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Nortel CEO Maps Out His Vision

Mike Zafirovski, now 100 days in the CEO chair at Nortel Networks Ltd. , has set his management a clear target for their business units: Attain a 20 percent market share, or "alternatives" will be considered. (See Nortel Names Zafirovski New CEO and Nortel, Moto Settle on Zafirovski .)

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.

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Stevery 12/5/2012 | 4:05:09 AM
re: Nortel CEO Maps Out His Vision
After watching this guy (from the peanut gallery), I have to say: it sounds like Nortel has a hope of the turn-around with him. Causing change at the top, setting clear financial/market goals...

It's all textbook leadership, but so few do it well. Would love to hear opinions from the inside.

Aside to LR/Ray: When did the 2 page articles start? For pete's sake, make that link to page 2 more pronounced. Who knows how many words of wisdom I've missed in other articles.
flam 12/5/2012 | 4:05:08 AM
re: Nortel CEO Maps Out His Vision His credentials appear to be good too - GE and Motorola. I hope that mix means that he has the right combination of ruthlessness and process focus to whip the competition's butt.

Between NT and LU, only one should survive. My money's on NT at this point.

opticalman 12/5/2012 | 4:05:07 AM
re: Nortel CEO Maps Out His Vision Mike Z. is definitely making an impact with the troops. It has given them hope that with better focus, Nortel can compete more effectively in the markets with greater potential to succeed.

His operations background and the people he has brought on-board are straight-shooters with a fresh perspective on how to run a world class organization.

The interesting part is what BU's are axed.

Best of luck.
Metropolitian 12/5/2012 | 4:05:06 AM
re: Nortel CEO Maps Out His Vision Mike Z. is definitely on the right track.
He has the potential to be another Jean Monty.

It will take an enormous amount of effort to undo the damage done by past CEOs: The reckless acquisitions made by John Roth and the quagmire of scandal brought on by Frank Dunn.

I agree with the two major steps he has taken so far:
1) He started to clear out significantly the dead wood at Nortel at the upper and middle levels. Unfortunately, Bill Owens did not have the courage to rock the boat and do this properly during his tenure.

2)He seems to have recognized that to compete in telecom you either have differentiate yourself by price (i.e. Huawei) or by innovation. I am glad he seems inclined towards the second option with his focus on R&D spending.

He has made one mistake so far. The joint venture with Huawei seems doomed to failure.
Who is really the winner in this deal ?
Not Nortel. Remember what a mess the last major JV turned to be when Nortel had partnered with Motorola about 10-15 years ago in the cellular arena.


ufo 12/5/2012 | 4:05:04 AM
re: Nortel CEO Maps Out His Vision Mike Z. promoted nothing but Six Sigma junks while at Motorola. Totally useless, troops hated it. Hey, do they really talk "big X and big Y"?!
ecipo 12/5/2012 | 4:05:02 AM
re: Nortel CEO Maps Out His Vision seems Nortel will be much smaller than it's now (I the number of markets they are in). a great chance for the competitors to increase market share.
Metropolitian 12/5/2012 | 4:04:59 AM
re: Nortel CEO Maps Out His Vision >>> I lay most of the blame at the feet of Clarance Chandran. Almost all the really big mistakes were done while he was CEO in all but name. In 2000 and the end of 1999, John Roth was in semi-retirement. <<<

Ulimately, the CEO is responsible for all the actions of his underlings. By doing nothing, signalled that Roth was in full agreement with Chandran's actions and decisions.

>>> As for Frank Dunn, whatever else he did, he saved the company. Nortel nearly perished in 2001. <<<

I disagree with this statement completely. What Dunn did, was to put a once highly respected company (that shared Cisco, Nokia & Motorola as its peers) and permenantly pigeon-holed it with the same corrupt group as Enron, Worldcom, Imclone & Adeplhia. Nortel will forever be remembered for this scandal, despite all the great things it did before or after the scandal.

Just look at Exxon (and the Exxon Valdez disaster) or Union Carbide (and Bhopal). These events are still associated with these companies 17 and 22 years later, respectively.

chook0 12/5/2012 | 4:04:59 AM
re: Nortel CEO Maps Out His Vision Actually I lay most of the blame at the feet of Clarance Chandran. Almost all the really big mistakes were done while he was CEO in all but name. In 2000 and the end of 1999, John Roth was in semi-retirement.

As for Frank Dunn, whatever else he did, he saved the company. Nortel nearly perished in 2001.

--chook

------------------------------
It will take an enormous amount of effort to undo the damage done by past CEOs: The reckless acquisitions made by John Roth and the quagmire of scandal brought on by Frank Dunn.
litedope 12/5/2012 | 4:04:58 AM
re: Nortel CEO Maps Out His Vision Monty was one of the best CEOs in big Tel-Netcom equip/service vendors. Not sure if the new CEO can match him.
A side note: Monty had his lunch in cafeteria very often, just like a regular employee. After he left the post, never saw Roth again ;-) in the same cafeteria. Agreed to the chookGÇÖs comment on Chandran.
DPD 12/5/2012 | 4:04:58 AM
re: Nortel CEO Maps Out His Vision Ed Zander, current MOT CEO is much better than Mike Z. He is doing what Mike Z. couldn't...that is, turn around MOT.
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