Mike Z.’s Nortel Legacy: A Colossal Failure

With Nortel (NRTLQ.PK) deciding that the only course of action is a fire-sale of all assets, Mike Zafirovski’s reign as CEO is about to conclude. Without being too harsh, it’s fair to say Mike Z.’s initial - and perhaps last - stab as a CEO was a colossal failure.

Sure, he dealt with some pesky accounting issues and reduced costs by laying off thousands of employees, outsourcing jobs to low-cost places, and selling a few assets. But the bold moves that Nortel needed to survive and thrive in a volatile and competitive marketplace never materialized.

A perfect example is how Nortel’s lack of M&A activity, especially given Mike Z. hired George Riedl, an M&A wizard, away from Juniper. When your biggest acquisition is Tasman Networks for $99-million, it’s obvious you’re not in the game.

In hindsight, Nortel had nothing to lose by playing it safe and conservative. With cash in the bank and a stock price that, at one point, rebounded to nearly $20, Mike Z. had lots of options to do something dramatic and game-changing. Instead, he stuck to a game-plan he knew from General Electric.

To solely blame MIke Z. would be unfair. If people are looking for scapegoats, Nortel’s board is the perfect candidate. Over the past decade, the board has been a huge disaster.

Here are some of the lowlights:

• Letting ex-CEO John Roth go on a multi-billion dollar spending spree, many of which were mistakes that Nortel wrote off or sold
• Dismissing Gary Daichendt and Gary Kunis’ aggressive corporate makeover
• The hiring of Frank Roth and Bill Owens as CEOs, who were unsuited for the job.
• Letting Mike Z. do nothing as Rome (aka Nortel) burned.

Truth be told, Nortel could have been saved if the right moves had been made. When Mike Z. took over, it was a $10-billion that needed strategic focus and a new, bold direction. Mike Z. was handed a huge opportunity to make his mark.

Unfortunately, he dropped the ball and, as a result, Canada’s flagship high-tech company is going to disappear.

For more, check out James Bagnall’s story in the Ottawa Citizen.

Comments

[serge9:]

Off course Nortel could have been saved if Board of directors and managements had that in mind, but all decision shows that their hidden agenda was to bring Nortel down while filling their Pockets, with a finance minister on Board (I do no know how he got his Degree and become a finance minister)
if Nortel were not a Public Company, and Z and the Board of directors are the sole owners, Nortel would have been Saved, because those Criminals would have think and Act to save the Company, But it is Public Money, so they loose nothing as a matter of fact, they Millions and Millions while bringing Nortel down, they all should be brought to Justice and stripped from every cent they took away from Nortel, and should not be allowed to hold similar position ever again

Jun 23 07:28 AM

[Far Side:]

I worked for Nortel, saw the problem develop in 1997 when I was in Customer Service, moved to IS to shore up my resume for future exit, got the pink slip in early 2002 because I flagged accounting impropriety to Micky Verma, and took my pension and payout with me.

I predicted the OSC/SEC probe, flagged 6 restatements in 2002, knew that all past M&As were under water, saw the failures of Frank Dunn and Bill Owen, and wondered how a light bulb C-Level manager with a troubled track record in Motorola could possibly turn Nortel around.

In this particular case, nostalgia aside, I truly believe that dismantling Nortel at this point is the only option, given that idiots, imbeciles, and stupid people were appointed to the board and that their successive choices of CEOs were just that.

Roth was a good leader but rather immature in understanding M&A finance and future projections. The acquisition of Xyros and Clarify was like buying companies with no future integrated value.

Indeed, acquiring Bay Networks was good BUT the merger was completely mis-handled. Trouble started when their Junior managers were brought in as "directors" and when their products were simple compared to the DMS switch. Most of the Bay people jumped ship over time and they product lines took too long to integrate.

At the end of the day, the whole sales and marketing area was flawed as sales incentives were based on % and multiple sales people hit the same customers with their own products assigned. Turf battles erupted and many customers got turned off.

Nortel management, throughout the last 10 years, suffered from deep narcissism and huge egos. They stopped listening and started to turn on their own staff who did not agree with them. This made for cloned managers who survived through brown nosing and carrying out instructions without question. Now these line managers will be welcomed with fork and knife when they get the pink slips as they were the same who hurt so many lives without proper reason or logic, just to save their own skins.

I wish all my colleagues good luck as there is life after Nortel

Jun 23 10:01 AM

[Far Side:]

The number of employees left in Canada is less than 3000 - why should the government even bother to bail out Nortel when it chiefly operates out of the US? It may be prudent for the government to hire all of their engineers into NRC as it will be much cheaper!

To add insult to injury, the CEO lives in an apartment during the week and commutes from Chicago weekly. Maybe, he should be groveling to Obama for a lifeline....

Jun 23 10:08 AM

[Far Side:]

The number of employees left in Canada is less than 3000 - why should the government even bother to bail out Nortel when it chiefly operates out of the US? It may be prudent for the government to hire all of their engineers into NRC as it will be much cheaper!

To add insult to injury, the CEO lives in an apartment during the week and commutes from Chicago weekly. Maybe, he should be groveling to Obama for a lifeline....

Jun 23 10:51 AM