Features - Firm Guidance
JUNE 26, 2000
BY JOE SAWARD
Nortel Networks is a vast telecommunications equipment maker, based in Canada. The company can trace its roots right back to 1880 when Alexander Graham Bell established the Bell Telephone Company of Canada in Montreal. The company grew rapidly in the early years of the century, acquiring a variety of other electrical companies and in 1914 it was decided to change the name of the firm to the Northern Electric Company. It was not until World War II that massive expansion began in the telephone business, with every house acquiring a telephone. That growth led to foreign expansion in the United States and the Far East. The company changed its name to Northern Telecom in 1976 to highlight the shift in the business towards the telecommunications business and that same year, the company introduced the first digital telephone switching device, a major breakthrough. This was adopted by AT&T and other industry giants and Nortel grew rapidly, investing in new digital systems and software in the 1980s. In 1993 new chief executive Jean Monty took over the company after NorthernÊTelecom posted serious losses and he began to sell off the non-telephone businesses owned by the company. Once the company had returned to profitability, expansion began with the most significant move coming in 1998 when a 7bn deal was struck to acquire Bay Networks and launch Northern Telecom into the rapidly-expanding data transmission business. As part of the transaction Bell Canada lost its controlling interest in the company which was then renamed Nortel Networks. A major global expansion was planned to meet the Internet boom and, as part of the marketing program the company decided to become a sponsor in Formula 1 and picked the Williams team, signing a three-year deal which is believed to be worth about $4m a year.
Nortel Networks is the biggest Canadian company by market capitalization, bigger even than its former parent Bell Canada.