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ACT I (1890s-1950s)

Bell and beginnings

Spun off from Bell Telephone in 1895, the Northern Electric and Manufacturing Co. is established to handle phone production. Over the years, it expands its product line to include a range of household items, from kettles to toasters to washing machines.

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Marc Lavoie(product manager): My dad worked at Northern, as it was called then, starting back in the forties after the war. We had a Northern Electric fridge, a Northern Electric stove, a Northern Electric TV, all bought from the company store where you could get anything you needed. Once, he came home with a few old crank telephones, authentic Northern products from the 1890s, which he saved from being thrown in the dumpster; I still have two of them. When I eventually got a job offer myself from Northern, he told me, "Don't even think about it. Just say yes."

Andy Moreau(installer): I started in 1955 for Northern Electric as a trainee. Back then, Northern wasn't just making telecommunications equipment; it had been making things like radios called Baby Champs. Know what I made when I started? Seventy-one cents an hour, which at the time was one of the best salaries in Quebec. Any time the government had a grant for something, I wasn't eligible, because I was making too much money.

Frank Mills(engineer/manager): Northern Electric used to be in the business of manufacturing products developed by Western Electric in the States. All they were doing was changing the title, taking out "Western Electric" and putting in "Northern Electric." Then the Americans asked Western to drop all associations with foreign companies [an anti-trust suit in the United States forced Western Electric to sell its stake in Northern Electric to Bell Canada] which included poor old Northern. That put Northern's feet to the flames, to figure out what to do after being cut off. That's when the R&D division was formed.

Gordon Thompson (engineer): I was hired in 1947 in the electronics department, and when we were left without any design authority coming from the States, we had to fly on our own. Wow! What an opportunity for a hotshot engineer right out of university. I thought I knew it all, and now I had the chance to prove it. It was an incredible period to be designing equipment for TV and radio stations, which were expanding so fast at the time. With Western Electric dropping out, we had to stand up, take the bat and hit the ball out of the stadium-which we managed to do.

AM: With Northern, you had two families. You had your co-workers during the week, wherever you happened to be, and then you had your other family when you came home. You had to stick together. I remember living in the Arctic, installing an early-warning radar system in the 1950s at the height of the Cold War. Living in a tent in minus-50-degree weather for four years, in places like Frobisher Bay and Cape Dyer, is not everyone's cup of tea.

Ken Lyons (project manager): Northern's products were almost too good. People would buy them, and then never have any problems. I help manage a telecommunications museum, and one of the oldest pieces we have is an old Northern Electric phone from 1910, with a hand crank on the side. You can still make calls on it. Even the cord is in good shape. The culture of the company was to make products that were designed properly, that worked properly, and that lasted. I go to the museum every Wednesday, to remember what Nortel used to be.

ACT II (1960s-1970s)

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Northern comes into its own

Countless countries come to Northern to establish their telecom systems. Its R&D team takes shape, and starts making advances that will become industry standard-particularly once the subsidiary Bell Northern Research is established in 1971. In foreseeing a digital world before almost any other company, Northern comes to dominate the field.

Gilles Dumouchel(installer): I still remember when I started: Dec. 13, 1965. It was a great day, and you couldn't ask for a better company. We were always well paid and well trained, right up to when I retired in 2000, when it was like the Roman Empire. At the beginning I was paid $1.65 an hour. I had three boys, and with my weekly paycheque we were able to pay the rent, buy groceries and order chicken on Friday nights.

AM: I worked 35 years in installation, and travelled all over the world. Greece, Turkey, South America, the South Seas: If you can direct-dial anywhere in the world today, it's probably because of Nortel. We'd go to these countries that had primitive telecommunications systems, where the transition to our equipment was so great it wasn't even funny. Some of them didn't even have a dial tone.

FM: During the early sixties, we didn't know what the hell we were doing, to be quite honest. We were going off in all directions. When I joined, there were less than 200 employees in R&D, trying to extend what we knew from Western Electric products and create new stuff. But we didn't have any focus, and so through the sixties our achievements were relatively minor. It took us about a decade to figure things out.

John Tyson(vice-president, advanced technology and corporate design): I was the first industrial designer ever hired by the corporation, believe it or not. We had a whopping annual budget of $13.5 million, and my first project was to design the first Canadian telephone, called the Contempra. It was a worldwide success, featured in New York's Museum of Modern Art and the Canadian Museum of Civilization. I don't think there's a person in Canada who hasn't used one of my products. As a designer, the culture was wonderful. You knew that what you thought mattered, and if you needed help, you asked for it. The one unforgivable sin was not speaking up.

