Optical/IP Networks

2002 Top Ten: Pink Slips

2002 was a year of retrenchment in the telecom industry. More than 200,000 workers lost their jobs in the sector during the first nine months of the year, according to outplacement firm Challenger Grey & Christmas Inc. In addition to that, there were some major shifts in the executive ranks.

Here’s a look at the most notable employment moves in the industry in 2002:

No. 10: SBC Communications Layoffs Even regional Bell operators have had to tighten their belts in 2002. SBC Communications Inc. (NYSE: SBC) will have cut its workforce by about 11 percent by early next year. The company eliminated 10,000 jobs early in 2002 and sacked another 9,000 in the second half of the year. It expects to chop another 2,000 from the roster in the beginning of 2003, bringing its headcount to approximately 172,000 (see SBC's Fed Up, But So Are Its Critics).

SBC’s chairman and CEO, Edward E. Whitacre Jr., blamed these latest announced cuts on the burdensome regulatory environment, which he claims is bleeding incumbents dry (see SBC Cuts Capex, Jobs).

But critics aren’t buying SBC’s pity party. They say alternative carriers have no other way to compete with them.

No. 9: Alcatel Layoffs Alcatel SA (NYSE: ALA; Paris: CGEP:PA) announced earlier this year that it would be reducing its worldwide roster to about 60,000 employees by the end of 2003 (see Alcatel Optronics to be Slashed and Alcatel's Submarine Prospects Sinking). Ouch! Its 2001 headcount was 101,000, according to Securities and Exchange Commission (SEC) filings.

No. 8: Cisco Execs Check Out, Martin Checks In

Cisco Systems Inc. (Nasdaq: CSCO) continued to trim its fat, cutting about 3,000 workers this year. The company reported it employed about 38,000 at the end of July 2001, and that number shrank to about 35,000 in 2002. But the more notable departures came in the executive ranks.

Carl Russo, the man behind Cisco’s optical strategy, left in May. So where is he now? Try the racetrack. The former top Light Reading Mover and Shaker said he was going to become a CART racing champ and dabble in more startups (see Cisco's Russo Resigns).

Bill Nuti, Cisco’s former vice president of worldwide service provider operations left earlier this year to become president of Symbol Technologies Inc. (NYSE: SBL). Is Nuti nutty for leaving a top post at Cisco? Probably not. One of the theories as to why Nuti would jump ship holds that any Cisco exec hoping to succeed Cisco CEO John Chambers is in for a wait of several long years (see Cisco's Nuti Talks Up Move to Symbol).

Meanwhile, to fill the void left by the departure of former telecom equipment chief Kevin Kennedy, who left in 2001, Cisco drafted top Fujitsu executive Ron Martin (see Kennedy Lands at Openwave and Fujitsu's Martin Joins Cisco).

No. 7: Ciena Sales Shakeup Ciena Corp.'s (Nasdaq: CIEN) inner circle of executives has changed radically in the past year, many of the changes taking place in the sales department. Michael McCarthy, Ciena's senior VP of worldwide sales and support, left, and CEO Gary Smith assumed his duties in the interim. At least two other major sales executives have also left, including Claude Achcar, Ciena's Asia Region VP, and Arely Castellon, Ciena's VP and general manager for Latin America and the Caribbean. Ciena says these changes reflect a new focus on RBOC accounts.

The company reduced its staff by about 44 percent this year (see Ciena Slashes Some More). At the end of fiscal 2001 its headcount was 3,778, down from 2,118 at the end of 2002 (see Ciena Cuts 450 Jobs).

No. 6: Bross Pops Up at BT

Who knew? Earlier this fall, Matt Bross, the Williams Communications executive turned IPO millionaire, showed up as the new CTO at British Telecommunications plc (BT) (NYSE: BTY; London: BTA) (see Why Did BT Bring In Bross?). BT announced the hire after newly named WilTel Communications Group Inc. (OTC: WTELV) – the carrier formerly known as Williams Communications – emerged from bankruptcy protection (see Williams Bolts Out of Bankruptcy ).

During the boom, Bross became notorious for making close to $42 million from pre-IPO shares he received from startups that were also Williams suppliers (see Bross Rides the ONI Gravy Train and Williams' CTO Profits From His Position ).

