Greg Enright: The macro effects of Nortel

The job cuts and executive-level chess game may not be over for Nortel Networks just yet, but it’s becoming clear that when it is, the company will be a shadow of its former self – if it’s around at all.

A slashing of approximately half of its work force down to an expected total of 45,000 by the end of this year and the resignation of embattled CEO John Roth have left many analysts wondering when, not if, Nortel will be snapped up by other networking giants who have not fared quite as bad during the Year of The Downturn, such as Cisco or Ericsson.

Whether the telecom equipment maker does make it through this, the most tumultuous era in its history, in one piece, the negative effects of its demise or its new, humbler identity will be felt in more areas than merely Nortel’s Brampton, Ont. headquarters.

First, consider what long-term influence Nortel’s decline could have on the way Canada is perceived by the global community as a technology player. Having one of the world’s largest networking and telecommunications companies located in our back yard didn’t hurt Canada’s reputation on the world stage. Canadian hi-tech has basically been synonymous with Nortel for the last few years. It put Brampton on the map the way Microsoft put Redmond, Wash. on the map.

If such a marquee player disappears, will there be a similar company that will step in and play the role of world-renowned technology vendor, one which represents Canada’s potential as a nation on the cutting edge of IT? Right now, of course, there are no other Canadian tech firms that would be capable of filling that role. Nortel enjoyed a huge market share of an important worldwide market for years; we’d have to wait a long time to see a Canadian company grab a similar slice of a similarly important pie.

What effect would a more negative view of Canada on the part of foreign investors have on this country? Let’s put it this way: Jean Chretien’s efforts to woo foreign investment on his many trade missions were never hindered by his ability to point to Nortel’s shining star as an example of what Canada could do. The spectre of a defeated and disgraced Nortel could very well make foreigner’s decision to invest in Canada a tougher one. Less money flowing into the country can only impede our growth towards being the kind of leading IT community that Chretien has so often said he wants us to be.

It’s also worth considering how confident Canadians themselves will be in sinking their money into tech stocks in the wake of Nortel’s decline. After the large sums lost in riding its downward spiral, it’s no wonder there’s trepidation at the thought of going down the tech investment path again.

These potential negative fallouts, if they do arise, should only affect the growth of Canadian IT in the short term. If Canada’s track record is any indication, it will be hard to keep the country’s business and technological minds down for long.

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Jim Love, Chief Content Officer, IT World Canada

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