Nortel Networks Corp, North America's biggest telephone equipment maker, filed for bankruptcy on Wednesday.
Nortel has struggled for years in an industry that has changed radically since Nortel's heyday in the late 1990s.
Telecom companies have slashed spending on the equipment that Nortel makes as the global economy has cooled. But for years the company has faced intense competition from North American and European rivals such as Alcatel-Lucent and Ericsson, as well as Asian vendors such as Huawei Technologies.
On Wednesday, Nortel said that it filed for Chapter 11 bankruptcy protection in the United States, giving it time to reorganize. It also filed for protection in Canada, and some of its European subsidiaries are expected to make similar filings.
The Canadian government pledged to help Nortel emerge from bankruptcy protection, and a government agency agreed to provide up to C$30 million in short-term financing.
Nortel said it expects to operate without interruption while in Chapter 11 and that it will still serve its customers worldwide. It said it has about $2.4 billion in cash.
"Nortel is still very much in business and our commitment to customers remains unwavering. We will continue to invest in leading edge R&D to deliver the value our customers expect from us," said Mike Zafirovski,
President and CEO, Nortel in a statement
at the company's web site.
"I am convinced that by choosing this path at this time, we can put Nortel on sound financial footing once and for all. It will allow us to deal decisively with our cost and debt burden, restructure our business and narrow our strategic focus in an effective and timely manner," Zafirovski added.