Nortel Networks has filed voluntary petitions in the United States under Chapter 11 for bankruptcy protection, due to poor trading conditions.
The company said the process will allow Nortel to deal with its cost and debt burden and to "restructure its operations and narrow its strategic focus".
Nortel must be put on a sound financial footing once and for all," said Nortel president and CEO Mike Zafirovski. "These actions are imperative so that Nortel can build on its core strengths. I am confident that the actions we are announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success."
The company began a turnaround programme in late 2005. Although Nortel said it had made important progress, the global financial crisis and recession had impacted its ability to complete the programme.
Nortel's customers include BT, BASF, T-Mobile, Deutsche Bahn and NASA.
The company is a key supplier for the 2012 London Olympics, hired to provide BT with routers, switches and networking equipment required to build and support the network and communications infrastructure.
Steve Broadhead, director of Broadband-Testing Labs, said that Nortel customers should not be surprised by the move.
"The writing has been on the wall for a while regarding Nortel as far as I'm concerned. Outdated product range, where is the focus? So, were I a customer of Nortel, I would have been looking at alternatives/contingency plans for
some time. There are plenty of "me-too" alternatives to move to that will not require major costs in retraining and redeployment. However, in some of the more specialist areas that Nortel plays, there could be issues for customers trying to move forward without a complete upheaval, and at a time when consolidation, not experimentation, is the byword," he said.
An application for bankruptcy protection under the Companies Creditors Arrangement Act in Canada is due to be heard today. Nortel has filed petitions for Chapter 11 Bankruptcy protection in the US Bankruptcy Court for Delaware.