25 ms·

Did a Chinese Hack Kill Nortel?

289 points by remir 6y ago

sandworm101 6y ago
Research In Motion > Nortel. Nortel built bad routers. RIM created blackberries, the smartphones before smartphones were a thing.
- HenryKissinger 6y ago
  Obama kept a BlackBerry as his personal phone for most of his presidency. https://money.cnn.com/2014/05/22/technology/security/nsa-obama-blackberry/ https://money.cnn.com/2014/05/22/technology/security/nsa-oba...
- blinding-streak 6y ago
  Not going to argue your point about products, but from a financial standpoint, RIMM/Blackberry's peak market cap was about $81 billion in 2008. Nortel's peak was $283 billion in 2000. Nortel was huge. Of course, the market was in a huge bubble at the time.
  - adventured 6y ago
    Nortel also got a bit larger than RIM by sales. Nortel's peak was $22.2 billion in fiscal year 2000, with $1.7b in operating income. RIM peaked at $19.9 billion in sales in 2011. Amazingly they tripled in size from $6b in sales in 2008, in just three years. Then lost 85% of their sales in another four years after that.
    - magicnubs 6y ago
      > Amazingly they tripled in size from $6b in sales in 2008, in just three years. Then lost 85% of their sales in another four years after that. I assume this is due to the advent of touchscreen phones. Around when people were getting used to the idea that mobile phones could be used for more than just making calls, touchscreens could be buggy/laggy and there wasn't haptic feedback or any sort of attempt at recreating the physical sensation of typing. RIM doubled down on physical keyboards, and Blackberrys had great ones (I could type much faster on my Blackberry Bold than on an iPhone at the time) and they already had productivity/utility apps and such since they were really PDAs. But the gradually improving touchscreen typing experience, combined with the increased utility of being able to put the keyboard away when you didn't need it, spelled the death of physical keyboard phones not long after.
  - sandworm101 6y ago
    Market cap is a measurement of how other people, stockholders, think of your company. It means little on the ground. A stock can double, or half, overnight. That doesn't mean the company is suddenly double or half its former size.
    - smabie 6y ago
      Sure, but what's a better metric of the size of a company? Employees?
      - hylaride 6y ago
        Gross revenue and/or profit.
        heisbsissi 6y ago
        The way I think companies should be valued is superior to your proposal.
- hylaride 6y ago
  Did you even read the article? Nortel built a lot of cellular networks and owned a huge chunk if IP for it (that was surprisingly valuable during the bankruptcy auctions). They also had quite the large long-haul fiber optic install base (which they bet the farm on, that quickly became commodified, which is really what bankrupted them). They also had one of the first commercially available DSL modems. Sure, they built “bad” edge routers and switches (they came out of the telco industry, so focused too much on managed services for them, which caused headaches for end-customers), but the company was an engineering powerhouse ruined by hubristic businessmen.
  - sandworm101 6y ago
    Oh, I read it. I also lived with Nortel gear during this timeframe. They were not great at much of anything. They were more often the only game in town, and they knew it. Canadian schools and government agencies bought their gear because it was canadian not because it was any good. Those touchscreen tablet controller things? Does anyone remember how bad touchscreens were in those days? Give me a blackberry with a mechanical keyboard. >> In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. That was the attitude of people running nortel at the time. Some consider it the canadian enron: the unicorn that ate itself.
    - lapnitnelav 6y ago
      That fancy attire really doesn't look that great : http://www.geocities.ws/cityofottawainfo/celeb_m.htm http://www.geocities.ws/cityofottawainfo/celeb_m.htm Proof that you can't buy taste. For everything else, obviously there's Mastercard.
      - sandworm101 6y ago
        And the cost shows how they wasted money. Leather bodysuits are not 1,000,000$ in any currency. And that couldn't possibly have been solid gold. It would be too soft. They paid 1,000,000$ for an off-the-rack fetish outfit and some a gold-plated hand-hammered steel sheet. A live-in designer? Nobody since 18th century royalty has needed a live-in fashion designer.
Hongwei 6y ago
My parents lost a small fortune in 2001 riding the tech crash down (Nortel was a good chunk of that). I've been trying to explain to them (1st gen Chinese immigrants) for the past three years that Nortel was killed partly by focused Chinese spying and IP-theft by Huawei. CSIS has know about this for years. They (my parents) just wouldn't believe it until I showed them this article. Their former university classmates (who also immigrated to Canada) are likely part of the 20 people that jumped ship to Huawei and implicitly may have leaked data before then. I'm glad this article got through to them, that it isn't just politics and Huawei & the CCP really did go offside.
- zyang 6y ago
  I interned at Nortel in early 2000's right before it all went down. I can tell you the engineering culture was rotten within. No-one was doing anything useful for years. Many orgs were built around milking the ancient layer 2 passport switch. The layer 3 router meant to compete with Cisco was 3 years late and only sold a few dozen units. There was accounting fraud going on at the highest level - delivery trucks circles around to pad the books. I'm sure the hack happened. I just don't think it would had made any material impact - there was simply not much to steal ¯\_(ツ)_/¯
  - freshhawk 6y ago
    I was also there as an intern around the same time. It was an insane place to get my first "office job" experience. Entire buildings of hundreds of people all working on powerpoint reports about potential training ideas for future projects to improve the production of the powerpoint presentations made to summarize the reports on internal "sales" numbers that are then filed without anyone reading them because everyone knew they were too fudged to matter and the internal competition thing was a smokescreen for fraud anyway. Who was embezzling what this week were conversations coop students got to overhear. I was there shortly before the whole thing collapsed and right before it did, in my department, there was a lot of boat shopping combined with clock watching as they waited for options to vest before the whole thing fell apart (everyone knew it would soon).
blinding-streak 6y ago
Nortel Market Cap Peak per year, in $USD Billions: 1997: $16 1998: $22 1999: $105 2000: $283 2001: $56 2002: $26 The dot com bubble produced insane valuations around the turn of the century. The run-up to the collapse was breathtaking.
- PakG1 6y ago
  Dang, so someone who invested in 1997 would have still made money in 2002, though they would have a lot of psychological pain from the ride down from the peak.
  - 11thEarlOfMar 6y ago
    Lol, that's me and AMZN. Bought at (split adjusted) $1.50 in 1997, rode it up to $86 in 1999, held all the way down to $6. Finally sold at about $20, still thinking I was brilliant. I have to laugh about it cuz I can't bear the alternative.
    - Ghjklov 6y ago
      It's alright, no matter how bad that feels, it will never be as bad as all of us who missed the BTC boat when it was a little baby a few years ago. People spending it frivolously and treating it like it was worthless toy money since it was pretty easy to get. Then look at it now...
      - Pxtl 6y ago
        I had a quarter Bitcoin and spent it all on a Humble Bundle.
      - jrockway 6y ago
        I have a friend who got into Bitcoin early. He had almost $300,000 when MtGox got hacked and he lost everything. So it wasn't all sunshine and roses.
      - deleted 6y ago
        [deleted]
phire 6y ago
Julian Assange originally became famous after getting caught hacking Nortel back in the early 90s. I guess Nortel didn't learn from that lesson and secure their network.
- TedDoesntTalk 6y ago
  Do you have a source for this? Curious to read about it.
  - phire 6y ago
