Nortel Networks, A story of rags to riches... and back to rags

       Nortel networks, though a company that most of you have never heard before, was really big coming into the late 1900s. In the early 1900sBell canada, a large canadian company founded its mechanical department, calling it northern electric. Fast forward to 1971 and northern electric makes an innovative break-through by creating the SP-1, a telephone switching system that is used to connect phone lines. It's one of the first ever systems to use a computer, causing it to sell very fast. With the newfound money, Northern Electric is able to go public and create the first digital private branch exchange system in the world. This is again another massive breakthrough that sells like crazy.
Now, leading up to the late 70s, Northern Electric, now known as Northern Telecom, is doing very well across the globe. This lets them spread into the data market too, providing a local area network and helping offices digitize their sales price and increasing the company’s sales and stock price. Northern Telecom then sets out to become the number 1 provider of Public and private networkers, but is outcompeted by the new and fast growing internet craze. Faced with this new problem, Northern telecoms shifts its focus from telephones to data and multimedia networking, and finally changes its name to the one its most known for, Nortel Networks.
Nortel Networks, now trying to catch up with the internet, starts buying a lot of internet startups, and with the demand for data increasing, they also start flooding the market with fiber optics. This is when the dotcom bubble starts to grow and Nortel’s stock starts to skyrocket, even though they aren't really making any money because of all the acquisitions that had already happened. Between 1998 and 2000 the company is unable to record a single annual profit, leading management to remove acquisitions off the expenses to make it look like they are making a profit when they really aren't. Investors are fooled by this new number and keep on buying stock from it, making it the 9th most valuable company in the world.
This all ends though when the dotcom bubble that I have talked about in earlier blogs finally pops. Nortel Networks was relying on the idea that fiber optics would always be in high demand, and it is soon proven that this really isn’t the case. With other tech companies dropping like flies demand dries up and the tech industry starts to slow down. Finally in 2001, with sales missing their expectations, Nortel finally admits that it won’t be making any profit, causing investors to run for their lives. Desperate for change, Nortel Management takes some of its savings and adds it to the annual earnings to make it look like they were finally earning money. However, this is soon figured out and Nortel uses the rest of its money fighting a lawsuit against fraud, causing it to eventually die out.

Sources:
https://www.youtube.com/watch?v=EKjAMxzdrHw
https://www.theglobeandmail.com/report-on-business/the-story-behind-nortels-fall/article4156221/

http://www.fundinguniverse.com/company-histories/nortel-networks-corporation-history/