Cramer on BloggingStocks: Learning the lessons of Nortel

I know. I bought the stock for Action Alerts PLUS when I saw the initial scoundrels were thrown out and I thought they could put the woes behind them.

It was a major mistake. The rot was too deep, the executives too in on it.

Nortel never came back from that accounting morass. In many ways Nortel was every bit as bad as Enron and Worldcom.

But there was one difference. At the time the accounting disaster occurred, Nortel was at the top of its technological game. No one thought it was being left behind. No one thought that NT was anything but the top of tech, a true rival even though its accounting problems were deep.

But they lost their step and they were history. (You could argue that the same thing happened to Lucent, too -- part accounting morass, part tech.)

think that Nortel's liquidation can be laid at the feet of the crooks running the joint. But it is worth remembering that the best tech -- which Nortel had -- meant nothing in the end, and five years after it had the best tech, the tech was just worthless. No one would pay for it.

No one.

So when you own tech stocks, even with installed bases, you don't own much at all, particularly if there is real competition. You can be wiped out much faster than in almost any other industry.

And Nortel went down real fast. That $250 billion company had, in the end, nothing anyone wanted. The cycles were just too quick, the machines just too worthless.

I am sure that many people will say that Cisco was the big winner from Nortel's woes. But here's something telling, too: You haven't made any money with Cisco either during this era.

I think the real takeaway is to remind you that tech's tougher than any other sector, and the while the reward is high, the risk is much, much higher.

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Cisco.