    Julian Assange helped research a great book called "Underground: Tales of Hacking, Madness and Obsession on the Electronic Frontier" Documents the antics (and downfalls) of various hackers from the late 80s and early 90s, most of them Australian. Assange (aka Mendax) is one of the hackers the book follows. It's out of print these days, but the author, Suelette Dreyfus made the book available online back in 2001 - http://underground-book.net/ http://underground-book.net/
- yc12340 6y ago
  Wait, so Nortel was killed by Chinese AND Assange?!
api 6y ago
There's a lot here beyond just the hacking. Huawei was able to grow so insanely fast because they had access to a blank check and endless credit from the Chinese government. Nortel and others meanwhile had to finance things themselves. Private companies cannot compete with governments. Governments, especially those with sovereign currencies, can do things that private companies simply cannot do and have pockets far deeper than any private company can ever hope to have. That's why China has won the global game. Everyone else is fielding their star players, sure, but China's star players are all on 'roids in the form of endless government backed credit and many other forms of state backing. To see an American example, look at American dominance of aerospace. America has stealth fighters, probably a ton of secret stuff responsible for a good number of UFO reports, and rockets that land themselves because the US government backs promising aerospace companies generously. This has been the case since WWII. Lockheed Skunk Works is almost 100% government funded. SpaceX isn't entirely government funded but they've certainly benefited from NASA funding, NASA R&D handholding, and in the beginning got a transfer of IP related to NASA's previous research into low-cost rocket engines. Without all NASA's help I doubt they'd be where they are now. China is doing this everywhere with everything.
- TedDoesntTalk 6y ago
  This is why Boeing should be bailed out (but with prison time and fines that impoverish for anyone involved in the cover up)
  - valuearb 6y ago
    Boeing should be forced into Chapter 11 so new ownership with clean hands can fix them. That’s the whole reason we have a bankruptcy code.
    - vaxman 6y ago
      “You can’t handle the truth!” Second favorite Nicholson quote, but so true. Seriously, Boeing will internally deal with what happened. Need proof? Ever wonder what happened to say, Rockwell International (most famous for Apollo and Space Shuttle)? Yeah, you should’a bought Boeing at $30. ((Doh!))
sradman 6y ago
> “This is plain and simple: Economic espionage did in Nortel,” Shields says. “And all you have to do is look at what entity in the world took over No. 1 and how quickly they did it.” The definitive book on the collapse of Nortel is 100 Days: The Rush to Judgement that Killed Nortel by James Bagnall, a journalist for the Ottawa Citizen. Occam’s razor applies here: the well documented fraud and bankruptcy at Worldcom and Global Crossing crushed Nortel. Overzealous regulators delivered the coup de grâce.
- kevin_nisbet 6y ago
  I just finished reading that one (thanks for the recommendation in another post), and yea, it provides an excellent perspective. That book lays out to me a much more compelling case that a leap to conclusions in the early 2000's that some fraud must exist killed nortel. Based on reading that book it's probably fairer to say the Americans killed nortel than the Chinese did. Although like anything else, a simplified explanation when there are lots of contributing factors at play likely doesn't mean much. The posted article though about Huawei killing nortel by hacking them appears to be a reach (can't say it doesn't contribute of course). As I recall working in the industry around the time Telus and Bell switched to UMTS and towards LTE, Nortel wasn't even in the running. I think they had already sold off their LTE technology and were holding onto some CDMA evolution. I don't have precise memory of how this all lined up though, and didn't really work on the access network side (which is where Huawei is used, so most of my knowledge towards Huawei is second hand). I only did an eval with Huawei once. While I don't have any insight into the china development bank offering low interest loans, and I didn't see it come up at all in that book, I've worked with a number of people who used to be contracted out by nortel to build networks in other countries. And nortel was using it's own money to fund networks in countries unlikely to repay the money for the equipment (Haiti probably stands out with the wildest stories). Those were some of the internal war stories about the financial troubles, although I'm sure there was lots. I don't think it's safe to say that Huawei hasn't benefited from IP theft, which may include theft from Nortel, and possibly other factors, that have allowed them to skyrocket in profitability and sales. The whole thing with Huawei / Cisco routers I believe is pretty well documented. I just don't agree with the posted articles premise, that China or Huawei are to blame or fully responsible for Nortels collapse.
alynn 6y ago
Have any other sources corroborated this story? Bloomberg News lost a ton of credibility with me after their “The Big Hack” cover story [1], claiming Apple and Amazon had been hacked by chips secretly added to their servers in the factory. The picture of the chip on the cover was purely a work of imagination. To my knowledge, no supporting evidence was ever produced, nor were any of the widespread criticisms of the story ever addressed [2], [3]. To push another “China secretly hacked the west” story while also invoking Betteridge's Law leaves me highly skeptical. [1]: https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies https://www.bloomberg.com/news/features/2018-10-04/the-big-h... [2]: https://en.wikipedia.org/wiki/Bloomberg_Businessweek#%22The_Big_Hack%22 https://en.wikipedia.org/wiki/Bloomberg_Businessweek#%22The_... [3]: https://www.washingtonpost.com/opinions/2019/09/17/bloomberg-reporter-challenged-big-hack-story-gets-promoted/ https://www.washingtonpost.com/opinions/2019/09/17/bloomberg...
- smabie 6y ago
  There are direct on the record quotes from different people with knowledge about it in this article. You could pretty easily interview or email them and find out.
  - throwaway423342 6y ago
    who exactly?
- kevin_nisbet 6y ago
  I've heard about the nortel hack from other sources, with the link to china being mentioned many times I've seen it. For example, here's some CBC reporting form 2012 that at least somewhat outside the current climate (https://www.cbc.ca/news/business/nortel-collapse-linked-to-chinese-hackers-1.1260591 https://www.cbc.ca/news/business/nortel-collapse-linked-to-c...). The big problem I have with the Bloomberg article, is it seems to really be trying to stretch the underlying information to draw the conclusion that Chinese Government or Chinese Hackers or Huawei are solely or the most responsible for the fall of Nortel. Did Huawei benefit and get it's start from stolen IP is likely a compelling story to explore, with lots of compelling underlying facts. Does Huawei or China still do this, is probably another good question. To try and link these questions to the fall of nortel, while glossing over other massive contributors to nortel's fall leaves me skeptical of the narrative also. It's disappointing, because I do believe there is plenty of compelling evidence around about Chinese IP theft, but reporting like this allows lots of noise to be mixed in, and for consumers of the information to reasonably be sceptical.
ycombonator 6y ago
West is littered with graveyards of companies hollowed out by Chinese Industrial Espionage. ASMC comes to mind. https://www.straitstimes.com/world/united-states/chinese-wind-turbine-maker-found-guilty-of-stealing-us-trade-secrets https://www.straitstimes.com/world/united-states/chinese-win...
- TedDoesntTalk 6y ago
  And the fines imposed, if they ever get collected, are irrelevant... the damage is done. In the case of the IBM's Xu who got 5 years prison time, so what? He's a fall guy. The damage is done.
chvid 6y ago
The telecommunications industry goes from a massive bubble in year 2000 to an extreme cost focus just one or two years later. Sending tens of thousands of engineers into unemployment and cutting research and development to the bone. Talk to anyone who had a job in the sector back then, they will you this. All those engineers eventualy were reemployed in other industries such as software and that helped creating the boom that came there. But it also created an opening for the Chinese electronics industry to move into that area as they were cheap and willing to invest unlike us in the west.
