Nortel Networks

Nortel is a company that dominates the internet/telephony backbone market, with a huge market share. While Cisco Systems, currently dominates the router/switch market on the enterprise side, Nortel dominates the systems that form the backbone of the internet.

Nortel's business stratgey has thus far been to develop a telecommunications technology up to the point at which it becomes an efficiency game, where companies compete to lower their cost of production/maintainence by a few dollars, at which point they usually sell of that division.

The new focus in the company is development in Optical Networking, and Wireless Networking, where it competes with companies like Lucent, and Alcatel. In the router market, Nortel dominates the market for large telecoms, whereas their main competitor dominates the market for enterprise switching and routing. Nortel is a technology company, and not a telecom.

Nortel is based in Ontario, Canada, though it has divisions throughout the world.

Nortel Networks was first incorporated in 1895 under the name "Northern Electric and Manufacturing Company." It made telephones, wind-up gramophones, and street call boxes for police and fire departments.

In 1914, it merged with The Imperial Wire and Cable Company to form "The Northern Electric Company."

In 1976, the company changed its name to Northern Telecom. By this point, Northern Telecom had decided to risk its future on the potential of digital telephony. Northern Telecom focussed on creating fully digital telephone switches--telephone switches which would convert the analog voice signal coming from a subscriber's telephone into digital data before routing the call. While other telephone equipment manufacturers were loathe to abandon tried-and-true analog telephony, digital telephony turned out to mean big savings for the telcos that were Northern Telecom's customers. Northern Telecom's early advocacy of digital technology enabled it to get the jump on many of its larger competitors.

Since the company was informally known as "Nortel" both internally and externally, in 1995 Northern Telecom changed its name officially to "Nortel" in an effort to strengthen its corporate identity.

In 1998, Nortel sought to reposition itself as a supplier of networking equipment for the blossoming Internet. Nortel acquired Bay Networks and changed its name to "Nortel Networks."

The dot-com crash late in the year 2000 meant disaster for Nortel Networks. The company laid off 44,000 employees worldwide between 2000 and 2002--almost half its workforce. Nortel Networks stock on the New York Stock Exchange plummeted from a high of $86 USD on July 26, 2000 to $2.47 USD on May 15, 2002. On April 4, 2002, Nortel Networks' credit rating was downgraded to junk bond status by Moody's Investors Service.