• Canada’s global competitiveness and productivity, and the role technology plays in improving both, if only small and medium-sized enterprises more readily adopted information and communication technologies (ICT);
• the importance of research and development inside businesses;
• strategies for building next-generation broadband networks across the country;
• notions of net neutrality and open, transparent networks;
• a drive to digitize all health records;
• the role legislation to protect consumers online plays in providing them with the confidence to adopt new technologies;
• and even a call to digitize all of Canada’s archived historical materials and make them accessible to the public.

It was a lot to take in, with the room full of high-powered business people, lawyers and academics, each with their self-interested view to propose. In his closing remarks, Minister Clement acknowledged he had a lot to synthesize.

But the underlying message of the proceedings, which were held under the high, arching ceiling of the Government Conference Centre’s main hall, was clear: the whole of the Canadian economy needs a thriving ICT sector, and the government needs to move quickly in adopting policies, legislation and spending plans that will position the country at the forefront of the continuing technology revolution driven by networks, the Internet, and digital content.

The timing was coincidental, but the symbolism was hard to miss. Just 60 hours before the conference opened, Nortel Networks officially announced what many suspected would be its fate ever since it sought bankruptcy protection in January: the once-grand communications equipment maker now planned to sell itself off in pieces—and likely for a sum about US$1.5 billion short of its US$3.6 billion in liabilities—and would also request that the Toronto Stock Exchange de-list its shares, likely putting its long-suffering investors out of their misery once and for all.

At the beginning of this decade, Nortel was Canada’s eminent technology flagship company, but now it is in tatters. Its stock last traded on Friday, closing at  at 18.5¢. On July 26, 2000, 2,239 trading days earlier, Nortel shares traded as high as $1245 (once adjusted for a 2006 1-for-10 stock consolidation), which gave it a market capitalization of about $385 billion, or about 36.5% of the total TSE 300 Index.

Briefly, a look back at the story in the National Post’s Financial Post Investing section the next morning (pay close attention to the last three paragraphs):

Analysts rush to ratchet up Nortel share targets: 50% upside seen

National Post
Thu Jul 27 2000
Page: D1 / FRONT
Section: Financial Post Investing
Byline: Michael Lewis

Better than expected second-quarter results fuelled a rise in Nortel Networks Corp.’s shares yesterday, and had analysts scrambling to upgrade their outlook for Canada’s most valuable company. After Nortel posted a large jump in per-share operating earnings, besting analysts’ consensus forecast by more than 25%, its shares (NT/TSE) rose $2.35 to $123.10. The stock is ahead by more than 68% this year and 286% over the past 12 months. In New York the stock (NT/NYSE) closed at US$87 3/8.

On Tuesday Nortel upped its revenue growth forecast for 2000 and 2001 to more than 40% from a previous maximum of 35%, and a number of analysts followed suit.

…Nortel said on Tuesday its EPS from operations will grow in the high 30% range and forecast 2001 growth of up to 35% in revenues and earnings per share.

Analysts are bullish on Nortel as a result of its growth prospects, largely based on intense global demand for its fibre-optic products.

And they are willing to look past the fact that Nortel’s accounting methods disguise underlying net losses, once the cost of acquisitions are included.

A string of multibillion-dollar acquisitions added $1-billion in costs in its latest quarter alone and contributed largely to the firm’s losses, after extraordinary items, of more than US$1.63-billion in the past two full reporting years.

“No company ever went under because of accounting methods,” said Tim Burke, a telecommunications analyst with Edward Jones in St Louis. “The important thing is to look at cash and growth, and Nortel has both.” (Source: FPInfomart.ca)

It’s breathtaking to reflect on the arrogance of that era, and all that has unraveled since.

But I digress. Although the news of Nortel’s liquidation was barely mentioned during the conference—the role of Twitter in the Iran’s election demonstrations was brought up more often—it nevertheless was an appropriate backdrop to a conference about Canada’s and its businesses’ roles in the global digital economy. Some of the attendees, like Sir Terence Matthews, have taken part in previous forums, task forces, strategic councils, and authored countless papers on the future of technology in Canada. Remember the National Broadband Task Force? That was 2001, in the days when Brian “Captain Canada” Tobin was the federal Liberal Industry Minister, although the process was started by his predecessor, John Manley (who is on Nortel’s board of directors).

