Nortel Networks Corp. (NYSE/Toronto: NT) has launched a top-down reorganization, throwing into focus the pressures on the company and the strategic importance of optical networking to its future, Light Reading has learned.

Nortel's been restructuring since early this year, when finances started to deteriorate, forcing thousands of layoffs and resulting in a series of executive defections (see Nortel Warns of Shortfall, More Layoffs). But those changes appear to have precipitated some additional moves in recent weeks.

The ball started rolling with the sudden resignation of CTO William R. Hawe in February (see Nortel CTO Quits as Woes Mount) and his replacement by Jules Meunier. Hawe's defection met with shareholder outrage when it was learned he'd cashed in $18 million worth of stock options just prior to the company's earnings downturn (see Nortel Explains "Option Activity").

To complicate matters, Nortel COO Clarence J. Chandran began a year-long medical leave of absence starting in March. Chandran's doctors reportedly urged him to take time to address complications emerging in the aftermath of a stabbing attack in Singapore in 1997. While clearly unrelated to the business, Chandran's absence has created a missing link in the executive chain.

The vacancies have made way for high-profile executive promotions in recent weeks. For example, Anil Khatod has been promoted to the newly created job of chief marketing and strategy officer, according to sources at Nortel. Previously, Khatod was a VP of strategic marketing and sales for Nortel's old Optical Networks division. Now, in a move that speaks to the growing importance of optical networking to the company's future, Khatod's been put in charge of marketing and strategy for the entire company.

Khatod replaces Charles Childers, who'd been appointed chief marketing officer in April 2000 by CEO John Roth. Nortel didn't confirm at press time just where Childers has gone, but sources believe he remains at the company.

Nortel also appears to be honing its forces in order to home in on strategic units. For example, in another change, Steve Schilling, formerly president of access networks at Nortel, is now charged with marketing Nortel's optical Ethernet products worldwide.

The main optical networking group at Nortel is also seeing major changes.

As reported first in Light Reading, Don Smith, president of Optical Internet Solutions, left in March (see Don Smith Leaves Nortel). At the same time, Brian McFadden, formerly a VP of Metro Optical Solutions, not only moved into Smith's spot but was promoted to a peer relationship with Greg Mumford, president of Nortel's Optical Internet division. (Previously, Smith had answered to Mumford, even though the two operated as a team.)

McFadden's promotion coincides with the formation of a new Metropolitan Optical division at Nortel that's separate from Mumford's Optical Internet business unit.

"This demonstrates our belief that metro is a key growth area for the company," a spokesperson says.

McFadden's now in charge of the OPTera Metro series of products, including the OPTera Metro 5200, which incorporates the product from Cambrian Systems, where Don Smith was CEO when the company was bought by Nortel in 1998.

Meantime, Mumford continues to oversee packet solutions and long-haul gear, including the OPTera LH 4000, which incorporates the Qtera gear Nortel acquired last year. Mumford's also been put in charge of the OPTera Connect PX all-optical switch, which Nortel acquired with its purchase of Xros last year.

It remains to be seen to what extent all these changes will help Nortel to cope with ongoing tough times. But one thing is clear: The company is eager to lead with strategies that support what it views as the key markets for the next few months -- namely, optical Ethernet, optical Internet, and metropolitan optical networks.

-- Mary Jander, Senior Editor, Light Reading http://www.lightreading.com