Nortel: Still Waiting For Mike Z. To Deliver

In the wake of disappointing financial results and yet another 2,000 jobs to be eliminated, the spotlight - and pressure - is clearly on Nortel (NT) CEO Mike Zafirovski and his hand-picked senior management team.

For all the talk about revitalizing Nortel and Six Sigma (aka cost reductions), you have to ask what Zafirovski has really done over the past two and half a years. Nortel has made exactly one acquisition (Tasman Networks), dumped one major asset (the money-losing UMTS business to Alcatel (ALU)), chopped about 5,000 jobs, while moving others to lower cost countries such as Turkey, Mexico and China.

But at the end of the day, Nortel is pretty much the same as it was three years ago - a company trying to be all things to all people without a dynamic growth engine. (Note: it would be unfair not to give Mike Z. credit for navigating Nortel though the accounting scandal he inherited, and giving the company some financial stability).

It got me thinking about what could have been if the Cisco (CSCO) Kids - Gary Daichendt (above left) and Gary Kunis - had been given the freedom by Nortel’s board to performance radical surgery on the company.

Their strategy would have seen Nortel focus on fewer businesses, which would have given it a sharper strategic focus and significantly lower R&D costs. At the same time, it’s likely the Garys would have sold a number of businesses, closed superfluous facilities and streamlined the books.

Unfortunately, their plans never came to fruition as Daichendt abruptly resigned as president and COO three months after he was hired after butting heads with CEO Bill Owens and failing to convince Nortel’s board of the new, radical strategic direction that was required. Soon after, Kunis, the CTO, followed him out the door.

Hindsight is always 20/20 but it would have been interesting to see what the two Garys would have done to Nortel.

Comments

[moondancer:]

Mike Z is a very talented guy and is on track to run around that big boat known as Nortel. To go back two years and question the Gary and Gary show and what would have been is just silly. Sorry but you can't turn back time. As someone who recently left the Nortel organization there are many good efforts underway and lots of new high level exec's who come from the enterprise space. They still need radical surgery on middle mangement in the sales area. They have poor staging capabilities to properly test the newer larger complex converged network solutions that could be home runs. This is another area where Nortel needs to invest.

2008 Mar 04 08:14 AM

[LeeWillcox:]

Lay off workers and hire more officers. Humm I think I see the problem
here. Hey, make sure all the new officers get a big bonus.

2008 Mar 04 11:40 AM

[irish:]

Mark, Mike Z never had a real chance in the first place. Once the board and Harry Pierce voted against the new plan, the game was over. The networking experienced executives left and the GE team with no industry experience took over. Six Sigma was never going to fix this. Mike Z had a blueprint left him on what to do and could not get it done. Nortel is now a penny stock with no product market share in double digits, a not good distribution model, no money or stock to buy something. Can not go up and will go down. Mike Z might be talented, but with this set of cards John Chambers would fail and he knows/built this industry. The tipping point has passed. It is going to be painfull for 35,000 people.

2008 Mar 04 03:21 PM

[Industryobs...:]

They keep on missing the mark. Revenues down from $30B to $10B. No profit to speak of in 4 years. The only product that generates measurable revenue (CDMA RF gear) is old technology with no medium/long-term future. A continual stream of layoffs that constantly distracts from execution of corporate turn around plans (not to mention a huge morale killer). Inadequate cash for R&D to build a future product offering. Poor product distribution plan. Giants like Cisco with none of the afore mentioned Nortel problems plaguing them.

Seriously. Moses coming down from the mountain couldn’t rescue this company.

2008 Mar 04 08:11 PM

[gihlmer:]

Nortel has rock solid products that are fully deliverable and ones that bring great value to the marketplace. The problem is perception. Seems to me that the message is not getting out.

2008 Mar 05 09:37 PM

[brightstar:]

As an ex-Nortel employee, I know where the problems are: middle level management. They just let hard-working good guys go, all the remaining guys all have a high rank and ex-managers are everywhere. If there is an issue/problem, it will go on a long journey (7-8 guys) and only the last poor little guy knows the answer. In Cisco, the lowest level manager has to spend 20% time in coding! Nortel? Noway! I have a friend, he said his manager has very little knowledge about what they were doing. In one case, he only needs 20 min to fix a bug, but he told him he needs one week. And on the 5th day, he told his manager it's done, and his manager was very happy!

In another case, one poor little guy was let go, and 3-4 people took over his responsibility. But they have no idea how those 3 apps work. The manager kept bugging that little guy, asking for knowledge transfer and even promised to give him $10k cash.

Now you know why Nortel has been kept going down?

2008 Mar 05 10:44 PM

[tech_observer:]

As an ex-nortel engineer, would totally agree with the last comment. Problem with nortel is that at a grass root level, it just does not breed a culture that would motivate engineers to put in there best. It has very little to offer to even it's best engineers. Even during the good times, the company never offered any true profit sharing or incentives to it's engineers. Most mid-level managers are old school that consider engineers as plug-and-play commodities. Lack of engineering centric culture and too much managerial politics. No matter what kind of executive strategy or CEO you might have, good luck against some of the silicon valley competitors!!

2008 Mar 07 07:20 PM

[Ex-Norteler:]

I am the ex-nortel employee.... i was ask to leave 2002. the reason is not because I am not capable in my job. in my department we have 2 person. my manager told me that another person have a family. so he need this job. this is why he decided to chop me. i think nortel is management is very unprofessional in dealing with this. very disappointed.

2008 Mar 09 10:42 PM