Eight years on, Canadians use the Internet and digital media much differently, while their understanding of the complex issues underlying them has grown more nuanced. Debates surrounding issues like net neutrality (or network management), intellectual property rights, digital rights management and online privacy in age of social networking have come a long way.

I will likely write more about the conference (you can watch the archived webcast here) and the emerging digital strategy, either in further blog posts or in the upcoming issue. But here’s one final thought: it was remarkable how prominent luminaries from the Waterloo, Ont. region were present. RIM co-CEO Mike Lazaridis helped open the conference, while University of Waterloo president David Johnston played a key role, as did Open Text executive chairman and chief strategy officer Tom Jenkins (whom I profiled in the most recent issue). In fact, Jenkins’ initiatives of the University of Waterloo Stratford Institute, the Canadian Digital Media Network, and the Canada 3.0 Forum on June 8 and 9, clearly helped shape this federal conference, and were mentioned multiple times by Minister Clement and others.

But representatives from Ottawa’s technology companies were not there in force—only Kirk Mandy, CEO of Zarlink Semiconductor made a comment from the floor. And, of course, not a soul from Nortel was present.

Where will Canadian tech companies be in 2019? One hopes neither on the verge of vanishing, like Nortel is now, or still sitting in conferences, talking about how the government needs to form some kind of strategy for its ICT industry.

Further reading on Nortel:

“Plan Z,” Canadian Business magazine, January 27, 2009

“The Good, The Bad and The Ugly: Nortel Networks,” Canadian Business magazine, March 30, 2009

Nortel Networks was created in 1895 when Montreal-based Bell Canada divested its manufacturing division under the name Northern Electric and Manufacturing Co. The purpose of the reorganization was to circumvent government restrictions prohibiting diversification of its manufacturing operations.

For the first 60 years of its existence, controlling equity stakes were owned by Bell Canada and Western Electric, the manufacturing arm of AT&T Corp. As a preferred supplier to Bell Canada, Nortel’s core business was manufacturing telephone equipment according to designs licensed from Western Electric – which, in turn, received a royalty on Nortel’s sales.

Nortel took full advantage of the freedom to diversify its production. By 1900, it was the largest manufacturer in the world of sleigh bells. It also became the dominant supplier of electrical appliances in Canada (a business it left in the 1950s).

The boom in the 1920s caused employment at Nortel to soar from 2,500 to 7,000 persons. But the depression of the 1930s hit hard and employment was cut back drastically to 2,500. Nortel was saved from bankruptcy thanks to a loan from Western Electric.

In 1956, AT&T signed an antitrust agreement with the U.S. Justice Department that loosened Western Electric’s monopolistic influence in the manufacture of telephone equipment. This led to Western Union withdrawing from the Canadian market and the sale of its Nortel stake to Bell Canada in 1962.

Over the 1970s, Bell Canada funded research at Nortel into the development of digital switches. By the early 1980s, it was first to market with this new technology for switching calls on the telephone network.

The timing was perfect: the recent breakup of AT&T’s monopoly allowed the regional Bells to buy equipment from suppliers other than Western Electric. During the severe recession of the early 1980s, Nortel’s stock was one of the few to rise appreciably, as purchase orders flooded in from the regional Bell companies.

In the late 1980s, Nortel’s fiber-optics product line emerged from “skunk work” projects initiated by Rudolph Kriegler (who was awarded the Order of Canada in 2008). In the early 1990s, John Roth led Nortel’s foray into wireless communications.

The Internet emerged as a force in the 1990s and to adapt, Nortel took a “right-angle turn” – a centerpiece of which was an aggressive acquisition program carried out under John Roth. At the peak of Nortel’s fortunes in 1999, Mr. Kriegler told a journalist: “I never thought Nortel would do so well.” Bell Canada sold off most of its Nortel stake in 2000.

Shortly after, the tech bubble burst and Nortel’s shares collapsed with it. An accounting scandal dispelled early signs of recovery. A financial crisis in 2008 dimmed hopes for a turnaround under CEO Mike Zafirovski.

Future post: What does Nortel’s history say about its chances for survival and how more growth stories like Nortel (during the 1970s-1990s era) might be created?