Nortel Networks Corp. watchers are keeping an eye on the struggling telecom technology company this week, as it is due to make millions in interest payments that could force it to file for bankruptcy protection in Canada and the U.S.

About $100 million worth of interest is due Thursday on debt issued as company bonds, a Nortel source has told CBC News. That has led to speculation that the company, which is headquartered in Toronto and is still Ottawa's largest private-sector employer, will find it can't make the payments and will seek protection from creditors.

Bankruptcy protection would allow the company to do some drastic restructuring or prepare for the rapid sale of some of its assets.

Despite the threat, Nortel officials such as former federal finance minister John Manley are putting on a brave face.

"I think all of the bad stuff is behind us," said Manley, who is on the company's board of directors and said it is focused on building its future.

"Nortel has been our Canadian flagship. It has history, it has thousands of patents, and that's the kind of thing it's very hard to create ... and when you've got it, you really need to do everything you can to preserve it," he added.

Parts could be sold off: professor

Not everyone is optimistic the company will be preserved.

Tamas Koplyay, who teaches technology management at the University of Quebec in the Outaouais (UQO), said he expects Nortel will soon cease to exist as an independent company, but parts of it will instead be broken up or sold.

He said he hasn't seen a shred of evidence that the company could turn itself around.

"The biggest assets I would say were the people. At this point I'm not sure exactly what shape the people are in," he said.

The company has seen 16 rounds of cuts over the past decade that have hit Ottawa hard, whittling Nortel's workforce in Canada's capital from 20,000 in 2000 to just 4,600 today.

"You cannot be creative under these circumstances," Koplyay said, adding that a nurturing, supportive environment is needed to encourage creativity.

Koplyay said he doesn't think Nortel should get a government bailout to survive.

He admitted that the company's demise would be an enormous shock, as there are no growing companies to fill the gap.

"Venture capital is so scarce and good ideas are not being funded anymore, and therefore the potential of turning a medium-growth company into another Nortel is not even on the horizon," he said.

But he thinks the right approach to the problem would be for the federal government to help new and emerging companies grow.

U.S. firm could buy Nortel

At least one Canadian analyst thinks Nortel won't file for bankruptcy protection.

Ross Healy, CEO of Strategic Analysis Corp., a firm that studies publicly traded companies to estimate the true value of their stock, believes Nortel will be bought by a U.S. firm first.

"For Nortel, maybe that's the best outcome," he said, adding it is more or less impossible for the company to rebuild its balance sheet when its stock is selling at a discount.

The company is not insolvent, he said, but it's far weaker than a technology company should be, given that such companies face a constant fight against the march of technology that quickly renders previous technologies obsolete.

"You've always got to have a balance sheet that's stronger than average just to keep you out of trouble," Healy said.

If the company is sold, Healy said he wouldn't be surprise if the federal government helped in the process.

Employee morale low

Meanwhile, Nortel employees such as Paul Arbour and Marc Lavoie said ongoing uncertainty is hard on workers.

Lavoie, who has worked for the company for 26 years and whose father worked there before him, said morale is low, but employees are hopeful.

"We still believe in this. We still basically like what we're doing," he said.

Arbour works for a unit that is up for sale. He has been a Nortel employee for eight years, and said the uncertainty is hurting employee motivation.

People are reluctant to stay up all night working on a project if they could be laid off, he said, and some are actively looking for other jobs.

But so far, he said, he's sticking with it.

"I really enjoy the job and I can't do this anywhere else," he said. "There's nowhere else in Canada, in Ottawa, where I can do the job that I do."