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.
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)_/¯
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).
We killed our own telecommunications industry by first throwing it into a massive bubble and then starving the shit out of it.
It wasn't killed by spying Chinese communist; if anything it was killed by the flipside of our capitalist system. The "madness of crowds" that drives "hot" industries through periods of massive over-investment followed by massive under-investment.
Sounds like it was badly miss managmed. Better companies outsold it, causing it to file bankruptcy.
This is one of the points of capitalism, Bad / wasteful decisions lead to failure. Better managed companies rise. Consumers get better products cheaper.
I'm sure it looks like that inside many big companies. There's a reason that FAANG+ companies fought over Nortel's patent trove. Nortel tech is still in a lot of today's most valuable products, covering things from BGA routing techniques to wireless communications. The area still supports an ecosystem of small manufacturers of world-leading optics and photonics components. That says something, at least.
Someone I worked with in 1006 who I think was at Bay Networks and jumped ship to Cisco had similar feelings about Nortel. Nothing about China, but it was already a sinking ship.
Chinese nationalism is potent. ...and it's somewhat understandable to internalize some of the pride of being part of a global power that is on the rise.
For those of us of Mediterranean decent, it would be as if the Roman Empire has been rebuilt and were expanding its influence globally. It would be hard for most people not to feel some element of subconscious or conscious pride.
The same feelings helped prop up the new Caliphate in the middle east recently (until it became obvious how brutal ISIS was).
Everyone wants to be part of something bigger than themselves.
I work with a ton of ex-Nortel engineers in town. All of them agree that the company was grossly mismanaged. The CxOs fudge the accounting, ignored warnings about their systems, and the burden of Nortel's fall should be mainly shouldered by management.
Huawei hacks are the sideshow, the burning tire fire of management is the main act.
Your parents aren't the only ones burnt by Nortel. Lots of Nortel employees indulged with the paper gains of their stock, only for it to crater and created lots of financial strain.
But like most articles with a question as the title, the answer is typically no. This article, frankly, is trying so hard to rewrite history, to divert attention from the main act to the side show.
Nortel was not killed by Huawei or a hack. It was killed by bad management.
The article tries to paint the picture of a fantastic company but that was not the case. It was mismanaged (and the article provides some glaring examples, including fraud), slow, bloated, it was really struggling in the cellular space.
Even the account of the hack shows how badly Nortel handled it.
There's always the temptation to find an external scapegoat but the buck does stop with Nortel's management.
The same happened to Nokia. People usually say that Microsoft killed it, but it was already pretty much behind everything when Microsoft took it.
Too much bureaucracy, everything outsourced, management out of touch with anything, meetings after meetings... Hell, I remember two/three weeks of meetings to replace apache proxy with nginx. Actual replacement and configuration update would take a couple of minutes.
I find it hard to believe that the company was so incredibly fragile that it, uniquely among its competitors was killed by Huawei stealing some of its IP.
Far more likely, there's no shortage of other reasons that led to its downfall, but it's easier for the people responsible to blame spies.
I'll take this with a grain of salt. To this day Bloomberg still stands by its "The Big Hack" article (Supermicro, Amazon, and Apple being hacked with the tiny Chinese chip), containing claims that have been thoroughly refuted (and ridiculed) since then, and about which even their own sources were very incredulous. The CEO of Apple called it "100 percent a lie", which is a very harsh word in this context. Those were lower standards than the ones we're held to when commenting here on HN.
I don't know how that article came to be but such precedent puts their tech articles into serious question. Obviously such articles about major Chinese interference and hacks are great with the readers and get a lot of attention. But while the premise may be true (the Chinese hack most likely happened), the implications and the interpretation of the reporter are on shaky ground.
I don't have any further evidence but I'd say that Bloomberg may be pandering to the readers and giving them what they want to hear during these times. And if I were Bloomberg reporters Jordan Robertson or Michael Riley I'd say that even if my sources denied it.
I agree with the overall sentiment, but I don't necessarily know if Nortel is truly unique amongst it's competitors.
I worked with lots of the big vendors over the years (I worked at a telcecom operator here in Canada), and you'd get to chatting and they were all under financial pressure internally, lots of layoffs. One time I was visiting one of the big vendors in the US, and our team was joking around how it felt like we were visiting a retirement home, it was like there was no one under 50 in the building (this was mid 2010's). Beers with other vendors, and they'd be talking about how there's an entire floor for like 5 employees and more layoffs coming down.
Because the company survived... doesn't mean it's alive and well.
Embedded hardware companies are skewed to an older demographic because you can't hire significant numbers of younger engineers with the necessary knowledge.
