The Bubble and the Bear

What this book actually teaches

The Bubble and the Bear: How Nortel Ate Canada (2002) by Douglas Hunter is a detailed corporate history of Nortel Networks and the technology bubble of the late 1990s, framed specifically through the lens of what the Nortel collapse meant for Canada — its pension funds, retail investors, and national sense of corporate identity. At Nortel's peak in July 2000, the company represented more than a third of the total market capitalization of the Toronto Stock Exchange. Its collapse wiped out roughly $350 billion in market value, impaired the retirement savings of hundreds of thousands of Canadian workers, and produced one of the most dramatic episodes of corporate governance failure in Canadian history.

Hunter's account is chronological and reported in depth, tracing Nortel from its origins as a Bell Canada subsidiary through its transformation under CEO John Roth into an acquisitions-driven telecommunications equipment company positioned to dominate the next generation of optical networking. The book examines how Roth and the board pursued aggressive acquisition-based growth — spending roughly $25 billion on acquisitions between 1997 and 2000, most famously JDS Fitel, Bay Networks, and Architel — at prices that reflected bubble-era valuations and synergies that did not materialize.

The accounting practices that accompanied this growth are examined in detail. Nortel used pro forma earnings — adjusted numbers that excluded restructuring charges, acquisition-related costs, and stock compensation — to present a version of its financial performance that diverged substantially from GAAP results. Hunter traces how these practices, common across the technology sector in the late 1990s, allowed Nortel to report apparent profitability while its cash position deteriorated. The book predates the 2004 accounting scandal in which Nortel restated earnings for multiple years, but the preconditions Hunter identifies were already visible in the public record.

The Canadian dimension is the book's distinctive contribution. Hunter examines how Nortel's status as a national champion created a cultural and regulatory environment in which critical analysis was discouraged — in the financial press, among Canadian institutional investors, and within the analyst community. The concentration of Nortel in Canadian pension funds and the TSX index created systemic exposure that individual Canadian retail investors could not easily diversify away from.

The weaknesses are primarily about scope. Hunter's focus on Nortel and Canada means the book engages less with the broader technology bubble dynamics — the Federal Reserve's monetary policy, the NASDAQ ecosystem, and the venture capital infrastructure that inflated the bubble across both sides of the border — that a comparative analysis would require. Readers who want the full bubble story need to supplement with other accounts.

For investors and students of corporate governance who want a detailed, well-reported case study of how a major technology bubble collapse played out at the company level — particularly through the lens of accounting practices and board failure — The Bubble and the Bear is one of the better documented accounts of the Nortel episode.

Read next

How The Bubble and the Bear stacks up

About John P Prestbo

Read more from John P Prestbo and explore the full bibliography on ClearValue Books.