Nortel CEO and Board Go to the Exits

Nortel in the midst of bankruptcy saw its CEO, Mike Zafirovski and a large portion of the entire board announced their resignations today. Back in November of 2008 I thought Zafirovski was on his way out. He has survived much longer than I anticipated. According to a story in today’s Canada Globe and Mail Report on Business,

“The direction has been set and we are now at a natural transition point as we continue to service customers, maximize value through sales and continue restructuring activities,” Mr. Zafirovski said in a news release.

“We’ve reached a logical departure point,” added Harry Pearce, the chairman of the board, who is stepping down along with five other directors: John Manley, James Hunt, Richard McCormick, Claude Mongeau, and Mr. Zafirovski.

It is sad what has happened to the once thriving telecom equipment firm. Keep an eye on how this all plays out.

For more:

New York Times

Newsvine

BizJournal

Ottawa Biz Journal

A Good CEO is Not Always All that is Needed - Nortel

The news that Nortel Networks NT (TSX) has moved into bankruptcy is not all that surprising.  The telecommunications firm has been suffering ever since the 2001 recession.  The company which changed CEOs back in November 2005 had high hopes with the arrival of Mike Zafirovsky.  Zafirovsky had a terrific pedigree.  He was extremely well regarded when he headed the cellphone division for Motorola.  Prior to his selection at Nortel he had been passed over for the CEO job at Motorola and appeared anxious to make his mark.  He also had tremendous training while at General Electric (before his time at Motorola) which at the time was headed by Jack Welch.  When he took the job at Nortel the company was mirred in scandal and was already suffering financially.  Zafirovsky an excellent operations manager may have lacked the strategic acumen to ultimately turn Nortel around but it is hard to see what he or anyone else might have been able to do.  According to an acute analysis by Gordon Pitts of the Globe and Mail,

… Nortel’s fate was probably determined by the time the new CEO arrived in October, 2005. The global asset meltdown and recession simply hastened the inevitable end of the Nortel saga –- as it will with many crippled companies that have entered the downturn with severe competitive liabilities. 

Mr. Zafirovski was realistic in understanding it would be a tough haul. “These things do not happen overnight” he said in an interview in summer of 2007. “We are not looking for a 50-year turnaround but we did say on Day One it would be three to five years to recreate something special. We are now 19-20 months into it so obviously the time frame is narrowing.”   

 Pitts went on to state,

Mike Zafirovski was the right leader to turn around Nortel, but he came too late to the game. He expected he might have up to five years to fix Nortel, but it was less than three years until the market collapse, which has simply thrown more gasoline on Nortel’s bonfire of cash flow. 

CEOs are essential to a company’s overall success but they are just a component.  Nortel’s management and products came up against a wall back in 2001 and never really found the right exit door to help it get back on track.  Let’s hope other struggling companies can look at Nortel and come away with some ideas on how they might manage to avoid Nortel’s fate. It is likely that Alcatel-Lucent’s situation may actually improve as a result of Nortel’s new status. Stay tuned  

For more:

Bloomberg

CEO Watch - Mike Zafirovski, Nortel Networks

Nortel Networks NT (NYSE) , the struggling telecommunications equipment manufacturer just announced another round of employee layoffs.  According to Howard Solomon of Network World Canada,

(The company) will lay off another 1,300 employees and restructure its business to face an accelerated “sense of emergency” in worldwide plunge in customer spending. 

… Zafirovski said that starting Jan. 1, Nortel’s four divisions will be trimmed to three: Units that will create and sell carrier network products, metro Ethernet network products and enterprise products. The global services division that had existed will be split among the remaining three so each unit will be vertically integrated.

One of the more illuminating aspects of the cuts, which according to many analysts is too small and too late, is the fact that four key executives will be leaving.  Most of them came in under Zafirovski who had been hired back in 2005 to deal with the company’s troubles.  Nortel will see the departure of Lauren Flaherty, chief marketing officer, John Roese, chief technology officer, Dietmar Wendt, the global services president and Bill Nelson, the executive vice president for sales.   According to a story by Amy Thomson and Vivek Shankar of Bloomberg these four executives will depart as the,

Nortel has lost more than $4.5 billion since Chief Executive Officer Mike Zafirovski took over in 2005, pushing him to cut 18 percent of the workforce. Phone companies such as Sprint Nextel Corp. have curbed network upgrades to cope with subscriber defections. Others are shifting from Nortel’s older technology, seeking faster products from Cisco Systems Inc. and rivals. 

 What’s even more troublesome is the fact according to Lilly Peel of the Times Online,

Nortel Networks Corp reported it biggest loss in seven years… 

It is difficult to see how Zafirovski will have the ability and the confidence of shareholders to permit him to continue much longer in his efforts to try and turn the company around.   Nortel like Alcatel-Lucent and many other telecom equipment manufacturers are fighting an uphill battle.  There is nothing about Zafirovski’s plans or previous actions that can instill confidence that he has what is necessary to keep the Nortel ship afloat as it continues to move through troubled waters. Stay tuned.  

For more:  

The Globe and Mail  

Seeking Alpha 

theStar.com

Financial Post