BIoT Canada

R&D eulogy to Nortel

'This critical mass of thinkers spun out literally dozens of companies to create an amazing hightech cluster.'

November 1, 2009  

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Here is something to consider: According to a Research Infosource Inc. report released in October, Nortel Networks spent $1.68 billion on research and development in 2008. That was enough to put it at the very top of the list of R&D investment by Canadian companies. And not just in the telecommunications sector, but across all sectors.

But that was 2008. Then some amateur magicians in the financial sector did a lousy job of pulling the tablecloth out from under the china at the global economy’s dinner party.

Not only did this break a lot of nice stuff and earn them lots of stern looks, it also contributed to the shattering of one of Canada’s most important companies and a much depended upon source of additional retirement income for many in this country.

Nortel filed for bankruptcy protection in January 2009 and as of this writing is being sold off piecemeal. When Research Infosource Inc. compiles its 2009 list of Canada’s most R&Dintensive companies Nortel will be nowhere on the radar.

As someone who grew up with Northern Telecom rotary dial telephones in his childhood home, a world without Nortel is going to take some getting used to. And as someone who has written about the technology sector since the mid1990s, it has been hard to watch this long and painful ride to the bottom.

We all remember those stories about Nortel stock riding the rocket ship to a high of around $125 per share in 2000. And then we watched it fall… and fall… and fall… to end up a penny stock.

But it is not the stock’s plummet that is going to give me nightmares. It is the intellectual capital that we are watching evaporate.

Of course, Nortel is not the only R&D game in the country. Bell Canada Enterprises was number two in the Research Infosource Inc. report, with 2008 R&D spending of $985 million (down almost 22%).

Other telecom/IT firms in the Top 10 included IBM Canada in fifth place ($397 million, up 5.3%) and AlcatelLucent in eighth ($237 million, up 0.8%). And special mention must be made of Waterloo’s Research In Motion, which expanded its R&D commitment by 51% the greatest boost amongst Top 10 companies to $383.5 million.

But there is more to large researchintensive companies than how much money they throw at new ideas. These companies are incubators: they generate a huge amount of brainpower. At one time, tens of thousands of brains worked at Nortel. The product of their efforts was not only hardware, software and services, but also the economic growth of the company’s biggest R&D beneficiary: Ottawa.

I remember, as a reporter in Ottawa in the 1990s, getting a poster from one of the area’s high tech associations. It showed the growth of the sector in the national capital region. The poster was arranged like the growth rings of a tree, and there in the centre was Bell Northern Research the onetime Bell Canada/Northern Telecom joint venture that became Nortel’s research division.

In addition to its own impressive R&D, this critical mass of thinkers spun out literally dozens of companies to create an amazing hightech cluster. Mitel, Newbridge, Corel, Mosaid, Tundra, JDS … the list goes on. Many of these companies, in turn, spun out new firms.

BNR’s influence is evident throughout Canada’s hardware, software and services sectors. Companies in areas as diverse as satellites and remote monitoring, semiconductor design, networking, applications development, plus all sorts of ancillary services like legal firms specializing in intellectual property law, venture capital funds, and others can trace some measure of their success, at some point, back to Nortel and Bell Northern Research. Naturally, the company had a huge impact on wireless equipment and services development, too.

The demise of Nortel has left a mighty big hole in Canada’s knowledge economy especially in the IT sector. Other companies are attempting to fill it, for sure, but it is going to take some time. And we will lose some smart people along the way as other technology companies, located elsewhere in the world, cherrypick the innovators out of the remains of our research giant.

But Nortel will not disappear not anytime soon. Because everyone from pensioners to professors will have an opinion on the big Nortel question. No: not, “What happened?” that is selfevident, because hindsight is 20/20.

Rather, “Did the federal government make the right decision to not extend the same type of support to Nortel that it did to General Motors and Chrysler?” Let the debate continue. CNS

Trevor Marshall is a Torontobased reporter, writer and observer of the Canadian wireless industry. He can be reached (on his mobile) at 4168787730 or