As the wireless industry hangs on the edge of its seat waiting for Nortel Networks Ltd. to announce plans to acquire or be acquired, the company’s president and chief executive officer, Mike Zafirovski, told shareholders at the company’s annual meeting that he isn’t interested in selling to or merging with another company, and said he does not feel that Nortel needs an acquisition to survive.
Zafirovski insisted that getting the company back on track will take time, but also said shareholders have his “absolute commitment” that Nortel’s transformation will be completed.
Part of that transformation was unleashed last week as Nortel announced plans to cut about 1,100 jobs and restructure the company’s pension plan. Combined, Nortel said the measures ought to save as much as $575 million by 2012.
Zafirovski explained to shareholders that the company’s pension plan was among the richest in the world, while the company had not been cash-flow positive since 1998 and now has a $2.5 billion pension liability. He said Nortel’s revised pension plan is more in line with that of its competitors in the industry.
Other aspects of Nortel’s transformation have been obvious since Zafirovski came on board last November and began overhauling the company’s executive team. Most recently, the company named former Broadcom Chief Technical Officer John Roese as its own CTO, charging him with steering about 12,000 engineers at Nortel’s research and development arm in Ottawa. At the meeting, Zafirovski said he does not plan to cut the team’s almost $2 billion budget, but said the company was not getting its money’s worth and needed to be more effective.
During a conversation with RCR Wireless News, Roese (pronounced rose) said Nortel’s narrowed technology focus “should always offer multiple technology choices for customers—we need to provide a canopy of coverage that suits different economic models.”
He defined Nortel’s five focus areas as enterprise wireline, enterprise wireless, carrier wireline, carrier wireless and unification technologies. Roese stressed that he intends to make sure that Nortel’s product lines, such as those of its newly formed Metro Ethernet division, are synergistic instead of “silo-ed” because, “The customer only cares about their communication experience, they don’t care about whether it comes from one group or another. We’re interested in leveraging our place in the communications ecosystem—we are an enabler of different types of technology.”
Roese will also advise Nortel as it considers potential mergers, acquisitions, partnerships or alliances. Granted, Zafirovski made it clear to shareholders that the company isn’t shopping around for an acquisition. But he also hinted that as the company gets stronger, it will consider its acquisition options.
This year’s meeting was notably calmer than last year’s, when financial scandals inspired investors to pummel then-CEO Bill Owens and other executives with tough questions about the state of the company’s finances for more than six hours. By last October, Owens, a former U.S. Navy admiral, left Nortel, reportedly to settle into retirement. Zafirovski burst onto the scene as the company’s president and CEO in mid-November and has since made several executive appointments along with streamlining the company’s technology focus.
Zafirovski reiterated to shareholders that his vision of re-building Nortel includes three themes: business transformation, integrity renewal and growth. “We can and will be a great company again.”
Wall Street didn’t seem completely convinced, as shares of Nortel dropped slightly last week as details of the annual meeting were reported. As of last Thursday afternoon, Nortel’s stock price was down 13 cents, trading at $2.29 per share on the New York Stock Exchange.
