortel’s

Once a source of national pride, technology giants fall from glory

BlackBerry Ltd.’s search for a buyer is stirring up old memories of another former Canadian technology giant that fell from glory.

Nortel Networks Corp., the telecommunications-equipment maker founded in 1895, once represented more than one-third of the country’s benchmark stock index, with a market value of $366 billion. It filed for bankruptcy in 2009, leading to thousands of job losses, a $7.8 billion asset sale and a severe blow to Canada’s ambitions as a technology leader.

Now BlackBerry, the smartphone pioneer is the Canadian icon seeking to avoid extinction. The company said this week it formed a special board committee to consider joint ventures, partnerships or a sale of the company, weighing all options after its new BlackBerry 10 products flopped.

“Nortel was a leader, BlackBerry was a leader. Look what happened to both of them — they lost that edge,” said Ian Nakamoto, research director at MacDougall, MacDougall & MacTier Inc. “How could it not crimp the national pride?”

Nortel had annual revenue of $28 billion at its peak in 2000, with 93,000 employees in more than 150 countries. Its bankruptcy filing spooked customers such as Verizon Communications Inc., whose concerns about the Canadian company’s balance sheet overruled their interest in its products, thenChief Strategy Officer George Riedel said in 2009. Nortel had to sell off its assets as a result, he said.

Unlike Nortel, BlackBerry isn’t loaded with debt. And many of Nortel’s wounds were self-inflicted. Nortel restated earnings going back to 1999 after probes by regulators in 2004 indicated executives incorrectly booked revenue, inflating sales figures by $3.4 billion. The company paid a $35 million fine in 2007 to settle U.S. Securities and Exchange Commission claims it defrauded investors by manipulating earnings from 2000 to 2003.

Meanwhile, phone companies were putting off network investments to weather the recession in 2009, magnifying Nortel’s internal missteps.

Many Canadians took Nortel’s bankruptcy like a punch in the gut. The company sold off units one by one from 2009 to 2011, culminating in a $4.5 billion sale of patents to a group including Apple and Microsoft Corp. — as well as BlackBerry itself, then known as Research In Motion Ltd.

Canadian regulators, charged with weighing the benefit of such transactions to the nation, chose repeatedly not to block Nortel’s asset sales. The company was denied aid from the Canadian government that may have helped avert a bankruptcy, former Nortel Chief Executive Officer Mike Zafirovski told lawmakers in 2009. Tony Clement, then Canada’s industry minister, said Nortel’s business plan wasn’t “commercially viable.”

BlackBerry’s decision to consider a takeover is fuelling speculation Canadian investors could band together to acquire the company, potentially offering a more palatable solution to regulators than a foreign buyer. In the end, as with Nortel, the government may not play much of a role, Nakamoto said.

“BlackBerry doesn’t have a balance sheet problem — they have a lack of customers,” he said. “What can Ottawa do? Get people to buy more BlackBerrys? There’s nothing they can do.”