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Zafirovski Adds Another GE Exec to Nortel

Senior staff at General Electric Co. (NYSE: GE) must be wondering if it's their turn next! Mike Zafirovski continued his appointment spree today by hiring another GE man, Joseph Flanagan, to his new executive team at Nortel Networks Ltd. . (See Nortel Appoints New Exec.)

In his 103 days as Nortel's new CEO, Zafirovski has poached three execs from GE (one of his former employers) to create a new purchasing and procurement team. Flanagan joins as VP of Order Management and will report to another new hire and former GE man, Joel Hackney, Nortel's senior VP of Global Supply Chain and Quality. The other hire from General Electric is Don McKenna, Nortel's new VP of Global Manufacturing Services. (See Nortel Appoints New VP, Nortel's New Faces Face Tough Task, and Nortel Hires Quality SVP.)

In a public presentation last week, Zafirovski highlighted the importance of a more cost-effective operations, procurement, and sourcing strategy to his overall Nortel vision, believing that the efficiencies the likes of Hackney, Flanagan, and McKenna can deliver will help him achieve the double-digit operating margins he's aiming for. (See Nortel CEO Maps Out His Vision.)

In a research note issued this morning, Prudential Equity Group LLC analyst Inder Singh says he expects Nortel to "streamline its inventory, supply chain and procurement processes," a move that could see the vendor "exit all of its manufacturing operations, including its international operations in Ireland and France. This could provide cash inflow of more than $700M for the company, offsetting the $575M cash outflow that could result from the shareholder lawsuit settlement." (See Nortel Takes $2.5B Hit.)

Singh also expects Zafirovski to act quickly in picking out the weak links in Nortel's product portfolio, following his announcement last week that he wants to focus on markets where Nortel can achieve a market share of at least 20 percent: "We expect Nortel to restructure some of its product lines, as the company strives to improve its growth and profitability momentum. Although this activity could easily extend through 2007, we feel that the bulk of the announcements could appear within the next six months."

— Ray Le Maistre, International News Editor, Light Reading

digits 12/5/2012 | 4:04:51 AM
re: Zafirovski Adds Another GE Exec to Nortel Zafirovski might be barred from poaching Moto folk for now, but surely he'll run out of GE people to hire soon (unless he's planning on taking Nortel into 'white goods'), and ultimately he'll likely fancy bringing in some Motorola buddies.
The exemption period was unspecified, but even if it lasts until this July -- until such time Zafirovski is barred from talking with certain customers Nortel has incommon with Moto -- surely he'll go cherry picking then?
reoptic 12/5/2012 | 4:04:48 AM
re: Zafirovski Adds Another GE Exec to Nortel Getting rid of factories and becoming focused on 'services' sounds a lot like Lucent's approach.

Good to cherry pick the best product lines for the future but the question is how do you put an effective solution together when you have a smaller portfolio. At minimum it requires much more extensive partnering which isn't a Nortel strong suit...may be better to do more M&A. Building new products takes forever as Neptune showed.

Fundamentally how does this company displace Cisco at the high end or Huawei at the low-end? Don't see it anytime soon.

stephencooke 12/5/2012 | 4:04:42 AM
re: Zafirovski Adds Another GE Exec to Nortel Ray,

I would say that you have hit the nail on the head. The GE guys have been brought in to deal with the business-type operational issues where they may be strong. The real meat will be in the technical positions (eg: CTO, etc.) where GE has no capabilities for mining but MOT is fully stocked... I know that Mike Z. has decided not to pick anyone with a Nortel background, recent or otherwise, for those positions. Given the seriousness and sensitivity of appointments such as CTO for Nortel I would say that he will likely turn to someone he knows from his past.

Steve.
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