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Rudolph Kriegler(vice-president of technology):I arrived at Nortel in 1966 and asked my new boss, "What would you like me to do?" He said, "Figure it out for yourself." That was frightening and pleasing at the same time. He did say that it would be nice if we could do switching electronically rather than by crossbars [the electromechanical, matrix-like switching method that was standard for decades] That led me to my work in silicon. I discovered how to process silicon in such a way that contaminants, which caused problems in transistors, could be eliminated. That turned out to be the basis of many of my patents, and for a while it became the industry standard. In Canada, at that time, there was hardly any research. That breakthrough provided the recognition that Nortel was a place where good stuff could be done. After that, they let me do whatever I wanted.

Anne Clark-Stewart(head of business planning and human resources): It was an absolutely amazing environment. When I first started with the company, 18 years old and straight out of high school, the only piece of mechanical equipment I'd ever operated was my sewing machine. And there I was manufacturing semiconductor components on the assembly line. Eventually I became the only female reporting to a president, one of only six females out of 1,500 executives.

JT: Don Chisholm was my mentor, as Bell Northern Research's first president, and one of the three or four brightest people I ever worked with. He not only had a brilliant mind, he had a management style analogous to Queen Elizabeth's walkabouts. He'd stroll around the office, wearing a cardigan sweater as old as he was. He had an uncanny ability to ask the question that launched a thousand ships, causing a rethink and pulling passion out of people.

Edith Cadzow(executive assistant): When Don Chisholm arrived, he took his jacket off and put his feet up on the coffee table, and you knew things were going to be different. I wanted to get him new furniture for his office because it was falling apart, right down to the foam cushions. He said, "I don't want any new furniture until my people get more space." That's the sort of guy he was. If someone phoned with urgent business, I had to go out into the labs to track him down, because everyone knew that's where he'd be. He'd be looking at what the young engineers were doing, making suggestions, helping them in the right direction. Often they didn't even know he was the president; they just thought he was some guy walking around.

Bob Ferchat(president): Bell was a very tough customer in those days. They'd been our parent company, so they were very demanding. They used to issue hundreds of complaints every day about our products. As a result, we were forced to make them better and better. That was the secret to Northern's success. When we started selling to AT&T, which at the time was the biggest customer in North America, they used to give us impossible specifications to meet. When we did it, they'd say, "Oh my God, they really know what they're doing."

RK: The main event of my life at Nortel was when I was head of the advanced technology laboratory in the late seventies, and I visited Japan, where Nortel had ordered some lasers from NEC for its fibre-optics program. I came away convinced that they had major problems, and that we wouldn't get the lasers. I told a vice-president that, and I was practically thrown out of the room for daring to question the judgment of important people. So I decided to set aside $400,000 to make those devices in-house, but I kept it quiet. This was a decision my entire career rested on, because if I didn't succeed, I'd be out. Two days before the Japanese lasers were due, the project co-ordinator called me and said, "We're not getting the any chance, do you have some?" Within days we had them ready to be released. We were heroes. And with that daring decision, the research labs really started growing.

ACT III (1980s-1990s)

A Canadian darling goes global

The telecom industry in the U.S. is deregulated, producing a host of customers looking to expand their networks. Advances in fields like fibre-optic networks put Nortel at the vanguard of key new technologies. The Internet boom of the late nineties sends the company-renamed Nortel Networks in 1999-into overdrive.

AC-S: We didn't have any trouble attracting talent from anywhere in the world. At one point, we were recruiting 75% of the PhDs in Canada, 50% of the Masters grads, 40% of the engineering and computer-science grads. We didn't have to advertise: We'd get thousands of resumés every year.

FM: Digital technology was the turning point for us. Things really began to take off, and so many things grew out of that. It was so exciting working at Nortel in those days. We felt like we were doing something that would make a mark on the country, and on the world. In the sixties, seventies and eighties, idealism was the fuel that made it all work.

BF: When I joined the company, everyone was laughing at the fact that we were planning to produce digital products. In fact, I remember AT&T and Bell Labs, which were powerhouses in those days, saying that it would never work. But we stuck with it. The big problem was producing a single computer chip programmed to change analog to digital and back; no one had been able to do that, and it was key to the whole business. The accepted wisdom was that it was difficult, expensive and would never work. But we did it, putting it out into a Bell switch in Ottawa on O'Connor Street.

