2012 funding fears as IT sponsor files for bankruptcy protection

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The company signed a £50million deal to be the official technology partner of the Games.

The company is due to provide technical expertise and equipment in partnership with fellow 2012 backer BT and is an experienced supplier to the Olympic Games. If the US firm goes under, Locog, the London Organising Committee of the Olympic Games, could find itself seeking to renegotiate with a rival firm in an unfavourable sponsorship market.

A successor to Nortel in the sector would find themselves in a buyer's market and seek to drive the price down, possibly taking it into the "tier two" sponsorship category of £20million to £40million.

Locog was unavailable for comment but it has admitted it faces a challenge raising the final one third of its £650million sponsorship target which it expects to meet.

Nortel Networks, North America's biggest telephone equipment manufacturer, filed for Chapter 11 bankruptcy protection in a Delaware court this morning.

The Toronto-based company has been hit by plummeting demand for its equipment as customers moved to faster technology.

Nortel, whose shares hit a $900 high during the dotcom boom, was warned last month by the New York Stock Exchange that it would be delisted if it did not bring its share price above the $1 minimum within six months.

Yesterday, Nortel's shares closed at 32 cents each.