Nortel Networks Corp. sought protection from creditors in the U.S. and Canada, falling victim to the economic downturn and years of struggle to turn around what was once Canada's largest company.

The Chapter 11 filing further weakened the ranks of major telecom-equipment makers and sent chills through suppliers already coping with declining sales of network gear and handsets. Phone carriers more than ever are seeking suppliers with good products and better balance sheets.

"The strong are going to get stronger," said telecom analyst Ping Zhao of CreditSights, a stock and bond research firm. Ms. Zhao gave Nortel little hope of emerging from bankruptcy. "They were already out of favor due to their weak finances, but for any of the new projects, they are definitely out of the picture" due to the filing.

A $107 million interest payment due Thursday may have hastened Nortel's decision to seek protection from creditors, analysts said. The Toronto-based company is entering bankruptcy court with $2.4 billion in cash to fund day-to-day operations, at a time when financing is drying up for companies reorganizing under bankruptcy protection.

Corporate bankruptcies and defaults, which experts predict will double in 2009, are striking industries ranging from retail, chemicals and autos. Falling consumer and business demand for their products are hitting at the same time payments are due on debt accumulated in recent years of easy credit. Lenders also are tightening restrictions on borrowers, making it harder for struggling companies to avoid bankruptcy.