FM: When I look back, we kind of fell into opportunities instead of mastering our way into them. We were nurtured by Bell, for instance, raised almost like a child. Without that, Nortel would never have gotten out of the blocks. Then the U.S. government set the stage for opportunity when they broke up AT&T and created the Baby Bells. By that time, we already had digital switching, which had evolved in our sheltered culture, and they snapped it up. A lot of our good decisions were forced on Nortel by circumstance, and a lot was achieved through luck.

Paul Hanrieder(engineer): Out of university, everyone was vying to get the best job, and so going to work for Nortel back in 1994, when it was really starting to take off, was a major accomplishment. It was something you could tell your family with pride: "I'm working at Nortel." It was almost surreal going through the doors, like you were entering a new culture and not just a job. People worked 14 hours a day, giving up their personal lives, going through divorces because they were so enthused with the company. I can still feel it now; it was ingrained in you, like a mission or a calling. It took over your life.

Paula Klein(software development director): In the early nineties, I joined the fledgling optical networks division, doing things that no other company could do. We were 18 months ahead of the nearest competition, and we knew what we were doing was really groundbreaking. There was a sense of being invincible. I remember going to a huge party that was thrown to celebrate reaching $1 billion in sales.

ML: When I joined in 1982, there were around 25,000 people, and by the late nineties Nortel had grown to almost 100,000. It all happened tremendously fast; it was hard to believe. Of course I watched the stock, like everyone else: It was my retirement plan, and I thought I was going to be a multimillionaire. We used to have an employee purchase plan for company stock, and everyone would compete to see how much they could invest.

KL: The stock price was ramping up every day, every hour. There was a sense of elation: "It's up to this, it's up to that." In my group, one guy checked his investments every blooming hour. The market was going crazy, and just about every financial reporter was saying everything was great. Then I saw one analyst say that Nortel stock was way overvalued, and I sat back and said, "You know, he's right." At that moment, I exercised half my options. A lot of people would be millionaires today if they had dumped their shares then.

PH: At the height of the boom, one of our directors in Calgary bought a Dodge Viper, worth about $90,000, purely from his stock-option income. A lot of people were able to pay off their houses in cash. I suddenly had a six-figure Nortel investment. Unfortunately I stuck with it, and rode it all the way into the toilet. My broker told me to do otherwise, but I was young and didn't listen.

ACT IV (2000s)

The demise of a legend

Nortel gains its independence after BCE CEO Jean Monty spins off the company. But the tech collapse hits it hard.

A seemingly endless series of layoffs begins, along with accounting scandals. CEO s like John Roth, Frank Dunn and Mike Zafirovski try to right the ship. A bankruptcy filing and an asset auction leaves little of the Nortel that was.

RK: In my opinion, the downfall started years ago, when Bell Northern Research was folded into Nortel [as part of a corporate restructuring]in 1997. I left in 1998, and while I didn't have to oversee the disassembly, I heard stories one day after the next about how terrible it was, to let things go that had been built up over so many years. The company also went on a buying binge and, starting in the late nineties, bought several small [Internet technology]companies that couldn't be integrated into Nortel, and were of practically no use. On top of that, the company sold to customers who didn't have any money. The collapse had to happen, because if the central brain of the company was being dissected, that alone would have taken Nortel down.

PH: One big bump in the road came in late 1999, after Nortel bought Bay Networks. At the enterprise division where I worked, we had the Norstar phone system for offices, with annual sales in the $800-million range. It was projected to go to a billion and a half, and was No. 1 in markets through North America and Europe, a truly world-leading product. Then they decided that the enterprise division would be headed by executives from Bay, and in January, 2000, they whacked much of our product development team. It sent the Norstar line into a tailspin. Only two of us out of 40 were kept on, to basically sweep the floors and lock the doors. Then they realized their mistake and asked us to rebuild the team from scratch.

John Roth (CEO): The company just didn't move fast enough. I know they spent a lot of money on R&D, but the product announcements were pretty slim. In hindsight, we should have focused more on the booming Internet sector. The change in the industry was one of the things that was starting while I was there. We have iPhones, that's all Web. Everyone's talking about MP3s and downloading music. That's all Web. I think maybe the company didn't push hard enough on that agenda. The R&D group of people are a tremendous asset-there's a lot of talent there. But it's a little bit like watching General Motors. Did they develop current products, or did they develop products that people don't want?

BF: The creative bookkeeping started because executives demanded that every quarter had to be better than the previous quarter: Make it so. The pressure was so great that people started to cheat on the books. If you cheat once, then you'll cheat a little more, and a little more, and finally the whole thing becomes a house of cards. Once you start, you get into the habit, and you always want that good feeling. It becomes like heroin.