- TedDoesntTalk 6y ago
  > willing to invest unlike us in the west The article says Huawei was given $10 billion or more in free or almost free loans.
  - throwaway423342 6y ago
    point being?
  - chvid 6y ago
    This is my point exactly. They were willing to invest where we were no longer willing. You can say that it is state capitalism and not free competition. But let there be no doubt; had there been free competition now and not a massive boycot led by the US government against Huawei, then Huawei would have been absolutely dominant.
valuearb 6y ago
While this article seems compelling, it’s also from Bloomberg Tech. A year and a half ago Bloomberg Tech wrote “the Big Hack”, which seems to have been made up out of whole cloth by a small group of sources that duped Bloomberg. Not only was Bloomberg duped, but they’ve never printed a correction, retraction, or clarification. I’d much prefer this story was written by a news organization with some credibility.
neonate 6y ago
https://archive.is/UUXDc https://archive.is/UUXDc
afwaller 6y ago
The hacks were not the problem. They engaged in financial shenanigans because they had a bankrupt management culture. Their decline and fall were the direct result of their human problems. And, briefly, their human problems stemmed from their human problems. Culture and management matter.
- artsyca 6y ago
  I've worked in a similar communications behemoth that was very closely related to the company in question. I have first hand experience with toxic, entitled, self-dealing management culture, poor-me devs, steady stream of clueless interns, oblivious contractors.. Vapid VP's, diddling directors, the works! Definitely suspected there were spies of all colors amongst us, but hey! the coffee was great.
deleted 6y ago
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moonchild 6y ago
> In 2005 the China Development Bank lent the Nigerian government $200 million to buy Huawei equipment for a national wireless network, offering an absurdly low interest rate, as little as 1% Why collect an interest rate at all, if it's less than the inflation rate? It's basically free money at that point.
scythe 6y ago
More information here: https://www.theglobeandmail.com/technology/tech-news/nortel-turned-to-rcmp-about-cyber-hacking-in-2004-ex-employee-says/article534295/ https://www.theglobeandmail.com/technology/tech-news/nortel-...
throwaway423342 6y ago
Remember this from bloomberg? https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies https://www.bloomberg.com/news/features/2018-10-04/the-big-h...
mhkhung 6y ago
It's capitalism that killed it. Stock price was sky high because of the optical-fiber hype. Management has to kill those traditional businesses (switches, etc) that doesn't have that high growth rate that justifies the stock price. Then optical hype was busted.. Also, who was supporting telecom in the old days? Bell Labs, AT&T, Lucent, etc? The government of course. Privatization happened and trade agreements with Europe meant the US and Canadian government can no longer support telcos and thus the downfall of all these companies at the time.. Even European ones like Alcatel, Nokia, Ericsson, Siemens. This allowed the Asian telcos, not only the Chinese ones, but Korean ones like Samsung to take over.. (Of course the Chinese government and Korean governments were and are still heavily involved in them).
dirtyid 6y ago
This is the decade old Brian Shields, ex-Nortel security adviser, story that got resuscitated against Huawei for the 5G war. No one took it seriously at the time because it doesn't comport with reality. Nortel primarily died from poorly conceived massive spending that fucked them during the dotcom/telecom bubble crash, executives started cooking the books, it was discovered, the company imploded. Don't get me wrong, Nortel was definitely the victim of industrial espionage, every telecom vendor in the world was being infiltrated by China at the time, CISCO, Siemens, Nokia, SonyEriccson, Acatel&Lucent etc. But they managed to survive or consolidate after the crash. Companies like Nortel don't implode that hard and fast from espionage - massive corporate incompetence and malfeasance however, will. BTW Huawei itself didn't hack Nortel, the original reporting blamed Chinese state actors who then passed what they found onto other domestic players like Huawei and ZTE which was actually CPC's original domestic champion before US sanctions crippled them, after which Huawei took the crown. This point is salient, Huawei literally out competed the favourite child. Regardless, if memory serve the tech Huawei used from Nortel was related to optical routing which was a niche segment that wasn't a large part of Nortel's portfolio. So even if Huawei, who was a small player at the time, stole Nortel's tech and took the relevant market shares, it would not have killed or even crippled Nortel. There are entire books and lectures dissecting Nortel's demise, the role of Huawei is never seen as anything but tangential, and playing it up is basically revisionist history / propaganda. Somewhat related, expat anecdotes of Nortel China in the late 90s - it was a shit place to work. Nortel Guangzhou drove away many of their talent (at least in engineering) because they wouldn't promote PRC nationals, and even Chinese Canadians. A lot of them ended up being poached by rivals or moved over to state enterprises, some with usb sticks full of data because Nortel fucked them. I knew a bunch of engineers with jumped shit with hard drives to Siemens and Lucent who later ended up at ZTE. Edit: Also for anyone wondering why Bloomberg's reporting on China has shifted in the last few years even before the trade war (prior Bloomberg was a pretty ardent globalist, i.e. pro Chinese engagement like most of big business), this article from 4 years ago speculating Bloomberg was too pro-China and needed to cultivate anti-China bonafides if he wanted to run as president. Prescient. Michael Bloomberg Has An Achilles Heel And It Is Not Guns Or Age But China https://www.forbes.com/sites/eamonnfingleton/2016/01/24/michael-bloomberg-has-an-achilles-heel-and-it-is-not-guns-or-age-but-china/#659df5386544 https://www.forbes.com/sites/eamonnfingleton/2016/01/24/mich...
loraa 6y ago
Oh man, lost a small fortune on Nortel stock.
jaakl 6y ago
Can you kill specific competitor by stealing secretly their technical IP at all? You would not make them any weaker. You would get yourself stronger, but that would be general technical advantage, against everyone in the market. Different story if you take commecial secrets, bidding papers etc but that was not the case here?
- kevin_nisbet 6y ago
  Using a very contrived and simplified example. If company A spent a trillion dollars coming up with the manufacturing process and formula to cure every cancer in the world. The intellectual property at it's root is the protection of that R&D investment. Company A than get's to setup manufacturing, and set pricing for the market, at the very least to recover the billion dollars investment. If company B comes along, and spends 100 million dollars to steal that magic formula and the manufacturing process. Company B now has similar costs to setup manufacturing, but significantly less in R&D costs that need to be recovered, to sell to the same product to the same customers. In the contrived example, there is no reason to buy company A's product from their IP, when the same can be had from company B, presumably for less. Company B than earns a larger profit, which can be sunk into their own IP for the next generation, giving them a huge step up. Of course the real world with tech products is way more messier than this, but in theory it's possible to do. As I posted elsewhere though, I don't believe it's fair to say it happened in the case with Nortel.
- nooneknowswhy 6y ago
  plus 0 R&D cost, and government compensated all time low price tag.
KKKKkkkk1 6y ago
I found this quote illustrative. Reminds you of Silicon Valley actually. Back then, Ottawa, not traditionally (or since) known for its glamour, seemed full of sports cars, corporate jets, and even society scandals featuring tech CEOs. In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. “You were just surrounded by the most interesting and intelligent people that you could find anywhere in the world,” says Ken Bradley, who spent 30 years at Nortel, including as a chief procurement officer. “Nobody would ever tell me I couldn’t do something.”
