updated 1/14/2009 10:50:20 AM ET 2009-01-14T15:50:20

Technology giant Nortel Networks Corp. filed for bankruptcy protection in Canada and the U.S. on Wednesday, the first major technology company to file for protection during the global downturn.

North America’s biggest maker of telecommunications equipment has been dealing with a sharp drop in orders from phone company clients. It filed for court protection in Delaware on Wednesday, a day before the firm is due to repay a $107 million interest debt on bonds.

Creditor protection would give the company more opportunities to explore restructuring options or sell off some of its assets.

The Toronto-based company said in a release that it had been in the process of a turnaround since late 2005 but added that “the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation.”

The company said it is taking this action now with a $2.4 billion Canadian ($2 billion) cash position.

“Nortel must be put on a sound financial footing once and for all,” Nortel President and Chief Executive Mike Zafirovski said in the statement.

The company has been attempting to recover for years from an accounting crisis that affected results and caused shareholder lawsuits, regulatory investigations and the firing of key executives, including CEO Frank Dunn.

Nortel stock, which once traded at more than $1,200 Canadian a share on a pre-split basis during the tech bubble, closed Tuesday at 38.5 Canadian cents a share on Canada’s main stock exchange.

Nortel once had more 95,000 employees and a market capitalization of $366 billion Canadian ($297 billion) on the Toronto Stock Exchange. It closed Tuesday worth just 191 million Canadian ($155 million).

The Toronto Stock Exchange has halted trading of Nortel’s shares. Nortel stock fell 30 percent in pre-market trading.

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