As someone who lived it (being younger than young and older than most), the whole notion of young hardware (or software) engineers being somehow “better” stems from (IMNSHO) two factors: 1) their naivety in being willing to sacrifice personal life so they can be more “productive,” often at a lower cost of labor —-if you call that type of output “product” because: 2) tech had progressed slowly from the 1940s to the 1980s when micro-electronics began to democratize and challenge the established players making the financial benefits of (non-wartime) warp-speed innovation clear for the first time in history (previously, it was taught that the risks of fast innovation far exceeded any benefit), but highly skilled workers (101% of workforce) were slow to want to deviate from their established work paradigms or risk their mortgage on a dicey startup job even with VC backing. First Steve (Jobs), then Bill (Gates) began to have luck pairing these workers with, then managing them with and ultimately replacing them with kids that had way more talent than experience (a mistake that Steve did not repeat after the “classic” MacOS disaster and being fired —and that Bill “outgrew”).
I could go on for hours about this, but what you are seeing today (an industry filled with mostly young people) is not a result of “under 50” workers (as you put it) being better, indeed it is a market aberration (that you may not be able to realize from your perspective in The Matrix) that arose by the rank-in-file being forced out during the dot-com crash in 2000 and new college grads not commencing for more than half a decade later. Watching the industry (slowly) “come back” with future pear-shaped gurus has been one of the great satisfactions in my long career. (Who needs Star Trek timewarp plots?)
PS: BTW, I have over 40 years of experience and am not eligible for the senior menu at IHOP anytime soon —though being GenX, I am also holding a reference to a Promise that, by the time I get to that age, they will have changed the qualifying age! -and yeah, the older presenters at WWDC mostly creeped me out too —though it may just be that they are required to stay healthy and not pear-shaped by the AppleWatch team.
I don't know a lot of this sounds like reverse ageism. Facebook was built entirely on young, talented engineers who could perhaps scale out software better than "experienced" developers. Same goes for a lot of Google products. The barrier of entry for software development is much lower and you can pretty much hit the ground running with a few good math and algorithms courses and good internships. You can become a good software architect with a few years of experience -- even the best are barely 50 years of age (Jeff Dean, for example).
I am not sure why this trend didn't translate towards hardware but if I were to guess - the jobs are fewer, the barriers of entry are higher (no one really teaches hardware design in school) and the cost of mistakes is bigger.
No rational person that has lived through age discrimination would engage in any kind of ageism and again, my career spans over 40 years. (How many people my age in the Fortune 500 company 40 years ago? ZERO! Maybe down in mailroom or something, but they weren't even allowed in the tech areas so I would have to assume.) I also strongly disagree with your assertion that Google has "young" engineers developing "a lot of Google products", at least in the sense that they are doing so without guidance from experienced engineers. As far as Facebook, I don't find their stuff very interesting (though I thank them for helping to all but destroy HP with their open hardware) --it's a website with a big power bill and a non-ACID database, right?
I don't know if I agree with that statement, engineers can be invested in, university programs etc. If a company is growing and expanding, they're going to need to draw on a lot of engineering and R&D talent.
And in my case it doesn't apply, the equipment we're evaluating was all software, running on a common x86 telecom platform. While I'm sure the office did have some embedded R&D, alot of what telecom vendors do just requires software developers.
My hero! Bro who is going to be the voice of reason in this crazy mixed up world? If I were an archaeologist in the future I'd start by reading all the most downvoted comments for sure!
Be sure to explain to your parents that this particular news outlet (Bloomberg) has a history of playing fast and loose with reality, particularly in regard to supposed Chinese industrial espionage activities. [1]
Also you might point out that the company pays bonuses to its "journalists" for successfully affecting financial markets. [2]
It's funny because all in all Bloomberg has a vested interest in staying on the good side of the Chinese government given their terminal business. You can see it in their editorial line which is rather neutral on most China issues compared to other publications like WSJ.
The article itself suggests that it's a possibility. There's no evidence connecting the hack to Nortel's flagging fortunes, and there's no evidence connecting Huawei's success to the information in the hack.
The article makes a much stronger argument that effective Chinese government support of Huawei and the failure of the Canadian government to support Nortel, as well as Huawei's ability to hire away many of Nortel's top researchers, led to their success.
getting downvoted for pointing out facts and reiterating the authors own words. The anti-Chinese hysteria on this website really is a sight to behold at this point.
Is "China bad" how HN and the US is going to look for the next 20 years as North America goes down the hill?
