x
Employment

Nortel's Empty Room at the Top

Nortel Networks Corp. (NYSE/Toronto: NT) today announced the search for a new CEO. John Roth, current president and CEO, is set to retire in April 2002. And the person everybody had perceived as his key successor, Clarence Chandran, has now officially resigned for health reasons, after months of speculation (see Nortel's Chandran Resigns).

The development comes in the wake of poor financials and massive layoffs (see Nortel: Losses and Layoffs, Eh?), and some analysts think it's a bid for faith in the struggling company.

"It's a classic management move," says Seth Spalding, director at Epoch Partners. "The main message here is that someone has to be held accountable. There's a sense that a management change may help, may provide some hope of a turnaround."

But Spalding says market forces, not Nortel's management, ultimately may be to blame for the company's latest bad news. And that could mean stakeholders will just have to wait out a prolonged period of retrenchment, both for Nortel and for other companies in the sector.

Meantime, Nortel's moving its knights. "Since Clarence is no longer available in our succession planning, I'll be working with our board of directors to undertake a search for my successor," Roth said in a prepared statement. "Our priority is to have my successor in place well before I retire to ensure a smooth and orderly transition. I will not be leaving until our annual meeting next year."

Roth says he will continue to act as COO and CEO until his successor is chosen.

The issue of who will step into Roth's shoes has become a topic of widespread speculation in and around Nortel. Sources say attendees at this year's company meeting April 26 were buzzing about it, and analysts have weighed in on a range of possibilities over the past several weeks.

Many believe that Frank Plastina, the 38-year-old president of Nortel's Wireless and Core Networks business, is the likeliest internal candidate for the CEO job. In an executive shuffle back in April (see Nortel Does a Metro Shuffle), Roth made it clear that Plastina would take an expanded position within the company, and some industry sources say he's acting as a virtual COO, participating in key projects with Roth. Indeed, there's speculation that Roth may be putting Plastina through a crash course for CEO, which is why the firm isn't looking for a COO at this time.

Without officially promoting Plastina, Roth declared in an internal memo early in April that "Frank Plastina will lead an expanded Wireless and Core Networks business -- one that includes Wireless, Passport and VoIP portfolio as well as the Personal Internet and Metro Optical portfolios."

This makes Plastina boss of four leading executives: Lloyd Carney, who heads Core IP Networks; Jules Meunier, head of Wireless; Brian McFadden, head of Metropolitan Optical; and Sue Spradley, Carrier Voice Over IP.

"Most major product line executives report to [Plastina]. That's a pretty important indicator that he's the strongest internal candidate [for CEO] at Nortel," says Michael Urlocker, analyst at UBS Warburg. But is he the best person for the job? "He's young; he doesn't have the full range of experience you'd want with a CEO. I think there's actually a vacuum at Nortel, a lack of qualified people at senior levels," Urlocker says. "I think they may have to go outside to find the right person."

Others agree. "I think they would have made an announcement by now if an internal successor was coming," says Seth Spalding.

Going outside the company for a CEO isn't something Nortel's had to do since the late 1980s, when Paul Stern came to the post and created what Urlocker calls a "troubling situation" for Nortel. "Normally, Nortel's always had a clear line of succession. They've only rarely gone outside the organization. Now that's not clear," he notes.

Nortel spokespeople say any speculation about Plastina's role as other than president of his business is just that -- speculation.

The latest management kerfuffle at Nortel was accompanied by reports from several newspapers, including the Wall Street Journal, that Nortel had confirmed the closing of its DSL (digital subscriber line) business.

Analysts say the DSL closing is of a piece with the rest of Nortel's restructuring efforts and could be the first of several division cuts. "They've clearly indicated that the wireless, optical, and core switching businesses are essential," Urlocker says, speculating that anything that doesn't fall into those categories may be jettisoned.

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
Page 1 / 5   >   >>
johnjohn 12/4/2012 | 8:26:45 PM
re: Nortel's Empty Room at the Top This is getting good...

Who will win the race between Lucent and Nortel?
noitall 12/4/2012 | 8:26:44 PM
re: Nortel's Empty Room at the Top the race between nortel and lucent, you mean the race to bankruptcy court? this company is falling apart! who will win is cisco because they're just smarter. nortel and lucent are run by very stupid people who pay $7 B for web switches that are now a commodity...cisco pays $7 B for cerent. yes, they've both made dumb acquisitions but going forward, cisco will make smarter and smarter decisions while nortel follows lucent into dumber and dumber moves. chromatis anyone? ascend, anyone? xros anyone? what a joke. roth is getting out just in time to avoid taking the blame for the coming apocolypse.
jenner 12/4/2012 | 8:26:41 PM
re: Nortel's Empty Room at the Top simply incredible. The past 4 months have been an absolute disaster as far as management is concerned. I guess Roth followed McGinn's lead, got too busy watching NT stock fly in 1999 and 2000 and fell asleep at the switch. CSCO, however, has big problems in providing carriers w/gear, up to this point they were not considered reliable enough. I agree, this is a golden opportunity for csco. let's watch and see. Csco up today towards the close, Market sees it...
fatchance 12/4/2012 | 8:26:40 PM
re: Nortel's Empty Room at the Top Clearly the only executive with the experience and skill sets to move Nortel further along the path they are on is Rich Maginn. He may even be able to attract more LU suits who are looking for another company to drive into the ground. Do you think they could also use some board members??
Belzebutt 12/4/2012 | 8:26:39 PM
re: Nortel's Empty Room at the Top "this company is falling apart! who will win is cisco because they're just smarter."