CEO Howard Janzen, who was head of Williams Communications since its inception in 1995, also resigned.

No. 5: Qwest Ditches Nacchio

After years of smooth-talking Wall Street and overseeing aggressive revenue growth that now appears to have been buoyed by questionable fiber swaps, Joseph Nacchio, one of the original bandwidth barons, resigned from his CEO position at Qwest Communications International Inc. (NYSE: Q) (see Notebaert Takes Out Nacchio).

Since Nacchio left in June, the carrier has continued to restate earnings, leaving some to wonder how low the numbers can actually go (see Qwest's Amazing Shrinking Revenues). Former Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) CEO Dick Notebaert has taken his place and looks to be focused on purging the remainder of Nacchio's crew and restructuring Qwest's debt (see Qwest Purge Continues).

Nacchio isn’t the only one to get the boot. The company cut another 2,000 jobs this year, to leave a total of about 55,000.

No. 4: Grubman Runs for Cover

From fame to shame, Jack Grubman has seen it all. The former Salomon Smith Barney telecom analyst rose to superstar status, earning himself as much as $20 million a year during the boom times, for tracking companies like WorldCom Inc. (OTC: WCOEQ), Global Crossing Holdings Ltd., and Qwest Communications International Inc. (NYSE: Q). His hobnobbing with CEOs and his occasional presence in their boardrooms earned him a reputation for having the inside track.

But Grubman’s cozy relationship with the telecom companies coincided with his firm receiving millions in investment banking fees, raising eyebrows with officials (see WorldCom Faces Increasing Difficulties). He officially left Salomon Smith Barney in August (see Jack Grubman Goes). He was recently ordered to pay a $15 million fine and barred from the securities industry for life.

No. 3: Nortel Restructuring What a difference two years can make. In December 2000, Nortel Networks Corp. (NYSE/Toronto: NT) employed about 94,500 employees. The company expects to be down to 35,000 by the end of this year (see Nortel Outlook Worsens).

Rank and file weren’t the only ones downsized. Some top execs were also squeezed out. Frank Plastina, former president of Metro and Enterprise Networks and 15-year Nortel veteran, left back in October (see Nortel Reorganizes). The company replaced him with another insider: Malcolm Collins, a 10-year Nortel veteran and former head of the firm's U.K. and Northern European region, became the new head of enterprise networking in early December (see Nortel Adds Another Enterprise Chief).

No. 2: Lucent Restructuring Lucent Technologies Inc. (NYSE: LU) started 2002 off with a bang by hiring a new CEO, Patricia Russo. A 19-year-Lucent veteran, who left in 2000 while CEO Rich McGinn still reigned, she returned in January to take the top spot (see Lucent's Next Leader).

The company has changed a lot since Russo’s previous stint, particularly when it comes to size. Lucent ended 2000 with over 100,000 employees. By the end of fiscal 2003, it hopes to be down to 35,000. The majority of pink slips went out in 2001, but Russo and her crew found more places to trim in 2002. Alas, paring back the staff didn't stop top executives from rewarding themselves with some tasty bonuses (see Lucent Fat Cats Gorge in 2002 and Post-Bubble Arrogance).

No. 1: Bernie Bites It

WorldCom execs are the biggest pink slippers of the year, and former CEO Bernie Ebbers is the king. The wheeling, dealing acquisition mogul built the company into the No. 2 carrier in North America. But it turned out to be a house of cards, propped up with an array of artificial accounting devices. WorldCom collapsed into bankruptcy (see WorldCom Goes Boom and WorldCom Files for Bankruptcy), and Ebbers resigned (see WorldCom's Ebbers Resigns) – but not before he was able to finagle more than $400 million in loans out of the company. This was in addition to his $1 million in base salary and $10 million bonus allotted in 2000.

WorldCom's CFO Scott Sullivan and sidekick Buford Yates, former director of general accounting at WorldCom, were both arrested and indicted this summer on securities fraud (see Ex-WorldCom Execs Charged With Fraud). While Bernie was called to Washington to testify in front of Congress and Sullivan was being hauled downtown, 17,000 rank-and-file WorldCom workers were getting their pink slips (see WorldCom Workers Get the Shaft).

— Marguerite Reardon, Senior Editor, Light Reading

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