Zafirovski leaves Nortel: "it's natural", company claims

Stuart Corner
Tuesday, 11 August 2009 03:17

IT Industry - Strategy

Nortel networks has announced the departure of president and CEO Mike Zafirovski, the resignation of a number of directors and a "more streamlined" structure saying "the company has reached natural transition point for reduction in the board size and for Mike Zafirovski to step down."

Zafirovski will depart immediately and the board size will be reduced from nine to three: John A MacNaughton, Jalynn H Bennett and David Richardson, with Richardson serving as chairperson. These three will also serve as members of the audit committees.

The current chairman, Harry Pearce, praised Zafirovski saying: "Mike came to Nortel to transform this company. He made great progress on many fronts including addressing significant accounting and related legal issues; improving the quality of Nortel products and the company's cost structure. His ambitious vision helped shift the economic centre of the company from legacy to growth investments. It was unfortunate the transformation was derailed by a deteriorating economic climate and the company's legacy cost structure. The operating improvements and strategic investments made during his tenure significantly contributed to the fact that Nortel's businesses are so attractive to potential buyers today."

Eric Krapf, editor & lead blogger for the TechWeb's No Jitter blog site commented "Mike Z-bashing has been popular and not entirely unjustified, but I think the two factors that Pearce cites are, ultimately, the lion's share of what brought Nortel down - if by 'legacy cost structure' you mean 'financial scandals and scandalously poor decision-making with regard to acquisitions.' Nortel wasted a lot of money buying companies they shouldn't have bought. The economic climate didn't help, but I wouldn't have put it first on the list. The economic climate's hit everyone in the communications business, and only one major vendor is in bankruptcy."

Nortel is also creating a "more streamlined" structure that it says "will enable the company to effectively continue to serve its customers, and also facilitate the sales of its businesses and integration processes with acquiring companies as well as to continue with its restructuring activities."

Nortel's business units - Wireless Networks, Enterprise Solutions, Metro Ethernet Networks, Carrier VoIP and Application Solutions and the LG-Nortel joint venture - will report to the chief restructuring officer, Pavi Binning. The company's mergers and acquisitions teams will continue their work under the chief strategy officer, George Riedel. Nortel Business Services (NBS) will continue to serve the transitional operations needs of Nortel businesses as they are sold 'to ensure customer and network service levels are maintained throughout the sale and integration processes," NBS will continue to be led by Joe Flanagan.

A core corporate group is being established that will be primarily responsible for the management of ongoing restructuring activities during the sales process as well as post business dispositions. It will be lead by John Doolittle, formerly Nortel's treasurer.

Binning said: "This is a new, but also highly critical phase for the company. From servicing existing customers to completing the sales process, we must effectively manage the remaining work so that we continue to see high service levels for customers while maximising value for creditors and providing clarity for customers and employees."