Did Chinese Hackers Bring Down Nortel?

The Wall St. Journal today reported that in 2000, Chinese hackers stole seven passwords from top Nortel executives and hacked into the beleaguered company for more than a decade.

The paper, citing Brian Shields, a nineteen year Nortel veteran who led an internal investigation, says the hackers downloaded “technical papers, research-and-development reports, business plans, employee emails and other documents”

PostMedia News’ Derek Abma today talked to Queen’s University David Skillicorn, a Professor at Queen’s University’s School of Computing who said this single fact may be more responsible for Nortel’s downfall than any bumbled acquisition, balance sheet scandal, or external force.

“When you compare Nortel to, say, Cisco, which were in very similar positions in 1999, it starts to look a bit less credible that it was just the dot-com bust that brought Nortel down,” he said.

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At its peak, in 2000, Nortel had a market value of $350 billion. The stock once represented 36% of the entire value of the Toronto Stock Exchange and employed 90,000 people.

The seemingly endless downward spiral of Nortel actually began on October 25, 2000, when CEO John Roth warned, for the first time, that the company would not meet its sales targets. Shares of Nortel fell from $96 to $71 that day. By 2002, half of the company’s 90,000 workers had been laid off. And then it got worse. Debt downgrades, missed reporting deadlines and financial restatements killed a meager rally in the stock. Nortel declared bankruptcy on January 14, 2009.

More recent evidence suggests Nortel’s fate may not, in fact, be so rare. In December, Bloomberg News reported that the networks of at least 760 North America-based companies, universities, ISP’s and government agencies were hit over the last decade by a single elite group of China-based cyber spies. The companies included Research in Motion, Boston Scientific, even tiny iBahn, a company that provides broadband to guests of Marriott Hotels.

Richard Clarke, famed security advisor to U.S. President George W. Bush, said that in the past five years China “…has been hacking its way into every corporation it can find listed in Dun & Bradstreet.” Adding that they are targeting “Every corporation in the U.S., every corporation in Asia, every corporation in Germany. I don’t think you can overstate the damage to this country that has already been done” he said.

Related: Terry Matthews: Nortel is Gone, Here’s How we Get Over It