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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 a decade. Recent evidence suggests the Ottawa-based company may have the victim of a larger trend that is becoming more prevalent.

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.

This story is brought to you Zecotek Photonics (TSXV:ZMS). As of November 16, 2011, Zecotek owned title to or controlled more than 55 patents and applications. Click here to learn more.

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

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

  1. Sorry, the assertion that this hacking may be the main reason for Nortel’s collapse is just plain foolish. This company was run by totally incompetent individuals who chose to manage stock price and not the company. They took their eye off the ball because they had no real understanding of why the market bought from Nortel and therefore really did not know what they should focus on. They tried to “manage by spreadsheet” because that is what management who has no understanding of the needs or expectations of their customers, partners or employees do. The resultant illegal accounting activity was a reaction to the results generated by their total management incompetence. While this hacking may have had some impact by “speeding up the inevitable”, the end was predestined by the actions of the management team.

  2. Anybody who has any basic knowledge of IT would see through that story,
    What a nonsense – that they used these passwords for years.
    Standard operating procedure was to change passwords at list every 90 days.
    So how is possible for this to last for years?

    Even if they get a hold of them they could be able to keep them for limited time.
    Yes they could use to get some technical documentation, however NORTEL was not beat by competition and better technical solution from competitions, it was destroyed from inside.

    I think that NORTEL is easy target to pick on because there is no entity do defend it right now.
    However I think that downfall of NORTEL is directly connected to bad management decisions.
    If there was to make decisions NORTEL high level management made a wrong one
    Another issue was linked with decisions of Board of Directors of who to put in charge of NORTEL.

    To bad, it was once one of the best telecommunication high tech.

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