- rrdharan 6y ago
  Article about the designer of said gown includes a fun anecdote about the Chretiens as well: https://capitalcurrent.ca/richard-robinson-keeps-high-fashion-in-ottawa-alive/ https://capitalcurrent.ca/richard-robinson-keeps-high-fashio...
throwaway423342 6y ago
> ...have a strong suspicion it was the Chinese government... so it MUST be China! > ...There were close to 800 of them: PowerPoint presentations from customer meetings, an analysis of a recent sales loss, design details for an American communications network. Others were technical, including source code... powerpoint and some technical files > relayed the PowerPoints and other sensitive files to an IP address registered to Shanghai Faxian Corp powerpoint and some sensitive files again. It's hard to believe Nortel had any 'edge' in 5G, and judging from other comments of first hand experiences here Nortel's failure has more to do with itself than anything else. pathetic medium quality opinion piece
thatiscool 6y ago
It is all china's fault, even the dotcom bubble. A sour loser always deflects his/her own fault.
leptoniscool 6y ago
The answer seems to be "no", lol https://en.m.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.m.wikipedia.org/wiki/Betteridge%27s_law_of_headli...
oxfordmale 6y ago
The breach was just a symptom, not the root cause of Nortel's demise. A company that doesn't act on a major breach of its own IP, has structural management issues.
greatgib 6y ago
I find this article too lenient and fan-boyish with Nortel inner value. It looks like that the hack is the reason of the complete collapse of the company. But the article gives the following sentence without even reflecting on it: << Four days before Dunn was fired—fallout from an accounting scandal on his watch that forced the company to restate its financial results— >> And, in my opinion, such a hack and the lack of action of Nortel after being informed of the hack are also symptoms of a defective organization. This is probably an element of little value, but I knew some people that did work at Nortel in engineering and this is just my opinion but they were technically very very bad but they were convinced otherwise. From others I also got the feedback that the company was the kind of place where most people fake working. Just to give you an example: around 2016, one of a former manager at Nortel that was now a high level executive in another company forced employees to work in a packed open space despite there being a lot of empty space on the same floor. Why? Because he knew better than anyone that software engineers are more productive in an open space... Despite recent studies and the opinion of the poor employees themselves. At the same time, the moving allowed him to get an individual closed room for himself...
rq1 6y ago
> In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. “You were just surrounded by the most interesting and intelligent people that you could find anywhere in the world,” says Ken Bradley, who spent 30 years at Nortel, including as a chief procurement officer. “Nobody would ever tell me I couldn’t do something.” Of course, that was the Russian agent disguised as a Chinese who did it. I’m not saying that they had nothing to do with it (I don’t know), but it sounds a bit like hubris to me.
politicdone 6y ago
Article: > critics, who point out that Chinese law obligates companies to cooperate with national intelligence work and to keep those requests secret. In other words, if asked, Huawei would have to spy for the state and cover up that spying. (U.S. companies have been accused of similar behavior, most famously following leaks by former National Security Agency contractor Edward Snowden.) If US IC doesn't use it's big tech collaborators for corporate espionage, and loses out to someone who does, US can't blame anyone but itself. Hiring ex Nortel was part of it, but also the billions of dollars of credit Huawei had thanks to CDB. If G7 states don't help their big tech with huge debt war chests, and lose customers to states that back their big tech...G7 states don't have anyone to blame but themselves. It seems the article hopes you believe that Western corporate competition is not cut throat...just a bunch of dainty little companies oh so shocked at the aggressive competition from Huawei. Nothing could be further from the truth...How to read this in anyway apart from 1) Interesting history on Nortel and Huawei, and 2) a fine example of the contemporary genre of "China bad literature".
deleted 6y ago
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Ice_cream_suit 6y ago
Internal fraud not external malice, was the cause of Nortel's demise: " Investigators ultimately found about $3 billion in revenue had been booked improperly in 1998, 1999, and 2000. More than $2 billion was moved into later years, about $750 million was pushed forward beyond 2003 and about $250 million was wiped away completely. The accounting scandal hurt both Nortel's reputation and finances, as Nortel spent an estimated US$400 million on outside auditors and management consultants to retrain staff. On April 28, 2004 amidst the accounting scandal, three of Nortel's top lieutenants—Douglas Beatty, CEO Frank Dunn and Michael Gollogly—were fired for financial mismanagement.They were later charged with fraud by the RCMP. The United States Securities and Exchange Commission (SEC) also filed charges against them and four vice-presidents for civil fraud" There are many other companies today, that are equally fraudulent.
seemslegit 6y ago
Was the super-micro story linked bottom of the article substantiated in any way in the two years that passed since Bloomberg published it ?
- deleted 6y ago
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canadian_tired 6y ago
I worked at Nortel before and during the collapse. It was a wild ride... stories abound. 100K+ employees... and they couldn't hire them fast enough. Many stories of Nortel hiring who ever they could just so the competition couldn't get them. The second most memorable day (the first being 9/11) was when Clarence Chandra did an all-hands webcast... "the perfect storm" presentation. This was the beginning of the end... we just didn't know how bad it would get. Massive projects were cut...and the employees with them. You are talking hundreds of people a week. I recall many of the people I worked around... packing up and moving home (often someplace in China) immediately. When people were laid off, they were allowed to hang out...use their computer...access stuff...before actually having to leave weeks later. I didn't work on the HW side, but I can tell you the SW repos were barely protected. The CMS (Livelink?) was pretty wide open... and if you could find what you wanted (LOL) easy to leave with it. Security was pretty lax... I'd bet many gigs of files just walked out of there on CDROMS or other media (USB sticks were not common then). I used to dig through all sorts of tech... cool stuff...probably a lot that should have been protected. It wasn't. Security was rarely talked about. All that mattered was the next release date... go go go.
executive 6y ago
DND wouldn't move into the old Nortel campus because of security risks: https://www.ctvnews.ca/canada/dnd-may-abandon-1b-move-to-former-nortel-site-because-of-surveillance-bugs-1.1477766 https://www.ctvnews.ca/canada/dnd-may-abandon-1b-move-to-for...
TwoNineFive 6y ago
Ehh... I'll bite. I worked at Global Crossing in the late 90s and early 2000s as an engineer. I was a Primenet employee. We got Huawei gear in to evaluate. Virtually everything they made was based on IP theft. Their routers literally had "Cisco Systems" strings all over the image files. It was blatant. The PLA were constantly trying to break into our systems. We knew it. We talked about it. It wasn't a secret. This is a difficult subject that I don't talk about with other people, in persona or otherwise. The conversation almost always quickly goes stupid in one of two ways: The person I'm talking to instantly goes nationalist one way or the other, or they just don't seem to have the IQ to grasp the issue. Having a rational conversation about the topic of what the US government and as private citizens/companies do about blatant Chinese aggression feels impossible. As for online, the 50 Cent party quickly shows up en-mass with the typical FUD, bullying, distracting jokes, pearl clutching, and so on.

