Nortel Networks Corp.'s new boss, Mike Zafirovski, wants to take the struggling telecom equipment maker to the next level, saying he will sharpen the strategic focus and pursue profitable growth.
The 51-year-old former Motorola Inc. executive takes the reins next month, after a surprise announcement yesterday that current chief executive officer Bill Owens is leaving after 18 months in the corner office. Observers applauded the choice, saying Mr. Zafirovski is a turnaround expert who can boost Nortel's competitiveness in a challenging global market.
Mr. Owens came when "people were ready to turn the lights off," Mr. Zafirovski said yesterday at a press conference in Toronto. "I do believe this is the opportune time to take the company to the next level."
He added later: "I'm convinced Nortel will be a big winner again."
Shares of Brampton, Ont.-based Nortel rose 21 cents or 5.4 per cent to $4.10 yesterday on the Toronto Stock Exchange.
But Mr. Zafirovski does have his work cut out. Under Mr. Owens, Nortel managed to right itself after being crippled by accounting, financial and industry woes. Once Canada's tech darling with a stock price that peaked at $124.50 in 2000, it has had a challenging fight to rebuild its reputation with investors and customers.
In an interview, Mr. Zafirovski said he is excited about the future.
"The juices flow, it's a positive energy," he said. "But of course I'm not at all confused that the challenges are substantial, not just internal . . . this is a tough, tough industry. This is the most exciting industry in the world."
Profitable growth is at the top of Mr. Zafirovski's list. Although first-half revenue rose, Nortel posted a small loss in the period. "We work way too hard, go through too much pain, to only have operating margin levels of low to mid-single digits," Mr. Zafirovski told reporters.
Nortel has taken investors for a wild ride in recent years. First, spending on telecom equipment collapsed earlier this decade. When signs of recovery emerged in 2004, so did bookkeeping problems that led to the firing of 10 executives, including then CEO Frank Dunn.
Mr. Owens, a former U.S. admiral, was elevated from a board member to CEO of Nortel in April, 2004, with the difficult task of leading the company through the accounting scandal.
He successfully filled that mandate, wrapping up an widespread restatement of Nortel's financial results from 2001 to 2004 earlier this year, which put the company back on a regular reporting schedule.
But observers always viewed him as an interim CEO, brought in to restore credibility because of his military background, but not as a long-term candidate as he lacked extensive business experience.
The market grew concerned this year about the company's strategic vision under Mr. Owens, saying it was unclear. Mr. Zafirovski addressed those fears yesterday, vowing to hone a clear strategic focus, including by analyzing where the firm invests its critical research and development dollars. Observers question whether Nortel can continue to be in all its existing businesses, and say it may exit some.
"The question is certainly we're spending substantial amounts of funds without generating the revenues or the profits," he said in the interview. "Do the foundations, the multiple areas, allow the growth, or do we need to cut back in some areas?"
Mr. Zafirovski's previous position was chief operating officer of Schaumburg, Ill.-based Motorola. He left the company in February, 2005, after being passed over for the CEO role. Analysts credit him with having helped turn around Motorola's cellphone business, experience they say will come in handy at Nortel.
And along with Nortel's internal issues, the telecom industry is also in flux. Demand for traditional circuit-switched gear is on the decline as companies move to the latest technology, while lower-cost rivals from China are gaining ground.
