Monday, June 22, 2009

Wait! You Forgot To Bail Out Nortel!

Yeah, if there's a company that could really use some bailout money - it's Nortel. Heck, they hadn't even recovered from the hi-tech bubble burst and the subsequent recession by the time the company was hit by the global financial crisis last fall... Luckily for us, most of their downsizing and layoffs took place back in 2001-02. Otherwise we'd have seen the government buying out their shares at $120 a piece (actually, if we factor in the reverse split, it would be $1200) as part of their "stimulus" effort.

Nortel has been in a nosedive since 2000, but its directors still believe they deserve another chance:
Mike Zafirovski, Nortel's CEO, told the parliamentary committee the he had heavily invested in Nortel stock last year because he was sure that the fallen technology giant was on track to recover its status.

Zafirovski said that several of the company's directors, him included, invested their personal money in Nortel stock last year.

He said his family invested about $500,000 in the company's stock, including some money that had been earmarked for his three sons' college tuitions, because he was certain Nortel was on the rebound.
Hmm... How long they've been saying that for? 7 years? 8? 9? Sure, they'll rebound. Yeah, I've seen their stock rebounding from $122 in late August of 2000 to less than $10 just a year later. The only way they could bring the stock price back into the double-digits was through a "reverse split" - when 10 old shares were replaced with 1 new, worth 10 times as much. Now, even those shares worth pennies. I believe that's enough. If Nortel ends up out of business - so be it; I bet, what's left of the company just can't do any worse under different owners.

So I applaud the government's decision not to include Nortel in the bailout package. Finally - a common sense decision for a change. I'd rather see that money going towards buying new streetcars for Toronto - after all that's something that's going to last 30 years, not to mention that it will be serving a city of 3 million...

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