289 points by remir 6y ago

Research In Motion > Nortel. Nortel built bad routers. RIM created blackberries, the smartphones before smartphones were a thing.

HenryKissinger 6y ago
Obama kept a BlackBerry as his personal phone for most of his presidency. https://money.cnn.com/2014/05/22/technology/security/nsa-obama-blackberry/ https://money.cnn.com/2014/05/22/technology/security/nsa-oba...
blinding-streak 6y ago
Not going to argue your point about products, but from a financial standpoint, RIMM/Blackberry's peak market cap was about $81 billion in 2008. Nortel's peak was $283 billion in 2000. Nortel was huge. Of course, the market was in a huge bubble at the time.
- adventured 6y ago
  Nortel also got a bit larger than RIM by sales. Nortel's peak was $22.2 billion in fiscal year 2000, with $1.7b in operating income. RIM peaked at $19.9 billion in sales in 2011. Amazingly they tripled in size from $6b in sales in 2008, in just three years. Then lost 85% of their sales in another four years after that.
  - magicnubs 6y ago
    > Amazingly they tripled in size from $6b in sales in 2008, in just three years. Then lost 85% of their sales in another four years after that. I assume this is due to the advent of touchscreen phones. Around when people were getting used to the idea that mobile phones could be used for more than just making calls, touchscreens could be buggy/laggy and there wasn't haptic feedback or any sort of attempt at recreating the physical sensation of typing. RIM doubled down on physical keyboards, and Blackberrys had great ones (I could type much faster on my Blackberry Bold than on an iPhone at the time) and they already had productivity/utility apps and such since they were really PDAs. But the gradually improving touchscreen typing experience, combined with the increased utility of being able to put the keyboard away when you didn't need it, spelled the death of physical keyboard phones not long after.
- sandworm101 6y ago
  Market cap is a measurement of how other people, stockholders, think of your company. It means little on the ground. A stock can double, or half, overnight. That doesn't mean the company is suddenly double or half its former size.
  - smabie 6y ago
    Sure, but what's a better metric of the size of a company? Employees?
    - hylaride 6y ago
      Gross revenue and/or profit.
      - heisbsissi 6y ago
        The way I think companies should be valued is superior to your proposal.
hylaride 6y ago
Did you even read the article? Nortel built a lot of cellular networks and owned a huge chunk if IP for it (that was surprisingly valuable during the bankruptcy auctions). They also had quite the large long-haul fiber optic install base (which they bet the farm on, that quickly became commodified, which is really what bankrupted them). They also had one of the first commercially available DSL modems. Sure, they built “bad” edge routers and switches (they came out of the telco industry, so focused too much on managed services for them, which caused headaches for end-customers), but the company was an engineering powerhouse ruined by hubristic businessmen.
- sandworm101 6y ago
  Oh, I read it. I also lived with Nortel gear during this timeframe. They were not great at much of anything. They were more often the only game in town, and they knew it. Canadian schools and government agencies bought their gear because it was canadian not because it was any good. Those touchscreen tablet controller things? Does anyone remember how bad touchscreens were in those days? Give me a blackberry with a mechanical keyboard. >> In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. That was the attitude of people running nortel at the time. Some consider it the canadian enron: the unicorn that ate itself.
  - lapnitnelav 6y ago
    That fancy attire really doesn't look that great : http://www.geocities.ws/cityofottawainfo/celeb_m.htm http://www.geocities.ws/cityofottawainfo/celeb_m.htm Proof that you can't buy taste. For everything else, obviously there's Mastercard.
    - sandworm101 6y ago
      And the cost shows how they wasted money. Leather bodysuits are not 1,000,000$ in any currency. And that couldn't possibly have been solid gold. It would be too soft. They paid 1,000,000$ for an off-the-rack fetish outfit and some a gold-plated hand-hammered steel sheet. A live-in designer? Nobody since 18th century royalty has needed a live-in fashion designer.

Hongwei 6y ago

My parents lost a small fortune in 2001 riding the tech crash down (Nortel was a good chunk of that). I've been trying to explain to them (1st gen Chinese immigrants) for the past three years that Nortel was killed partly by focused Chinese spying and IP-theft by Huawei. CSIS has know about this for years. They (my parents) just wouldn't believe it until I showed them this article. Their former university classmates (who also immigrated to Canada) are likely part of the 20 people that jumped ship to Huawei and implicitly may have leaked data before then. I'm glad this article got through to them, that it isn't just politics and Huawei & the CCP really did go offside.

zyang 6y ago
I interned at Nortel in early 2000's right before it all went down. I can tell you the engineering culture was rotten within. No-one was doing anything useful for years. Many orgs were built around milking the ancient layer 2 passport switch. The layer 3 router meant to compete with Cisco was 3 years late and only sold a few dozen units. There was accounting fraud going on at the highest level - delivery trucks circles around to pad the books. I'm sure the hack happened. I just don't think it would had made any material impact - there was simply not much to steal ¯\_(ツ)_/¯
- freshhawk 6y ago
  I was also there as an intern around the same time. It was an insane place to get my first "office job" experience. Entire buildings of hundreds of people all working on powerpoint reports about potential training ideas for future projects to improve the production of the powerpoint presentations made to summarize the reports on internal "sales" numbers that are then filed without anyone reading them because everyone knew they were too fudged to matter and the internal competition thing was a smokescreen for fraud anyway. Who was embezzling what this week were conversations coop students got to overhear. I was there shortly before the whole thing collapsed and right before it did, in my department, there was a lot of boat shopping combined with clock watching as they waited for options to vest before the whole thing fell apart (everyone knew it would soon).

blinding-streak 6y ago

Nortel Market Cap Peak per year, in $USD Billions: 1997: $16 1998: $22 1999: $105 2000: $283 2001: $56 2002: $26 The dot com bubble produced insane valuations around the turn of the century. The run-up to the collapse was breathtaking.

PakG1 6y ago
Dang, so someone who invested in 1997 would have still made money in 2002, though they would have a lot of psychological pain from the ride down from the peak.
- 11thEarlOfMar 6y ago
  Lol, that's me and AMZN. Bought at (split adjusted) $1.50 in 1997, rode it up to $86 in 1999, held all the way down to $6. Finally sold at about $20, still thinking I was brilliant. I have to laugh about it cuz I can't bear the alternative.
  - Ghjklov 6y ago
    It's alright, no matter how bad that feels, it will never be as bad as all of us who missed the BTC boat when it was a little baby a few years ago. People spending it frivolously and treating it like it was worthless toy money since it was pretty easy to get. Then look at it now...
    - Pxtl 6y ago
      I had a quarter Bitcoin and spent it all on a Humble Bundle.
    - jrockway 6y ago
      I have a friend who got into Bitcoin early. He had almost $300,000 when MtGox got hacked and he lost everything. So it wasn't all sunshine and roses.
    - deleted 6y ago
      [deleted]

phire 6y ago

Julian Assange originally became famous after getting caught hacking Nortel back in the early 90s. I guess Nortel didn't learn from that lesson and secure their network.

