Nortel CEO: No 'Fad Diet' In Turnaround Plan

Nortel Networks CEO Mike Zafirovski on Tuesday outlined plans to turn around the struggling networking and telecommunications company. At the same time, Nortel said it expects a wider loss for

May 16, 2006

3 Min Read
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Nortel Networks President and CEO Mike Zafirovski on Tuesday outlined plans to turn around the struggling networking and telecommunications company.

Zafirovski detailed his strategy as Nortel disclosed that it expects a wider loss for its first quarter.

“We’re not putting Nortel on some sort of fad diet. We’re going to make this company leaner, faster and give it more endurance,” Zafirovski said during a conference call on Nortel’s financial outlook. “We know this is a marathon, not a sprint.”

A key piece of the strategy will be the expansion of the Nortel’s channel, particularly in the enterprise IP telephony market, Zafirovski said.

Just six months into his new job as head of Nortel, Zafirovski is charting a course to help the Brampton, Ontario-based company regain its financial strength in the wake of an accounting scandal and several years worth of financial restatements.Nortel aims to get back on schedule with its financial reporting by next month, and the company plans to disclose its first-quarter results no later than June 5, executives said.

Nortel executives said on Tuesday that the company anticipates first-quarter revenue to be flat or down slightly, with a slightly wider loss compared with year-ago results.

Still, Nortel is bullish about its future, Zafirovski said, pointing to the warm reception he has received from Nortel customers and the momentum that Nortel has seen in several product areas, including VoIP, mobility, optical and WiMAX.

“I see a real strength growing [in IP telephony] as we build our channel capabilities to cover the market for these products,” Zafirovski said. “When we get a shot at an enterprise customer today, we have a higher win rate than anybody else.”

Nortel expects high single-digit revenue growth for the full year, company executives said.Zafirovski’s six-point plan to build investor value and right the Nortel ship entails a three- to five-year process. First on the list is the installment of Nortel’s management team, which is now 90 percent in place, he said. Second, the company is implementing “an aggressive focus” on its balance sheet, as well as corporate governance and business/financial controls.

Nortel also aims to improve its cost structure, in part by modifying its procurement strategies, cutting some research-and-development projects, consolidating product lines and providing new tools to sharpen sales-force effectiveness, he said, adding that the total effort is expected to drive $1.5 billion or more in operating margin expansion.

Another major initiative is a commitment by Nortel to target at least 20 percent market share and a No. 1 or No. 2 position in all of its key technology areas over the next three years. “This is a market in which typically only the leaders in the market will prosper long-term,” Zafirovski said. “We do not expect the decisions to be easy. The general guideline is for us to be truly relevant.”

At the same time, Nortel plans to invest for growth by increasing its funding by $100 million this year in WiMax, IP Multimedia Subsystems and IPTV, he said.

And finally, Zafirovski’s game plan calls for an increased emphasis on software and services. “We are recreating a great company,” he said.0

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