Local Tech Wire 

As Nortel nears financial shoals, execs tossed overboard might be the survivors

Captain Mike Z.

Related Stories

• Nortel's restructurinng: 4 execs out; 1,300 jobs cut; salaries frozenn

Related Blog Posts

• Mike Z’s Nortel rescue plan – Shuffling deckchairs on the Titanic?

Site Search

RESEARCH TRIANGLE PARK, N.C. — As the S.S. Nortel continues to sail toward the icebergs of financial destruction, its captain and chief executive officer wants the crew and passengers (bond holders, stock holders, financial analysts) to know that he’s at the helm.

"I can assure you that the sense of urgency which we had in mid-September has only accelerated these last two months," said Mike Zafirovski in a conference call Monday as he spelled out the latest reorganization he’s hatched since taking over the troubled telecom-gear giant three years ago.

"This is a critical time for Nortel,” he added.

Well, now, there is a spot-on comment if The Skinny’s ever heard one.

Three years into the job with $4.5 billion in losses, thousands of job cuts, his own management team in place (and four now being thrown overboard as part of the restructuring), Mike Z says his latest plan will get Nortel focused and back on course toward profitability.

But is he sharing the pain? And is time running out for him even though he has made progress in many areas? Lawsuits have been settled. Financial messes he inherited have been resolved. Nortel has been gutted like a fish. Yet its stock still stinks. What’s next?

Mark Evans, a Canada-based journalist who has covered Nortel for years and writes periodically for WRAL.com and Local Tech Wire, said Monday that it’s time for Mike Z to set an example.

“If Mike Zafirovski had decided to take a $1/year salary or decline any bonuses in 2009, it wouldn’t have meant much to the bottom line but certainly would have sent a strong signal to Nortel’s employees who are being asked to suck it up,” Evans wrote.

“In fiscal 2002, Cisco CEO John Chambers drew a $1/year salary at a time when the company was laying off 8,500 employees.”

Mike Z’s latest scheme didn’t help Nortel (NYSE: NT) stock. It fell 14 percent to $1.01 after Nortel announced a $3.4 billion loss and a 14 percent drop in revenue.

RBC Capital Markets analyst Mark Sue was so impressed that he wrote: “I would like to refill my Prozac prescription.”

His rating on the stock: Underperform with speculative risk.

So what’s next for Nortel, which was mum about details on plans to sell its Metro Ethernet business unit?

"They really need to be acquired by a bigger player," Steve Howse, an adjunct professor at McMaster University's DeGroote School of Business, told the Toronto Star. "They're just not big enough in the global market anymore."

However, Howse also raised the prospect that Nortel might face bankruptcy.

Andrew Willis, writing for the Globe and Mail in Toronto, said Nortel’s investors need to “face some hard truths.”

“The company that endlessly attracts bottom-fishing investors disappointed once again yesterday, with another 1,300 job cuts, suspension of preferred share dividends, and a restructuring that could serve as a prelude to a bust-up,” he wrote.

“Oh, and CEO Mike Zafirovski announced a $3.4-billion (U.S.) quarterly loss, the worst in seven years.”

About the only person to see something positive in the Nortel mess was Dave Greenfield at ZDnet.

“As I was reading about Nortel’s rerun today, I was thinking that there might be a silver-lining in all of this for enterprise folk,” he wrote.

“The thing is, the only division that showed remotely positive performance in this macabre report was the Enterprise Solutions group,” Greenfield pointed out. He also noted that Internet protocol telephone revenue was up 17 percent from the same time frame in 2007.

But will the glimmers of good news be enough to act as beacons and get Nortel back on course?

If Captain Z does so, he will manage without four top executives, including his chief technology officer. Joel Hackney, the former top Nortel exec in RTP, really is becoming Captain Z’s “No. 1.”

Out is CTO John Roese, an accomplished inventor and longtime industry veteran.

Jim Duffy, at NetworkWorld, recounted some of Roese’s qualifications:

“Roese has almost two decades of experience in networking and security, VoIP, wireless technology and machine-to-machine communications. In addition, Roese is the inventor on 16 granted and pending patents in the area of policy management, location-based networking and other areas of communications.”

Unfortunately, all those patents weren’t enough to keep him on the bridge of S.S. Nortel Titanic. He and other execs take to the lifeboats on Jan. 1.

If Captain Z doesn’t get a grip on things soon, those in the lifeboats may be the ones who survive.

The Skinny

WRAL Local Tech Wire Publisher and Editor Rick Smith dishes out tidbits from the local technology sector. Read more articles…