Nortel Networks Ltd. (NYSE/Toronto: NT) COO Gary Daichendt has resigned after only three months on the job, the company said in a statement released this morning.
So what happened? In a short, blunt press release, Nortel CEO Bill Owens, who hired Daichendt, basically said the top executives couldn’t work together.
"It has become apparent to Gary and me… that we have divergent management styles and our business views differ,” said Owens in the statement.
Nortel also announced that Gary Kunis, chief technology officer, who joined Nortel following the appointment of Daichendt, will also be leaving the company. Kunis previously worked alongside Daichendt at Cisco Systems Inc. (Nasdaq: CSCO).
The departure of the two top executives throws Nortel’s leadership back into question, just days after Owens spoke at Supercomm, saying things were just dandy.
Owens told a packed auditorium earlier this week in Chicago that “Nortel is doing well -- business is good. We’ve been through a transition.” Clearly that transition hasn’t yet ended.
Daichendt, former executive vice president of worldwide operations at Cisco before retiring in 2000, looked to be in position to eventually take over the CEO spot (see Ex-Cisco Exec Named Nortel COO). Owens had shed some responsibilities when Daichendt came on board.
The departure of of Kunis means Nortel has gone through three CTOs in less than a year. In October 2004, Brian McFadden took over for Greg Mumford. In March, McFadden was replaced by Kunis, becoming chief research officer (see Nortel Changes CTO – Again ).
— R. Scott Raynovich, US Editor, Light Reading (Ray Le Maistre, International News Editor, contributed to this story)
Nortel certainly promoted the "vision thing" for its management in the past, but when that vision is from God, I gather the board drew the line.
From today's Ottawa Citizen...
Making room for God in the workplace Perhaps former Nortel executive Gary Daichendt was merely demonstrating a measure of humility by suggesting God provided him with career advice. There are a few CEOs out there who would think to themselves: It's completely illogical for God to talk to me since, after all, I am God.
Alas, you will have the buy the paper to read the rest.
The story behind Daichendt's departure; No. 2 executive invoked divine intervention in bid to quickly take over the helm
By; JAMES BAGNALL
CanWest News Service
July 5, 2005
After all the angst, heartache, and sheer drama of the previous two years, Nortel Networks' board of directors was ready for something approaching normal in early June. Instead, God made an appearance - and company chairperson Red Wilson's agenda was sidetracked once again in circumstances that can only be described as surreal.
The directors' meeting should have been straightforward. The stewards of Canada's largest technology company had gathered in advance of their June 29 shareholders' meeting to analyze presentations by company management on the state of Nortel's business.
Of particular interest was the rundown to be provided by Gary Daichendt, hired only three months earlier as Nortel's chief operating officer. Daichendt came with impressive credentials. He had been the top operations executive at California-based Cisco Systems, the globe's pre-eminent power in computer networking. There was every expectation Daichendt would one day take over as chief executive from Bill Owens, who was nearing retirement age.
That Daichendt was a deeply religious Christian was considered a plus. In the wake of its lengthy accounting scandal, Nortel is portraying itself as an ethical organization.
But the directors wanted Daichendt to prove himself. Daichendt and another former Cisco executive, Gary Kunis, had been making the rounds at Nortel - trying their best to quickly understand the telecommunications equipment business and come up with strategies for reviving the Nortel name. Because the two Garys declined to tip their hand about their conclusions, senior Nortel managers had begun to suspect big changes were in the works.
The managers' fears were probably unfounded. A series of fairly personal exchanges between Daichendt and the 12-member board not only delayed the discussion about company strategies, it turned that part of the session into an afterthought.
The sequence went something like this: With Owens occupied elsewhere, Daichendt told directors he and his wife had prayed that morning for guidance. God's message, he informed the board, was that he should quickly be made CEO, implying Owens would have to go. Daichendt added chief financial officer Peter Currie would also have to leave Nortel.
Daichendt's words provoked some astonishment. One director queried the source of Daichendt's difficulty with Currie who, like Daichendt, had been recently hired.
Currie was a former vice-chairperson of the Royal Bank of Canada but had also worked at Nortel from 1979 to 1992. He is, by all accounts, a credible executive. Daichendt's reply did not appear to impress the directors.
At some point in the general discussion, a director would have responded to Daichendt's bold declaration he was ready to be CEO. At the very least, it seems likely the directors told Daichendt they were not ready to decide the issue of succession. Indeed, Daichendt's aggressive play for the top job may have caused the directors to reconsider his status as heir-apparent.
Whatever the board's full response, Daichendt declared he would quit. But the story doesn't end there. According to one account, Daichendt left the meeting to inform Owens about what had transpired. Owens noted Daichendt had already prepared his board presentation on company strategy - so why not stick around and deliver it? Remarkably, Daichendt agreed and returned to face the directors once again. Later, Daichendt and Kunis took their leave for good.
Their sudden departure left the Nortel board with a devilishly difficult job - that of crafting a news release to explain what had happened and why. Eventually, the company settled on a quote it attributed to Owens: "It has become apparent to Gary and me, that we have divergent management styles and our business views differ," read the statement issued June 10.
The meaning of the last three words remains unclear. Perhaps the two disagreed on tactics, rather than longer-term strategies. Had Owens differed profoundly with Daichendt on Nortel's ultimate direction, it's difficult to believe he would have agreed to Daichendt's presentation in the first place.
So where does this leave Nortel? The view from the inside is the exit of Daichendt and Kunis hurt, but is far from debilitating - especially in light of the impressive recent performance of Currie. That's not to say the board won't hire another newcomer as chief operating officer. Nortel's directors have learned there's a lot of value in keeping the contest for CEO competitive.
In the end, it's unlikely the invoking of divine intervention by Daichendt created the conditions for his exit. Rather, it was the impatient ambition that lay behind it."
"We've got to get our costs down," Mr. Owens said. "We're working very hard on that." Expenses will come down further over the next years, from 40 per cent of revenue in 2004 to 35 per cent by the end of this year, and 30 per cent by the end of 2006, according to Mr. Owens. Among the measures it could take is sharing space at its headquarters, which Mr. Owens said were too large for Nortel alone.
Anyone left to do a layoff there.... My feeling was there are very few engg people there now (atleast in the former cascade/ascend group). anyone know the numbers...?
Many pundits considered another round of layoffs inevitable as NT never did properly readjust the base salaries (citing low morale and "loyal" employees through tough times) and thus never did get their cost structure in line with the rest of the industry.
IMHO, this is one of Owens' few missteps in recovering NT from the brink, as "loyalty" was a myth - people had no other place to go, and other players had taken the salary cuts.
There have been a large number of layoffs in the wireline org in the last couple of weeks (succession, telephony,global support ...) in Ottawa (avg 30 people per day). heard mgmt is pre-notifying individual employees as much as 2 month before the actual layoff date, indicating plans are in place for the layoff round extending into early 2006?
Well 3000 was a number that was part of the program they announced last year as part of the Flex move. They have also announced plans to rationalise R&D to make them more cost effective. We tend to forget that before GaryD they were working a plan to recover the company and that many of the components of that plan would take several quarters but hey they have been pretty quiet about the departures of late as well as any internal shuffles. Guess they are waiting for the AGM to get their mandate affirmed.
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