PK: I've lost count of how many people I had to lay off. I remember one terrible day, when we were shutting down an entire research lab in Vancouver. I spent the whole afternoon sitting in the office of the VP I worked for, with three others, just signing all the termination paperwork. Almost a thousand people, at that one location alone. The early days of layoffs were devastating because it was so unprecedented; Nortel just didn't do that. But at least, in the beginning, it was fairly easy to find lower performers to lay off. As the years went by, we were laying off top-notch people, individuals who were just amazingly talented. We were really down to the bare bones.

PH: At one time, we had 15 different buildings running in Calgary. As time went on, manufacturing started moving out, to Mexico, to India, to China. My own division ended up being moved to Beijing, and we basically had one year to send every bit of knowledge about our engineering products to a team in China. How do you transfer years' worth of experience like that? God only knows how much knowledge has been lost.

AM: It was the biggest Canadian company, and the best. You can't have that go down the tubes, without somebody doing something very wrong. And it wasn't the worker. Every damn installer participated in the growth of this company, not the presidents. The executives didn't bolt anything down or make it work-the installers did. Now our pensions are being diminished or polished off, and we paid for them. When I used to get a five-cent raise, three cents would go to my pension. What's transpiring now is robbery; somebody's stealing from me. It's a strong word, but I have no shame in saying it.

BF: It's like watching your brother or sister die. The promise was there, the need was there, the market was there, and over the past decade they've blown it in spades. The people who get hurt in these things are the innocent bystanders, those who are just working at their jobs and doing what they're told. The company was built on quality and customer service, which are the most fragile things ever. We became ordinary, and that's extremely sad.

JT:Shortly after Nortel filed for bankruptcy protection, a motley crew of us went public with our efforts to save the company: [former executive VP]Ian Craig, [former VP]David Mann, Bob Ferchat. These people represented the best that Nortel ever stood for. There was no prospect of financial gain whatsoever; we just wanted to help find financing to save Nortel, and for the federal government to intervene on behalf of pensioners and displaced employees. We all shared one common passion, for Nortel and its people and its culture, and believed that it was in Canada's national interest to save the company. Now, though, the house of cards has fallen. It looks like it's all over.



The Nortel saga


Bell Telephone Co. of Canada incorporates its autonomous manufacturing division, Northern Electric and Manufacturing Co.


Northern Electric merges with Imperial Wire and Cable Co. to create Northern Electric Co. Ltd. Bell Canada owns 50%, and U.S.-based Western Electric owns 44%.


Northern Electric produces Canada's first vacuum tube, in February, and within three months its first radio receiver.


The company produces and installs the first moving-picture sound system in Canada in Montreal's Palace Theatre.


Factories are dedicated to the war effort, building aviation and tank radios, and fuses for anti-aircraft guns.


Returning to consumer electronic products, Northern Electric introduces the Baby Champ table radio and sells 136,000 for $25 each.


AT&T's Western Electric terminates its relationship with Northern and sells its holdings to Bell Canada following a consent decree by the U.S. Justice Department.


Northern establishes its independent research and development division, Northern Electric Research Laboratories, in Ottawa.


The laboratories are renamed Bell Northern Research and are jointly owned by Bell Canada and Northern.


The company plans a bold strategy to manufacture a new generation of fully digital telephone switches.


A groundbreaking line of digital telecommunications switches is unveiled at Disney World. To reflect the new vision, the company name is changed to Northern Telecom.


BCE Inc. is created; the conglomerate assumes ownership of Bell Canada's stake in Northern Telecom.


Northern Telecom's digital gamble transforms it into a telecommunications giant with $5 billion in sales, up from $1.7 billion at the beginning of the decade.


CEO John Roth's audacious "right-angle" turn from telecommunications to the Internet market leads to the $9.1-billion purchase of Bay Networks, a California-based leader in data networking equipment.


Northern Telecom becomes Nortel Networks Corp.


The CEO of BCE, Jean Monty, distributes 94% of its Nortel Networks stake to shareholders, making Nortel Networks a totally independent company. Share price hits a high of $124.50 on July 26.


A slowing U.S. economy and disappointing results send shares plunging to under $8. Roth announces a series of job cuts that total almost 50,000 by year's end.


Accounting scandals swirl around the company (which had reported a return to profitability)as it announces a "comprehensive review" of assets and liabilities.


Nortel acknowledges restated revenues were part of management fraud.


Nortel files for bankruptcy protection on Jan. 14.

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