TedDoesntTalk 6y ago
Do you have a source for this? Curious to read about it.
- phire 6y ago
  Julian Assange helped research a great book called "Underground: Tales of Hacking, Madness and Obsession on the Electronic Frontier" Documents the antics (and downfalls) of various hackers from the late 80s and early 90s, most of them Australian. Assange (aka Mendax) is one of the hackers the book follows. It's out of print these days, but the author, Suelette Dreyfus made the book available online back in 2001 - http://underground-book.net/ http://underground-book.net/
yc12340 6y ago
Wait, so Nortel was killed by Chinese AND Assange?!

api 6y ago

There's a lot here beyond just the hacking. Huawei was able to grow so insanely fast because they had access to a blank check and endless credit from the Chinese government. Nortel and others meanwhile had to finance things themselves. Private companies cannot compete with governments. Governments, especially those with sovereign currencies, can do things that private companies simply cannot do and have pockets far deeper than any private company can ever hope to have. That's why China has won the global game. Everyone else is fielding their star players, sure, but China's star players are all on 'roids in the form of endless government backed credit and many other forms of state backing. To see an American example, look at American dominance of aerospace. America has stealth fighters, probably a ton of secret stuff responsible for a good number of UFO reports, and rockets that land themselves because the US government backs promising aerospace companies generously. This has been the case since WWII. Lockheed Skunk Works is almost 100% government funded. SpaceX isn't entirely government funded but they've certainly benefited from NASA funding, NASA R&D handholding, and in the beginning got a transfer of IP related to NASA's previous research into low-cost rocket engines. Without all NASA's help I doubt they'd be where they are now. China is doing this everywhere with everything.

TedDoesntTalk 6y ago
This is why Boeing should be bailed out (but with prison time and fines that impoverish for anyone involved in the cover up)
- valuearb 6y ago
  Boeing should be forced into Chapter 11 so new ownership with clean hands can fix them. That’s the whole reason we have a bankruptcy code.
  - vaxman 6y ago
    “You can’t handle the truth!” Second favorite Nicholson quote, but so true. Seriously, Boeing will internally deal with what happened. Need proof? Ever wonder what happened to say, Rockwell International (most famous for Apollo and Space Shuttle)? Yeah, you should’a bought Boeing at $30. ((Doh!))

sradman 6y ago

> “This is plain and simple: Economic espionage did in Nortel,” Shields says. “And all you have to do is look at what entity in the world took over No. 1 and how quickly they did it.” The definitive book on the collapse of Nortel is 100 Days: The Rush to Judgement that Killed Nortel by James Bagnall, a journalist for the Ottawa Citizen. Occam’s razor applies here: the well documented fraud and bankruptcy at Worldcom and Global Crossing crushed Nortel. Overzealous regulators delivered the coup de grâce.

kevin_nisbet 6y ago
I just finished reading that one (thanks for the recommendation in another post), and yea, it provides an excellent perspective. That book lays out to me a much more compelling case that a leap to conclusions in the early 2000's that some fraud must exist killed nortel. Based on reading that book it's probably fairer to say the Americans killed nortel than the Chinese did. Although like anything else, a simplified explanation when there are lots of contributing factors at play likely doesn't mean much. The posted article though about Huawei killing nortel by hacking them appears to be a reach (can't say it doesn't contribute of course). As I recall working in the industry around the time Telus and Bell switched to UMTS and towards LTE, Nortel wasn't even in the running. I think they had already sold off their LTE technology and were holding onto some CDMA evolution. I don't have precise memory of how this all lined up though, and didn't really work on the access network side (which is where Huawei is used, so most of my knowledge towards Huawei is second hand). I only did an eval with Huawei once. While I don't have any insight into the china development bank offering low interest loans, and I didn't see it come up at all in that book, I've worked with a number of people who used to be contracted out by nortel to build networks in other countries. And nortel was using it's own money to fund networks in countries unlikely to repay the money for the equipment (Haiti probably stands out with the wildest stories). Those were some of the internal war stories about the financial troubles, although I'm sure there was lots. I don't think it's safe to say that Huawei hasn't benefited from IP theft, which may include theft from Nortel, and possibly other factors, that have allowed them to skyrocket in profitability and sales. The whole thing with Huawei / Cisco routers I believe is pretty well documented. I just don't agree with the posted articles premise, that China or Huawei are to blame or fully responsible for Nortels collapse.

alynn 6y ago

Have any other sources corroborated this story? Bloomberg News lost a ton of credibility with me after their “The Big Hack” cover story [1], claiming Apple and Amazon had been hacked by chips secretly added to their servers in the factory. The picture of the chip on the cover was purely a work of imagination. To my knowledge, no supporting evidence was ever produced, nor were any of the widespread criticisms of the story ever addressed [2], [3]. To push another “China secretly hacked the west” story while also invoking Betteridge's Law leaves me highly skeptical. [1]: https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies https://www.bloomberg.com/news/features/2018-10-04/the-big-h... [2]: https://en.wikipedia.org/wiki/Bloomberg_Businessweek#%22The_Big_Hack%22 https://en.wikipedia.org/wiki/Bloomberg_Businessweek#%22The_... [3]: https://www.washingtonpost.com/opinions/2019/09/17/bloomberg-reporter-challenged-big-hack-story-gets-promoted/ https://www.washingtonpost.com/opinions/2019/09/17/bloomberg...

smabie 6y ago
There are direct on the record quotes from different people with knowledge about it in this article. You could pretty easily interview or email them and find out.
- throwaway423342 6y ago
  who exactly?
kevin_nisbet 6y ago
I've heard about the nortel hack from other sources, with the link to china being mentioned many times I've seen it. For example, here's some CBC reporting form 2012 that at least somewhat outside the current climate (https://www.cbc.ca/news/business/nortel-collapse-linked-to-chinese-hackers-1.1260591 https://www.cbc.ca/news/business/nortel-collapse-linked-to-c...). The big problem I have with the Bloomberg article, is it seems to really be trying to stretch the underlying information to draw the conclusion that Chinese Government or Chinese Hackers or Huawei are solely or the most responsible for the fall of Nortel. Did Huawei benefit and get it's start from stolen IP is likely a compelling story to explore, with lots of compelling underlying facts. Does Huawei or China still do this, is probably another good question. To try and link these questions to the fall of nortel, while glossing over other massive contributors to nortel's fall leaves me skeptical of the narrative also. It's disappointing, because I do believe there is plenty of compelling evidence around about Chinese IP theft, but reporting like this allows lots of noise to be mixed in, and for consumers of the information to reasonably be sceptical.

ycombonator 6y ago

West is littered with graveyards of companies hollowed out by Chinese Industrial Espionage. ASMC comes to mind. https://www.straitstimes.com/world/united-states/chinese-wind-turbine-maker-found-guilty-of-stealing-us-trade-secrets https://www.straitstimes.com/world/united-states/chinese-win...

TedDoesntTalk 6y ago
And the fines imposed, if they ever get collected, are irrelevant... the damage is done. In the case of the IBM's Xu who got 5 years prison time, so what? He's a fall guy. The damage is done.

chvid 6y ago

The telecommunications industry goes from a massive bubble in year 2000 to an extreme cost focus just one or two years later. Sending tens of thousands of engineers into unemployment and cutting research and development to the bone. Talk to anyone who had a job in the sector back then, they will you this. All those engineers eventualy were reemployed in other industries such as software and that helped creating the boom that came there. But it also created an opening for the Chinese electronics industry to move into that area as they were cheap and willing to invest unlike us in the west.

