Nortel Networks Corp. will sell much of its wireless business to Nokia Siemens Networks for US$650 million, the ailing telecom company announced late Friday.

The deal stipulates that at least 2,500 Nortel employees carry on with Nokia Siemens and hinges on approval from the United States Bankruptcy Court.

Close to 1,000 people in Ottawa will be affected by the sale's first phase. The capital is home to the bulk of Nortel's research on new wireless technology, known as LTE.

A Nokia spokesman told CTV Ottawa Friday night that they hope to keep the bulk of Nortel's capital employees through a global centre of research excellence for wireless technology.

No details have been provided on what the future holds for pension benefits and current management.

It's just the latest blow to Nortel, a company that once employed 90,000 people around the world but has since shrunk to about 30,000. Over the past decade, it has been hit by the tech crash, accounting irregularities and now the worldwide economic crisis.

"All of it took its toll and finally the camel's back got too heavy and it couldn't hold the straw anymore and here we are," Bernie Wolf, of York University's Schulich School of Business, told CTV News Channel on Saturday. "It's a really, really sad day for Canada and Nortel, seeing it chopped up like this."

Nortel president and chief executive officer Mike Zafirovski said the deal will best preserve the company's value while preventing the loss of thousands of jobs.

"Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority," Zafirovski said in a news release.

"We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible. This will ensure Nortel's strong assets -- technologies, customer relationships, and employees -- continue to play an important role in driving the future of communications."

The company also announced it is in negotiations with "external parties" to sell the rest of its operations.

However, if the company can't secure a satisfactory deal, it will consider other restructuring alternatives, but did not elaborate on what those might be.

Susan Spradley, head of North America for Nokia Siemens, said the acquisition of Nortel strengthens its own operations.

"The relationship and customer base that they have is tremendous and we're very excited to expand our relationship with some of those customers even deeper," Spradley said.

"And of course we have the R&D teams that we consider some of the best in the world and while we have competed against them in the past we are very excited to have them part of our team going forward."

Nortel will now apply to delist its shares from the Toronto Stock Exchange.

Nortel, once a thriving telecommunications company with 90,000 employees, filed for bankruptcy in both the United States and Canada earlier this year after a number of mishaps sent its stock plummeting, including accounting irregularities that eventually led to criminal charges against some former executives.

In recent months, the global economic crisis led to a dramatic drop in business that slashed the company's revenues. Nortel lost more than US$5billion last year and the losses have continued into 2009.

The company's net loss for the quarter ending March 31 was US$507 million, or $1.02 per share. That is compared to a quarterly loss of $US138 million, or 28 cents per share, a year ago.

Revenues are also down 37 per cent, from $2.76 billion to $1.73 billion.

The company's downward spiral began in October 2000, when some investors expressed their disappointment at the company's sales figures.

Within the week, chief financial officer Frank Dunn took over as CEO from the retiring John Roth.

The company experienced something of a rebound until October 2003, when Nortel officials acknowledged some accounting irregularities.

Dunn was fired in April 2004, and an RCMP investigation led to fraud charges against him and others.

Zafirovski was named CEO in late 2005 and presided over a US$2.5 billion settlement with shareholders over the accounting scandal.

Although he has often promised that restructuring efforts would "re-create a great company," the economic downturn has proven too difficult to overcome.

Friday's news followed an announcement last month that Nortel plans to sell its majority stake in LG-Nortel, a joined venture with LG Electronics that was established in 2005.

One industry source told CTV Ottawa that Nortel could have attracted 30 to 40 per cent higher value than the current sales price.

With files from The Canadian Press and a report from CTV Ottawa's Paul Brent