Canada’s Most Valuable Company – RIP

My previous post discusses some of the reasons the best and brightest are leaving big companies to work in startups. One factor is that the employees in the world’s greatest software, chip and networking companies haven’t earned any significant wealth from options for over a decade. The result is that many of the most valuable employees have been choosing to work in startups where there is a better opportunity to do innovative work and make possibly make some significant equity gains.

The company examples in the previous article are some of the world’s very best, big companies – Microsoft, Intel and Cisco. This post continues on the same topic but looks at what happened to Canada’s most valuable company – Nortel.

100 Year Old Tech Company

Nortel was founded in 1882. In recent times, the company manufactured telecommunications and computer network equipment. Their customers were primarily telephone, mobile phone and cable TV companies.

In 2000, Nortel employed 94,500 people and had a market capitalization of $398 billion. Its value made up one-third of the entire TSX index – making it Canada’s most valuable company.

Most Valuable in the Country to Bankrupt in Under a Decade

By 2009 (less than 10 years later) Nortel was bankrupt. The bankruptcy trustee tried to find a buyer for the entire company but there were never any serious offers. Instead parts of Nortel were sold to the highest bidders.

How can this happen? How can a company that’s over 100 years old, employing close to 100,000 people, go from being the most valuable in our country to being bankrupt in less than a decade?

In my opinion, a large part of the reason is that the company was too big. Being a big company in the 21st century seems to have a similar outlook to being a big dinosaur 50,000 years ago. (That’s a good topic for another post or possibly a book. Perhaps a 21st-century version of Good to Great – but titled something like Big to Gone.)

Big Companies can be Risky Places to Work

When I graduated from university, many of my classmates in electrical and computer engineering went to work at Nortel.

I was determined to work in a startup after graduation. The majority of my classmates thought that was a risky plan. A good number of them wanted to work in a big company because they wanted stability and security.

Things didn’t work out as my classmates expected. It’s not just that almost all of the people who worked for Canada’s most valuable company lost their jobs. There was an even worse shock for those who worked for decades at Nortel, believing the contributions they were making to the company’s pension fund would support them during retirement.

There have been reports of $100 million missing from the employee’s Health and Welfare Trust and articles about billion dollar pension shortfalls. Even after Nortel’s assets were sold, pensioners got less than they had been promised and many actually had to pay back money they had already received.

This is a common story for people who thought they had retired after years in large organizations. Many other big companies have gone bankrupt recently. After the bankruptcy accounting was finalized, many retirees received terrible shocks.

Startups for Stability and Opportunity

The world sure has changed. When I speak to young graduates today, I rarely hear anyone talking about working in a big company. They want the benefits of working in a younger company – an organization of a size more compatible with our new hyper-connected, hyper-competitive world. Somewhere they can do innovative work and where their business destiny, and future economic prosperity, is in their own hands and those of their close work friends.

These young grads also appreciate that working in a vibrant, younger company gives them the best chance to make some exciting money on their shares or options.