TedDoesntTalk 6y ago
> willing to invest unlike us in the west The article says Huawei was given $10 billion or more in free or almost free loans.
- throwaway423342 6y ago
  point being?
- chvid 6y ago
  This is my point exactly. They were willing to invest where we were no longer willing. You can say that it is state capitalism and not free competition. But let there be no doubt; had there been free competition now and not a massive boycot led by the US government against Huawei, then Huawei would have been absolutely dominant.

valuearb 6y ago

While this article seems compelling, it’s also from Bloomberg Tech. A year and a half ago Bloomberg Tech wrote “the Big Hack”, which seems to have been made up out of whole cloth by a small group of sources that duped Bloomberg. Not only was Bloomberg duped, but they’ve never printed a correction, retraction, or clarification. I’d much prefer this story was written by a news organization with some credibility.

neonate 6y ago

https://archive.is/UUXDc https://archive.is/UUXDc

afwaller 6y ago

The hacks were not the problem. They engaged in financial shenanigans because they had a bankrupt management culture. Their decline and fall were the direct result of their human problems. And, briefly, their human problems stemmed from their human problems. Culture and management matter.

artsyca 6y ago
I've worked in a similar communications behemoth that was very closely related to the company in question. I have first hand experience with toxic, entitled, self-dealing management culture, poor-me devs, steady stream of clueless interns, oblivious contractors.. Vapid VP's, diddling directors, the works! Definitely suspected there were spies of all colors amongst us, but hey! the coffee was great.

deleted 6y ago

[deleted]

moonchild 6y ago

> In 2005 the China Development Bank lent the Nigerian government $200 million to buy Huawei equipment for a national wireless network, offering an absurdly low interest rate, as little as 1% Why collect an interest rate at all, if it's less than the inflation rate? It's basically free money at that point.

scythe 6y ago

More information here: https://www.theglobeandmail.com/technology/tech-news/nortel-turned-to-rcmp-about-cyber-hacking-in-2004-ex-employee-says/article534295/ https://www.theglobeandmail.com/technology/tech-news/nortel-...

throwaway423342 6y ago

Remember this from bloomberg? https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies https://www.bloomberg.com/news/features/2018-10-04/the-big-h...

mhkhung 6y ago

It's capitalism that killed it. Stock price was sky high because of the optical-fiber hype. Management has to kill those traditional businesses (switches, etc) that doesn't have that high growth rate that justifies the stock price. Then optical hype was busted.. Also, who was supporting telecom in the old days? Bell Labs, AT&T, Lucent, etc? The government of course. Privatization happened and trade agreements with Europe meant the US and Canadian government can no longer support telcos and thus the downfall of all these companies at the time.. Even European ones like Alcatel, Nokia, Ericsson, Siemens. This allowed the Asian telcos, not only the Chinese ones, but Korean ones like Samsung to take over.. (Of course the Chinese government and Korean governments were and are still heavily involved in them).

dirtyid 6y ago

This is the decade old Brian Shields, ex-Nortel security adviser, story that got resuscitated against Huawei for the 5G war. No one took it seriously at the time because it doesn't comport with reality. Nortel primarily died from poorly conceived massive spending that fucked them during the dotcom/telecom bubble crash, executives started cooking the books, it was discovered, the company imploded. Don't get me wrong, Nortel was definitely the victim of industrial espionage, every telecom vendor in the world was being infiltrated by China at the time, CISCO, Siemens, Nokia, SonyEriccson, Acatel&Lucent etc. But they managed to survive or consolidate after the crash. Companies like Nortel don't implode that hard and fast from espionage - massive corporate incompetence and malfeasance however, will. BTW Huawei itself didn't hack Nortel, the original reporting blamed Chinese state actors who then passed what they found onto other domestic players like Huawei and ZTE which was actually CPC's original domestic champion before US sanctions crippled them, after which Huawei took the crown. This point is salient, Huawei literally out competed the favourite child. Regardless, if memory serve the tech Huawei used from Nortel was related to optical routing which was a niche segment that wasn't a large part of Nortel's portfolio. So even if Huawei, who was a small player at the time, stole Nortel's tech and took the relevant market shares, it would not have killed or even crippled Nortel. There are entire books and lectures dissecting Nortel's demise, the role of Huawei is never seen as anything but tangential, and playing it up is basically revisionist history / propaganda. Somewhat related, expat anecdotes of Nortel China in the late 90s - it was a shit place to work. Nortel Guangzhou drove away many of their talent (at least in engineering) because they wouldn't promote PRC nationals, and even Chinese Canadians. A lot of them ended up being poached by rivals or moved over to state enterprises, some with usb sticks full of data because Nortel fucked them. I knew a bunch of engineers with jumped shit with hard drives to Siemens and Lucent who later ended up at ZTE. Edit: Also for anyone wondering why Bloomberg's reporting on China has shifted in the last few years even before the trade war (prior Bloomberg was a pretty ardent globalist, i.e. pro Chinese engagement like most of big business), this article from 4 years ago speculating Bloomberg was too pro-China and needed to cultivate anti-China bonafides if he wanted to run as president. Prescient. Michael Bloomberg Has An Achilles Heel And It Is Not Guns Or Age But China https://www.forbes.com/sites/eamonnfingleton/2016/01/24/michael-bloomberg-has-an-achilles-heel-and-it-is-not-guns-or-age-but-china/#659df5386544 https://www.forbes.com/sites/eamonnfingleton/2016/01/24/mich...

loraa 6y ago

Oh man, lost a small fortune on Nortel stock.

jaakl 6y ago

Can you kill specific competitor by stealing secretly their technical IP at all? You would not make them any weaker. You would get yourself stronger, but that would be general technical advantage, against everyone in the market. Different story if you take commecial secrets, bidding papers etc but that was not the case here?

kevin_nisbet 6y ago
Using a very contrived and simplified example. If company A spent a trillion dollars coming up with the manufacturing process and formula to cure every cancer in the world. The intellectual property at it's root is the protection of that R&D investment. Company A than get's to setup manufacturing, and set pricing for the market, at the very least to recover the billion dollars investment. If company B comes along, and spends 100 million dollars to steal that magic formula and the manufacturing process. Company B now has similar costs to setup manufacturing, but significantly less in R&D costs that need to be recovered, to sell to the same product to the same customers. In the contrived example, there is no reason to buy company A's product from their IP, when the same can be had from company B, presumably for less. Company B than earns a larger profit, which can be sunk into their own IP for the next generation, giving them a huge step up. Of course the real world with tech products is way more messier than this, but in theory it's possible to do. As I posted elsewhere though, I don't believe it's fair to say it happened in the case with Nortel.
nooneknowswhy 6y ago
plus 0 R&D cost, and government compensated all time low price tag.

