Nortel CEO Maps Out His Vision
Addressing the RBC Capital Markets Communications, Media, and Technology conference Thursday, Zafirovski, who has had a major impact on the company since taking the helm, laid out his vision for Nortel's future and identified what needs to be addressed and fixed within the organization. (See Nortel Takes $2.5B Hit, Nortel & Huawei: Broadband Buddies, Nortel's New Faces Face Tough Task, and Nortel Takes Tasman for $100M.)
In his eyes, he's almost starting from scratch and building a new company: "We're at ground zero," he told his audience. "We're digging ourselves out of a hole."
So what's Zafirovski got to say, and what is he going to do? Here's a rundown of his thoughts on Nortel as a business, its technology and development, its customers, and its people.
Business and finance issues
Financial issues are a major concern for the CEO, who reckons Nortel's last good year was 1998. He's planning to address the company's cost structure, its procurement strategy, corporate governance and financial control, and, over the course of the next two to three years, put Nortel in a position where it can achieve double-digit operating margins.
He couldn't comment on whether Nortel managed to break the $10 billion revenues barrier in 2005, but noted that the company recorded revenue growth in the first nine months of last year for the first time in five years.
He also believes that within the company's DNA is an inherent knowledge about how to be a good partner. That's a view that some of its recent allies have disputed recently. (See Avici Downsizes to Survive and ECI: Nortel Didn't Deliver.)
Technology, R&D, market share
Zafirovski said Nortel has been "trying to be everything to everybody, spending enormous amounts on R&D" but without any real focus or direction. The company will outline next week how it intends to distribute its $1.9 billion R&D budget, with IMS (IP Multimedia Subsystem), IPTV, and WiMax to get bigger slices of the pie.
The CEO is also looking to attain a 20 percent market share in the sectors Nortel competes in. If that level can't be achieved, "then we'll look for some alternatives for those activities." He noted that of the 35 or 36 communications sectors identified by analysts at Lehman Brothers , Nortel participates in 22 but is the No. 1 player in just one market, and the No. 2 in another four.
"We have a lot of work to do in those other 17 markets to see if we can achieve the 20 percent share."
Steps are already being taken to shift focus and not waste resources. Zafirovski cited the "meaningful amounts of dollars" invested in the Neptune multiservice router, noting that "we thought we were too far behind with no reasonable chance of catching up." (See Neptune Changes Orbit.)
Another area where Nortel is aiming to make a greater impression is in services, which account for less than 20 percent of revenues at present. The CEO wants the dollar value of the services business to at least double. And to do that he needs someone to focus on that sector.