Nortel CEO: We're Ready to Deal
Zafirovski stressed the need to strengthen Nortel's balance sheet, fix broken financial systems, install a new leadership team, and turn Nortel employees into "boy scouts" who would do the right things. He also indicated that acquisitions -- or even deals on a larger scale -- would be a part of Nortel's future. (See Nortel CEO Maps Out His Vision, Nortel's New Faces Face Tough Task, Nortel, Moto Settle on Zafirovski , and Nortel Names Zafirovski New CEO.)
The new CEO, a former Motorola Inc. (NYSE: MOT) executive and a 25-year veteran of General Electric Co. (NYSE: GE), looks to impose his Jack Welch training on Nortel's turnaround. He said that while at GE, he was involved in 75 acquisitions, so deals will likely be a part of Nortel's future. When asked if sizeable transactions would be a problem considering Nortel's weakened financial position, he said big deals wouldn't be ruled out.
"There are mechanisms that would enable the deal if it would be a meaningful transaction," said Zafirovski.
The CEO said he expected the industry's move toward consolidation, demonstrated by the recently announced Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU) deal, to accelerate. "Most of the action has been on the customer side, but now there will be more on the equipment side." (See Alcatel, Lucent Seal Deal.)
In the meantime, Zafirovski is focusing on changing Nortel's corporate culture by cleaning up its financial systems, streamlining the product focus, and hiring new executives. He said that four important leadership positions remain to be filled, including Chief Marketing Officer, President of Services, President of Innovation, and Chief Technology Officer.
Nortel will cut product lines that don't have more than 20 percent market share, trim more than $200 million from its financial costs, and improve the company's operating margin by $1.5 billion, all in the next couple of years, said Zafirovski, who noted that it will take "three to five years to create a great company."
Here at the CTIA wireless conference, Nortel unveiled more details about its IP Multimedia Subsystem (IMS) portfolio and indicated it's one of the areas in which it intends to focus. (See Nortel Enhances IMS.) So what does Wall Street think it will take to boost Nortel's stock price? It sounds as if many expect M&A activity to move the stock. Zafirovski is seen as the executive who has the street cred to turn the company around, but many folks also expect him to clean up the company and shop it around.
Sources tell Light Reading that the company is talking to other large equipment providers about potential mergers akin to the Alcatel/Lucent marriage. Nortel is believed to be one of a number of vendors that have held exploratory talks with Siemens Communications Group about consolidation possibilities. (See Alcatel/Lucent: The Domino Factor and Sources: Lucent, Nokia in Play for Siemens.)
— R. Scott Raynovich, Editor in Chief, Light Reading