KKKKkkkk1 6y ago

I found this quote illustrative. Reminds you of Silicon Valley actually. Back then, Ottawa, not traditionally (or since) known for its glamour, seemed full of sports cars, corporate jets, and even society scandals featuring tech CEOs. In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. “You were just surrounded by the most interesting and intelligent people that you could find anywhere in the world,” says Ken Bradley, who spent 30 years at Nortel, including as a chief procurement officer. “Nobody would ever tell me I couldn’t do something.”

rrdharan 6y ago
Article about the designer of said gown includes a fun anecdote about the Chretiens as well: https://capitalcurrent.ca/richard-robinson-keeps-high-fashion-in-ottawa-alive/ https://capitalcurrent.ca/richard-robinson-keeps-high-fashio...

throwaway423342 6y ago

> ...have a strong suspicion it was the Chinese government... so it MUST be China! > ...There were close to 800 of them: PowerPoint presentations from customer meetings, an analysis of a recent sales loss, design details for an American communications network. Others were technical, including source code... powerpoint and some technical files > relayed the PowerPoints and other sensitive files to an IP address registered to Shanghai Faxian Corp powerpoint and some sensitive files again. It's hard to believe Nortel had any 'edge' in 5G, and judging from other comments of first hand experiences here Nortel's failure has more to do with itself than anything else. pathetic medium quality opinion piece

thatiscool 6y ago

It is all china's fault, even the dotcom bubble. A sour loser always deflects his/her own fault.

leptoniscool 6y ago

The answer seems to be "no", lol https://en.m.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.m.wikipedia.org/wiki/Betteridge%27s_law_of_headli...

oxfordmale 6y ago

The breach was just a symptom, not the root cause of Nortel's demise. A company that doesn't act on a major breach of its own IP, has structural management issues.

greatgib 6y ago

I find this article too lenient and fan-boyish with Nortel inner value. It looks like that the hack is the reason of the complete collapse of the company. But the article gives the following sentence without even reflecting on it: << Four days before Dunn was fired—fallout from an accounting scandal on his watch that forced the company to restate its financial results— >> And, in my opinion, such a hack and the lack of action of Nortel after being informed of the hack are also symptoms of a defective organization. This is probably an element of little value, but I knew some people that did work at Nortel in engineering and this is just my opinion but they were technically very very bad but they were convinced otherwise. From others I also got the feedback that the company was the kind of place where most people fake working. Just to give you an example: around 2016, one of a former manager at Nortel that was now a high level executive in another company forced employees to work in a packed open space despite there being a lot of empty space on the same floor. Why? Because he knew better than anyone that software engineers are more productive in an open space... Despite recent studies and the opinion of the poor employees themselves. At the same time, the moving allowed him to get an individual closed room for himself...

rq1 6y ago

> In 1999 the co-founder of Corel Corp., who’d gotten his start at Nortel’s precursor company, threw a gala at which his wife showed up in a C$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple. “You were just surrounded by the most interesting and intelligent people that you could find anywhere in the world,” says Ken Bradley, who spent 30 years at Nortel, including as a chief procurement officer. “Nobody would ever tell me I couldn’t do something.” Of course, that was the Russian agent disguised as a Chinese who did it. I’m not saying that they had nothing to do with it (I don’t know), but it sounds a bit like hubris to me.

politicdone 6y ago

Article: > critics, who point out that Chinese law obligates companies to cooperate with national intelligence work and to keep those requests secret. In other words, if asked, Huawei would have to spy for the state and cover up that spying. (U.S. companies have been accused of similar behavior, most famously following leaks by former National Security Agency contractor Edward Snowden.) If US IC doesn't use it's big tech collaborators for corporate espionage, and loses out to someone who does, US can't blame anyone but itself. Hiring ex Nortel was part of it, but also the billions of dollars of credit Huawei had thanks to CDB. If G7 states don't help their big tech with huge debt war chests, and lose customers to states that back their big tech...G7 states don't have anyone to blame but themselves. It seems the article hopes you believe that Western corporate competition is not cut throat...just a bunch of dainty little companies oh so shocked at the aggressive competition from Huawei. Nothing could be further from the truth...How to read this in anyway apart from 1) Interesting history on Nortel and Huawei, and 2) a fine example of the contemporary genre of "China bad literature".

deleted 6y ago

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Ice_cream_suit 6y ago

Internal fraud not external malice, was the cause of Nortel's demise: " Investigators ultimately found about $3 billion in revenue had been booked improperly in 1998, 1999, and 2000. More than $2 billion was moved into later years, about $750 million was pushed forward beyond 2003 and about $250 million was wiped away completely. The accounting scandal hurt both Nortel's reputation and finances, as Nortel spent an estimated US$400 million on outside auditors and management consultants to retrain staff. On April 28, 2004 amidst the accounting scandal, three of Nortel's top lieutenants—Douglas Beatty, CEO Frank Dunn and Michael Gollogly—were fired for financial mismanagement.They were later charged with fraud by the RCMP. The United States Securities and Exchange Commission (SEC) also filed charges against them and four vice-presidents for civil fraud" There are many other companies today, that are equally fraudulent.

seemslegit 6y ago

Was the super-micro story linked bottom of the article substantiated in any way in the two years that passed since Bloomberg published it ?

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canadian_tired 6y ago

I worked at Nortel before and during the collapse. It was a wild ride... stories abound. 100K+ employees... and they couldn't hire them fast enough. Many stories of Nortel hiring who ever they could just so the competition couldn't get them. The second most memorable day (the first being 9/11) was when Clarence Chandra did an all-hands webcast... "the perfect storm" presentation. This was the beginning of the end... we just didn't know how bad it would get. Massive projects were cut...and the employees with them. You are talking hundreds of people a week. I recall many of the people I worked around... packing up and moving home (often someplace in China) immediately. When people were laid off, they were allowed to hang out...use their computer...access stuff...before actually having to leave weeks later. I didn't work on the HW side, but I can tell you the SW repos were barely protected. The CMS (Livelink?) was pretty wide open... and if you could find what you wanted (LOL) easy to leave with it. Security was pretty lax... I'd bet many gigs of files just walked out of there on CDROMS or other media (USB sticks were not common then). I used to dig through all sorts of tech... cool stuff...probably a lot that should have been protected. It wasn't. Security was rarely talked about. All that mattered was the next release date... go go go.

executive 6y ago

DND wouldn't move into the old Nortel campus because of security risks: https://www.ctvnews.ca/canada/dnd-may-abandon-1b-move-to-former-nortel-site-because-of-surveillance-bugs-1.1477766 https://www.ctvnews.ca/canada/dnd-may-abandon-1b-move-to-for...

TwoNineFive 6y ago

Ehh... I'll bite. I worked at Global Crossing in the late 90s and early 2000s as an engineer. I was a Primenet employee. We got Huawei gear in to evaluate. Virtually everything they made was based on IP theft. Their routers literally had "Cisco Systems" strings all over the image files. It was blatant. The PLA were constantly trying to break into our systems. We knew it. We talked about it. It wasn't a secret. This is a difficult subject that I don't talk about with other people, in persona or otherwise. The conversation almost always quickly goes stupid in one of two ways: The person I'm talking to instantly goes nationalist one way or the other, or they just don't seem to have the IQ to grasp the issue. Having a rational conversation about the topic of what the US government and as private citizens/companies do about blatant Chinese aggression feels impossible. As for online, the 50 Cent party quickly shows up en-mass with the typical FUD, bullying, distracting jokes, pearl clutching, and so on.