For an actual science based look at Nortel there was a good study done by a team at the Tefler School of Business years ago.[1] Taking an extensive look at the corporate culture and the state of the business which was despite dotcom evaluations in a pretty sorry state already. Tracing the decay back to the 80s and 90s and a whole row of disastrous decisions.
> Is "China bad" how HN and the US is going to look for the next 20 years as North America goes down the hill?
As a US citizen, reading HN for a year has downgraded me from being extremely patriotic, to considering my options if I get expelled from the country in the next 20 years on the basis of my ethnicity. These folks would cheer that on, and they're my neighbors.
As someone who is neither Chinese nor American and has no horse in this race, I find it amusing how strong the bias against China is on this site. TikTok accesses clipboard, it must be an intelligence operation; LinkedIn and AirBnB do the same, I guess the devs were lazy and didn't do enough testing. Someone find a security hole in a Huawei device, that must be a communist backdoor; a Cisco device has the same security issue, they are just moving fast and breaking things.
You know the old saying that we judge ourselves by our intentions and others by their actions. If you cut someone off while driving, it's just a simple error and no biggie, you just misjudged the road situation momentarily; but if someone cuts you off, they are a idiot who should not be on the road and deserves to get their license taken away and their car impounded.
The reaction to anything China on HN is like the above, applied at a national scale.
Wrong or right, many Americans see China as an enemy. News is filtered through that light. And some news, like convictions about IP theft by Chinese (Xu at IBM, 3 individuals at Sinovel, etc, etc, etc), leave little room for debate. These stories color the ones which may or may not be nefarious like TikTok. Guilt by association.
But they are very selective in doing that. Even when the same actions are done in the same context they will use different measures for different people based on their sentiment toward them. And that just adds to the bias and fuels the cycle. As explained by this simple but accurate picture [0]. They see China and and their hackers as enemies. Do you think they see the NSA and by extension their own country as an enemy? Discarding (unwittingly) half of the context makes it a lot easier to assume they have the moral high ground.
Propaganda doesn't mean it's a lie, just that you take the same truth and shape it into an opinion for the people, depending on what you want to achieve. And it's a tool used by every superpower.
I'm suggesting that I don't know if Nortel was hacked by the Chinese, and that I don't know if any such hack was responsible for the company's eventual downfall, and that reading a Bloomberg article will be of little or no help with either condition.
Bloomberg's last China hack article was completely discredited, and still no retraction/explaination. They have the appearances of Trump's propaganda machine. Considering the timing of this relative to the election and GOP's sole strategy of China scapegoating we can all take this latest as more of the same
It's possible for two people of different political parties to agree on something. Bloomberg's brief candidacy was characterized by being to the right of the entire rest of the Democratic field.
> “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.
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.
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.”
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.
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.
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.
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?
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.
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...
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.
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.
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.
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.
Haha, I bought AOL in the late 90's, rode it up 10x, then sold it when it sank back to 1x. A couple stocks I bought augered in so bad they were just removed from my brokerage statements, never to be seen again.
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...
I gave away 10+ bitcoins on Hacker News almost 10 years ago. lol (on a different account... I was an early adopter of this website, too)
They would have been worth almost $200,000 at the peak of bitcoin's value, but I don't feel bad about it because there's no way I would have held them until that point. I mined them myself when they were worth like $12 each, and I definitely would have sold them when it hit $100.
Depends on dilution, Nortel could have easily issued enough shares to cause the stock price to drop over that period. I don’t know about Nortel, but Cisco was a stock printing machine over same period.
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.
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.
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-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.
Thank you for reminding everyone. I don't trust Bloomberg News at this point — "The Big Hack" seems to have been pure fiction, and this article seems to follow the beaten path to maximum clicks and ad impressions.
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.
> ...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.
> 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.
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.
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).
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.
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.
> 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.
Please do not insinuate or ask if someone read the article. You may not have noticed that this is against the rules.
"Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that.""
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$1 million leather bodysuit with an anatomically correct gold breastplate and a 15-carat-diamond nipple.
That was the attitude of people running nortel at the time. Some consider it the canadian enron: the unicorn that ate itself.
Most of that gear was likely bay networks kit, which was actually acquired by Nortel. I don’t disagree that it was crap, but it was cheaper than Cisco.
I grew up in the Ottawa area in the 1990s and my parents were in the tech scene there; the Copelands were rich and eccentric (and odd), but that’s no different than Elon Musk, Larry Ellison, or Steve Jobs.
My point isn’t that Nortel didn’t put out shit products, every large successful company has. It’s that Nortel was more than a crappy router company.
