Nortel Swings Axe, Switches CEOs
Frank A. Dunn, Nortel's chief financial officer, will replace John A. Roth as president and chief executive officer effective November 1, 2001, the company says. Roth will stay on as vice chairman, and Terry Hungle, formerly president, finance, will take the CFO role.
Roth originally planned to stay as CEO through April 2002, but apparently events have changed the plan.
It's not always easy to pin down numbers on Nortel layoffs. According to the latest company press release, this round of job cuts will leave Nortel with about 45,000 employees by Halloween (October 31), when it plans to finish delivering pink slips.
According to spokesman David Chamberlin, the company will have about 44,500 employees by the end of the layoff. Nortel had 94,500 employees as of December 2000, he says, and now has roughly 64,500 employees.
Chamberlin says the latest reduction will cut 10,000 of those employees, while another 10,000 will be lost through the sale of "non-core assets," such as the sale of Nortel's Clarify customer relationship management business, announced yesterday (see Nortel Divesting).
In total, these divestitures are expected to bring roughly $700 million to Nortel in the fourth quarter 2001 and the first quarter 2002, Dunn says.
Nortel also says it will now focus on just three product areas -- wireless, optical long haul, and metro networks. Previously, the company had targeted five technology areas: wireless Internet, intelligent Internet, metro optical, long-haul optical, and voice over IP.
Included in Nortel's document dump this evening are several executive changes. Frank Plastina becomes president of Nortel's Metro Networks business, and Greg Mumford becomes president of Nortel's Optical Long Haul Networks business. Pascal Debon, formerly President, Europe, The Middle East & Africa, will take over as president of Nortel's Wireless Networks business. Debon replaces Jules Meunier, who is leaving the company.
The embattled company is also moving its breakeven point to "well below" $4 billion in quarterly revenues. "The business plan we're putting in place will make very good money [at a level of spending] well below $4 billion per quarter," said Dunn, in a conference call Wednesday afternoon. Previously, Nortel anticipated a breakeven rate of $5 billion in quarterly revenues.
Dunn says Nortel expects to reach its new breakeven point by the first quarter 2002.
The news, the latest in a long line of layoffs and financial losses at the networking giant, were particularly brutal and shocking because there had been a few signs that the bad days were ending at the company. Rumors had been circulating for some time that more cuts were on the way -- but none had expected them to be this bad (see Nortel: More Layoffs?).
During the conference call, the outgoing Roth seemed shaken as he repeated himself during the introductory remarks and noticably lacked his usual verve. Dunn, in contrast, sounded like a typical bean counter -- droning on about inventory writeoffs, pretax charges, cash performance, and specific incremental charges.
Analysts asked many questions. One wanted to know why Roth's successor had been picked sooner than expected. Back to his usual artlessness, Roth said that after an exhaustive search inside and outside the company, the board had "settled on Frank as the ideal candidate at this point in time."
— Mary Jander and Phil Harvey, Senior Editors, Light Reading