Sure they are. 2.5 billion in inventory write-off is a brilliant move. Roth is probably tired of taking all the crap, and he has to "pay" for the stock slide. The funny thing is, Nortel didn't slide any more than the rest of the industry, so can we really blame Roth? Let's fire all the other CEOs who's stock also went down. Including Chambers. Want some proof?

http://finance.yahoo.com/q?d=c...

How is NT any more "stupid" or "dead" than CSCO? NT recently became the 1# telco equipment company on the planet, let's wait an see a little bit before we declare them dead, mm-kay?
noitall 12/4/2012 | 8:26:38 PM
re: Nortel's Empty Room at the Top belzebutt: ever get tired of building pbxs?

cisco made some blunders, no question. but my bet is on chambers. the old class 5 switch, sonet gear, etc...do those aging products constitute leadership and the position of "#1 telco equip. company?" also, they have no enterprise or small business products that are worth mentioning so they are totally exposed to the carrier market which is going to be in the dumper for another year at best. lastly, when you look at industry trends, you see integration and seemless connectivity, convergence kinds of developments as the big plays. nortel is nowhere with that strategy.



Belzebutt 12/4/2012 | 8:26:34 PM
re: Nortel's Empty Room at the Top "Now that Nortel pays better"

I just want to clarify that as "Nortel pays better than it used to", somewhat on par with Cisco. I'm basing this on talking to recruiters at career fairs and some other things.
Belzebutt 12/4/2012 | 8:26:34 PM
re: Nortel's Empty Room at the Top "belzebutt: ever get tired of building pbxs?"

Didn't you hear, most of the "pbx people" got laid off by now. The data stuff is what's being invested in.

"the old class 5 switch, sonet gear, etc...do those aging products constitute leadership and the position of "#1 telco equip. company?"

Aging products? How old is IOS again? Login to one of those boxes and then login to a Juniper you'll see what's getting old.

"also, they have no enterprise or small business products that are worth mentioning so they are totally exposed to the carrier market which is going to be in the dumper for another year at best."

That's funny judging by Cisco's financials they don't seem to be much better off, despite their focus on enterprise. Show me the money.

As for integration and seemless connectivity, does Cisco have a network management tool that works across all their products? Nortel has Preside. They have pretty much everything except routers, but that's where Juniper comes in. Cisco's not so great anymore.

I hate to bring up the stock price again, but notice that Cisco stock charts used to be untouchable, nothing would come close. Notice that over the last year or two Nortel stock has equalled Cisco's performance, and outperformed it at times. This from a company that 3 years ago wasn't even a Cisco competitor. Then notice that Nortel used to be 1/2 the size of Lucent just a few short years ago, and they quickly grew past it. Granted Lucent screwed up and Cisco screwed up, but if Nortel surpassed Lucent and caught up to Cisco in stock performance, they sure as hell did something better than these two guys.

The big attraction to Cisco used to be the stock. It's a sweat shop, but the money and stock made it worth it for some people. Now that Nortel pays better and Cisco stock isn't doing any better than Nortel, and Cisco still is a sweat shop while Nortel isn't, you wonder what's going to attract people to Cisco. I predict that all their best people will leave pretty soon, the top ones already left and became Juniper. The circle of life continues.

Cisco reports grown decline for the first time. Net loss for the first time. Layoffs for the first time. The glory days are over for Cisco.
prefer_to_lurk 12/4/2012 | 8:26:33 PM
re: Nortel's Empty Room at the Top
noitall... except how to spell.

S E A M L E S S

"you see integration and seemless connectivity, convergence kinds of developments as the big plays. nortel is nowhere with that strategy."

Instead of parroting industry buzzwords, could you elaborate on this opinion ?

Nortel is stronger in VOIP than Cisco (witness the $1B deal with Cable and Wireless). Cisco has AVVID -- neat acronym, but 2+ years on now and what does it really mean ?

Nortel dominates in Optical networking (with 10 times Cisco's optical revenues), and crushes Cisco in DWDM -- Pirelli and Qeyton don't cut it.

Or do "convergence" and "seemless connectivity" mean something else to you ?

As far as Enterprise business, you should be aware that the big trend is towards outsourcing, where Carrier Managed Services are going to grow dramatically. Guess what ? Cisco isn't winning any major prizes with Telcos -- especially with their focus on Layer 3 which is going to be superceded by Optical Ethernet and Layer 2 connectivity at the edge. What Carrier wants to take on the nightmare of provisioning all those meshed connections ?

So where were Cisco's advantages again ?

P.S. The PBX comment to Belzebutt was at best juvenile and at worst proof that you've been drinking too much Cisco Kool-Aid.

ptl



justcurious 12/4/2012 | 8:26:31 PM
re: Nortel's Empty Room at the Top < Cisco will make smarter and smarter decisions >
Please read Fortune's cover story this week:
"Cisco has made its own mess" or the San Francisco Chronicle's article which mention:
"What do you get if you marry a creative writer with an aggressive accountant? Cisco's third-quarter earnings news release" I guess Chambers borrowed this from Lucent's McGinn
Page 1 / 5   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE