NORTEL PHONE SYSTEM

The origins of Nortel (then known as Northern Electric and Manufacturing Limited) date back to the creation of Bell in 1880 when Bell’s rapid growth eventually led to its need for a separate company to take over the mechanical department work. In December of 1895, Northern Electric and Manufacturing Company Limited (Northern Electric) was incorporated under the dominion charter for this purpose.

In January 1923, Northern Electric started to operate an AM radio station with call letters. Then, in July of that same year, they were the first radio station to provide entertainment to the passengers of the transcontinental train. After the Great Depression, Nortel converted most of its operations to war production in order to help with WWII efforts, and by 1944, most of its employees were engaged in these activities. After the war, Northern Electric continued its substantial growth to meet the ever expanding communications needs of Canada, and had 12,775 employees by 1948.

In 1957, Bell Canada purchased remaining shares of Northern Electric from Western Electric to make it a 100% Bell Canada-owned company. Finally, in March 1976, the company changed its name to Northern Telecom Limited as a sign that they were trying to focus on digital telecommunications. Unfortunately, a few issues arose in the mid-80s: software problems, poor marketing, and the inability of Northern’s switch to keep up with all the new tasks the expanded software had to do.  In an effort to cut their losses, Nortel launched a PR campaign to reassure customers that they had solved those issues and that their new processor would double the capacity of these switches.

In 1989 Northern’s expenses fell, their profits jumped, and by 1990, they were the sixth largest telecommunications company in the world. However, US customers continued experiencing issues with the switches and were further irked when the company was slow in providing solutions. The CEO was replaced, and eventually the new CEO’s changes aimed at improving the software, switch, and sale issues caused the first quarterly loss in years. This lead to Northern’s market value being nearly cut in half.

It was in 1998 that the name “Nortel” emerged, a change aimed at emphasizing their ability to offer complete solutions for multiprotocol, multiservice, and global networking over the internet and communications networks. Nortel bought Sonoma for ~US$540million in stock in the year 2000, and following this announcement, the market capitalisation of Nortel hit US$24billion. In the following years, Nortel’s emphasis and success on new technology was demonstrated through their engineering of 60% of revenues from products less than 18 months old. Nortel was also working in establishing a presence in the undersea-fiber business and gaining a reputation as a leader in the wireless internet technology sector.

At its highest point, Nortel accounted for more than a third of the total valuation of all companies listed on the Toronto Stock Exchange (TSX) and employed 94,500 employees worldwide. In 2009, Nortel filed for bankruptcy and eventually sold all its business units. It is speculated that the bankruptcy was caused by a loss of confidence from clients, but employees and academics are to this day debating the underlying causes of this demise. Nowadays, Nortel is no longer manufacturing but their hardware can still be found in use by many businesses.