The Bay Network switches were pretty good, actually. Well, not so much the Centillion...but the Baystacks were ok. It was the routers that they got from Wellfleet through the Bay acquisition that were wildly out of date with the worst management software ever written (Site Manager). They were still trying to push BCN/ARNs after everyone else (least of all Cisco) had introduced 3-4 new generations. And Site Manager was awful...seriously.
And the cost shows how they wasted money. Leather bodysuits are not 1,000,000$ 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.
To be fair, it was almost certainly the diamonds that brought the price to $1m. But in the words of David Lee Roth “who am I to get in the way of a good rumor”.
I used to do the Xmas cards bulk mail for Canadian celebrities for several charities in the 80s. The 9-track tape(!) had stage names and real names for about 5,000 celebs, so that was interesting to peruse.
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/
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 is not running for president any more ... but yeah ... he definitely had a China "problem" and he might still be interested in a political position.
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.
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.
> 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.
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.
Kelley Johnson’s Skunk Works was successful because it rejected government controls and oversight. Read Kelley’s 14 rules of Management.
Johnson had a 15th rule that he passed on by word of mouth. According to the book "Skunk Works" the 15th rule is: "Starve before doing business with the damned Navy.“ because the Navy wouldn’t relinquish control of projects to the Skunkworks.
And it’s “funding” was paid contracts for performance, not an infinite credit line of free cash that Huawei got. Entirely different things. Huawei has sucked up a huge amount of Chinese resources, and there is no guarantee they’ve made a positive return, or ever will.
And SpaceX is a great example, just like the Skunkworks it’s NASA funding was pay for performance. SpaceX would have been out if business without the first contract, and would not be remotely as big today without the others, but those contracts have also saved NASA billions of dollars.
The vast majority of government funded projects are similar to the SLS, which has eaten up $15B+ in taxpayer funds without a launch. And when it finally launches 4+ years late it will be the most expensive launch system ever by a factor of over 2x per launch, and at least 20 times more expensive per pound than commercial launch systems. While reusing 40 year old engines!
Government backed financing for equipment sales, and government procurement for defence or large projects ... these are activities are miles apart in terms of operational realities.
The Chinese government is involved to this day in financing Huawei customers. This is a big 'no no' for supposedly 'free trade' because it's a huge strategic advantage for any competitor wishing to completely dominate a market and flush out competitors.
The CCP controls their national commercial banks and controls the central bank - they can direct financing to happen directly for what they perceive to the benefit of the state and make no mistake this is a lot of firepower.
Imagine if the head of he Federal Reserve, and the head of Morgan Stanley were directed to make strategic loans to Cisco's customers at he behest of the President.
Cash-strapped Western companies, getting really sweet financing and credit terms and 'one stop one shop vendor' from Huawei is enough to really spook everyone.
Neither is it really a 'side show' issue - it's quite a fundamental thing. The financing is as important part of the equation as the product itself. Much like the financial terms on your car loan or mortgage are fundamental aspects of your terms of ownership.
Imagine if Trump Directed the Fed to print money to give to Chase Bank, to lend money to TMobile Germany to buy gear from Cisco. This would be incomprehensible to us.
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!))
This sounds like a more plausible explanation for why Huawei succeeded.
Simply because of unlimited support and funding from the China central government, in order to get independent technology Research and Development.
And plus, the financing for foreign countries, is also super important. There was talk about some African nations, only interested in buying Chinese products, simply because the Chinese provided favorable financing terms. Terms which the western countries refused to do.
In this case, the western countries wanted to make as much money as possible from one deal. Whereas China played the long game, and chose to make less money per deal, but had to strike a lot more deals, to make their money. So, China made their money in volume.
It seems there are different goals at play here.
The countries in the west, have their national champions, and their own governments support them at a holistic and policy level. And each company tries to compete with each other to win a bigger slice of the pie.
Whereas in China, their goal, is simply for technology independence from the west. So, they are willing to throw as much money at the problem as possible, in order to achieve that goal.
This also harkens back to the atomic bomb analogy. That once the technology was proven to be scientifically possible, then it can be independently achieve by a foreign government, if they put enough time, money, and people at solving the problem.
For this reason, I wonder if near-zero interest rates and corporate bond purchasing will ever end in the US. If it continues, isn't it kind of like the government supporting these large US corporations in the similar way? Encouraging them to take any contract or spend on any investment that returns more than 0% in interest?
I'm not saying this would be "good" or "bad". I imagine it would be bad for smaller companies, but good for larger ones, maybe good for American competitiveness in world commerce (for a while) but could be bad in the long run because we'd be committing to a race-to-the-bottom price war with a competitor who has a lower bottom price than we do.
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.